Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Is Now a Good Time to Invest in the Magnificent 7?
Ruby Layram
10th Dec 2024
With 2025 around the corner, the time has come for investment experts to shed light on what they expect from the market in the new year.
In a recent press release from Evelyn Partners, Kate Morrisey, Head of Asset Allocation, shared 5 themes that could impact the financial markets next year. One comment that immediately caught my eye was her forecast for the Magnificent 7.
Here’s what next year is looking like for the leading tech stocks and why I’m tempted to add more to my portfolio!
The Magnificent 7 is set to outperform the S&P 500 (again!)
It is no secret that the Magnificent 7 has had a great year in 2024. The stocks delivered an annual growth that has beaten the rest of the S&P 500 by 30%.
This has largely been driven by a fierce appetite for tech stocks amongst investors, with companies such as Tesla and NVIDIA leading the way.
Despite the fact that this hype may have quietened down slightly, it looks like the Magnificent 7 is set to outperform the wider US market yet again in 2025.
According to Morrisey’s forecast, analysts (from Goldman Sachs) estimate 18% earnings growth for the Magnificent 7, compared to 12% for the remainder of the S&P 500.
Although the gap is much narrower than what we’ve seen in 2024, I think that the Magnificent 7 still stands as a solid addition to your portfolio (particularly if you’re a growth investor!).
The ‘Trump Effect’ and US stock performance
As well as all being involved in the tech industry, the Magnificent 7 are all US companies that stand to benefit from what I like to call the ‘Trump effect’. This is a term that I use to describe the effect that Trump’s administration has had on the US stock market.
Since his victory, the S&P 500 has been on an upward trajectory and investor sentiment seems high. This is largely due to Trump’s ‘pro-growth’ policies which will create an environment for US businesses to thrive.
In a recent US market forecast, David Kostin, chief US equity strategist at Goldman Sachs Research, shared that “Robust earnings growth should drive continued equity market appreciation into next year.” His forecast made it clear that the S&P500 will continue to see growth under Trump’s administration.
A growing US economy provides fertile ground for the Magnificent 7 to continue to thrive.
Potential roadblocks
Although I think that 2025 could be another strong year for the Magnificent 7, it’s important to understand potential roadblocks that could prevent the stocks from generating the same growth that they have this year.
Most notably, it is possible that Trump might implement tariffs on imports from China and Europe, without legislation.
During Trump’s first presidency, these tariffs weren’t great for the US economy! In fact, on the days when the tariffs were announced, the market fell by 11.5% (according to Bloomberg).
The uncertainty around whether or not Trump will impose tariffs again has been echoed in the markets, with many investors keeping an eager eye out for tariff announcements.
Another potential blocker that could prevent the Magnificent 7 from seeing huge growth next year, is the fact that most of the stocks are currently trading at fair value (according to Goldman Sachs). This means that the current stock prices are equal to their intrinsic worth.
For the Magnificent 7 to continue seeing significant growth, the sector would have to experience a sudden increase in demand from investors. This may be difficult after experiencing a recent surge which could be tough to replicate (although, not entirely impossible!).
Nevertheless, I still think that the Magnificent 7 has a way to go, especially when you consider the current hunger for technological advancements in areas such as AI, Astronautics and Renewable Energy.
If you are thinking about adding stocks from the Magnificent 7 to your portfolio, I recommend diversifying with stable assets, such as Gold, to cancel out any volatility that you might experience. In fact, I recently wrote a great guide on how to build a diverse investment portfolio that you could check out.
As always, investing comes with risk and it is impossible to predict how the market will move.
Are you interested in learning more about investing? Why not sign up to the MoneyMagpie bi-weekly Investing Newsletter? It’s free and you can unsubscribe at any time if you find it isn’t for you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
Subscribe
Login
0 Comments
