Magnificent 7 stocks keep rolling, but there are challenges ...
• Market concentration has reached its highest level since 1972. The top 10 stocks have broken away from stocks #11-#50 to an even greater degree than during the tech bubble in 2000-2001
• Large spikes in market concentration have frequently coincided with or preceded prior recessions, as shown in the chart below
• Market concentration is making life difficult for active equity managers; 2023 was one of the worst alpha years on record with only 23% of Russell 1000 large cap managers outperforming (vs 66% in 2022) These dynamics explain why we spent so much time on antitrust issues in the 2024 Outlook, since that’s the primary Achilles heel I can imagine that could disrupt the continued domination of the largest stocks. While Tesla has run into a pricing buzzsaw and lower volumes3 , the rest continue to thrive (JPM).