In a financial spectacle, the Magnificent 7 stocks now wield a market cap larger than the entire stock market of any country, excluding the U.S., as per Factset. The dominance of these tech giants within the S&P index is unmistakable, and projections indicate that this gap will persist in the current quarter.
Contrary to popular belief, the expanse of tech valuations goes beyond the Magnificent 7. Tech stocks, in general, are experiencing elevated valuations, with TMT ex-Mag 7 stocks reaching 7.2 standard deviations above their 2015-19 average, clocking in at a multiple of 21.6x. These lofty multiples are intricately tied to heightened growth expectations in the sector.
Amidst this financial landscape, a pivotal question emerges: Can the dwindling levels of consumer spending sustain an exuberant equities market? As the tech sector continues to shape the financial narrative, the delicate equilibrium between valuations and real-world economic dynamics takes center stage.
In March 2000 I calculated what would happen if Cisco continued its parabolic trajectory. I should have heeded that warning sign.
If Nvidia continues this trajectory, it will be a $7.5t company in one year.
Nvidia is the Cisco of AI.
Circa March 2000. pic.twitter.com/xdK4QvmJwG
— Mac10 (@SuburbanDrone) January 31, 2024
The bigger they are, the harder they fall.
You don't think it's true…check past stock market drops.— floridanow1 (@floridanow1) February 1, 2024
"The difference between the Big 6 and everything else in the S&P is stark…[and] this gap is expected to persist into the current quarter."@DataTrekMB pic.twitter.com/mN3iKq04dJ
— Daily Chartbook (@dailychartbook) January 31, 2024
Despite popular belief, tech valuation extremes are not all about the mag 7. Tech stocks are expensive all around. At 21.6x, TMT ex-mag 7 stocks is now 7.2 standard deviations above its 2015-19 average. The highest multiples correlate closely to elevated growth expectations. t.co/1s5y0HmJwX
— Gina Martin Adams (@GinaMartinAdams) January 31, 2024
The next level question is whether the rundown levels of consumer spending will be sufficient to support a buoyant equities mkt. t.co/zY620ywTti
— Scarlett's Grandpa (@KASDad) January 31, 2024