According to a top strategist, the Magnificent Seven, a group of tech stocks that have driven markets, are about to start trailing the market.
Under the leadership of Michael Hartnett, strategists at Bank of America coined the phrase “Lagnificent 7” to characterize potential developments for the Tesla Inc. (TSLA), Amazon.com Inc. (AMZN), Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL), Apple Inc. (AAPL), and Meta Platforms Inc. (META) grouping.
The Roundhill Magnificent Seven ETF MAGS has lost 1.6% in the last five sessions.
The Bank of America analysts predicted that DeepPeak would result from a number of circumstances, including the controversy surrounding the Chinese AI chatbot DeepSeek this week.
The analysts stated that the tailwinds driving the U.S. outperformance—such as excessive fiscal expenditure, increased immigration, and the AI investment bubble—are beginning to wane.
“U.S. exceptionalism now exceptionally expensive [and] exceptionally well-owned,” they stated.
Accordingly, the analysts think that investors ought to take into account cheap value bets, especially in sectors like European and Japanese banks, which are still much below their historical peak.
With the U.S. ISM and worldwide PMI moving from the contraction zone to the expansion range in the first quarter of 2025, the report also stated that a recovery in global manufacturing activity is anticipated. According to them, this offers prospects in commodities, high-yield bonds, foreign stocks (particularly those of European and Japanese banks), and old-economy cyclical industries.
The BofA Bull & Bear Indicator, a proprietary measure of market mood, has also surged from 4.0 to 4.2, indicating heightened investor optimism fueled by tight credit spreads, high-yield bonds, inflows into developing markets, and bullish hedge fund positions in oil futures.
