The Magnificent Seven have been dominating equity markets, not just in the United States but also globally, these past 24 months. It is easy to see why this group of technology companies, which includes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, is attractive to investors as they are businesses that hold near monopolies over their patch of the global economy, and also show great promise going forward as innovation in artificial intelligence and the electrification of large parts of the economy paints a picture of bountiful opportunities ahead.
But there is a dark side to the success of these seven stocks. Their performance has been so dominant that it has raised questions about the very structure of equity markets. Do the Magnificent Seven form a dislocation that eventually will revert to the mean, or are we embarking on a new era of heightened market concentration?
Orcas are magnificent too. Powerful, smart and agile, these animals could be described as beguiling; interesting and attractive, but don’t let your guard down around these über dolphins.
Although there are very few records of orcas attacking humans in the wild, they most certainly have done so when kept in captivity. The famous documentary ‘Blackfish’ from 2013 shows how a large orca, named Kasatka, trapped the foot of her trainer Ken Peters in her jaws and pulled him underwater for periods of up to 3 minutes, right to the edge of the time a human can hold their breath. Peters survived, but only just.
Will investors survive the Magnificent Seven?
Probably, but they might change the way we construct equity portfolios going forward. How far can you deviate from the benchmark? How much conviction do you want to display in your portfolio? And is liquidity starting to form an issue?
Now celebrating 10 years, the [i3] Equities Forum will discuss this topic and more:
- Are Emerging Markets about to make a comeback?
- Is it possible to increase diversification by time horizons?
- Are the correlations between different style approaches what we think they are?
- Is systematic investing the answer to Your Future, Your Super?
- Are funds running out of capacity?
- Does a sustainable approach necessarily skew to growth strategies?
We hope to see you at the 10th [i3] Equities Forum on 19 and 20 February 2025 at the Park Proxi Gibraltar in Bowral, NSW.
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