Magnificent 7, index enters correction zone
Although the Magnificent Seven index has outperformed US equity markets over the past year, it is showing signs of slowing, with the index entering correction territory in recent days.
The Magnificent Seven are seven of the most influential and best-performing US technology companies: Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Tesla and Meta Platforms. These companies represent a significant portion of the stock market, accounting for around 30% of the S&P 500 index.
After a period of strong growth, the stock market performance of this group of companies began to suffer some setbacks. First there was the DeepSeek affair and a couple of negative quarters, then Tesla’s negative sales figures in Europe. The result is shown in the charts below.
In the chart above we look at the performance of the magnificent seven index and the Russell 3000. We can see that the M7 has outperformed the Russell 3000 over the past year, but the health of the ‘seven sisters’ appears to have changed markedly from a few months ago. Since its peak at the end of 2024 (cumulative return of +43%), the index has fallen by more than 14 percentage points. In other words, the M7 has entered a correction phase.
The graph above shows the comparison between the performance of the M7 index (market capitalisation-weighted version) and the Nasdaq Composite.
