The year 2023 is expected to see the market’s dependence on top companies like the Magnificent 7 – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – narrow. While these technology giants have experienced impressive growth in recent years, JPMorgan Asset Management (JPMAM) believes that their dominance may not be sustainable for long-term stability.
Despite their significant impact on the overall return of the S&P 500, accounting for 89% in 2023, some members of the Magnificent 7 like Nvidia and Microsoft have outperformed others like Tesla this year. However, JPMAM projects that the gap between the Magnificent 7 and the remaining S&P 493 companies will narrow in upcoming quarters. They anticipate a 17% earnings growth in Q4 for both groups, marking a significant improvement for non-Mag 7 firms.
While JPMAM doesn’t see this as a bubble, they acknowledge that the market is top-heavy and adjustments may need to be made for long-term stability. Healthcare, energy, and materials sectors are expected to experience earnings growth in Q4 after previously seeing declines earlier in the year. Despite their impressive growth over time, it seems that these technology giants may need to continue adapting to maintain their dominance in the market.
