Anticipated Soft Landing Poses Headwinds for Magnificent Seven in the Coming Year
The tech titans, often called the "Magnificent Seven," have notched impressive achievements in 2023, serving as primary catalysts for the ascent of the US stock market. Nevertheless, some analysts speculate that 2024 may witness the tech bubble popping.
An analyst from Societe Generale has articulated his rationale for the potential tech bubble popping. On one hand, the US stock market is overly concentrated in the 'Magnificent Seven,' which now constitute a third of the market's total capitalization. On the other hand, the lofty valuations of tech stocks pose a disadvantage, implying an excessive valuation premium. Furthermore, technical analysis indicators such as the CNN Fear & Greed Index, the call option ratio, and the VIX index collectively suggest an overheated condition in the current US equities market.
Regarding this, we have composed an analysis piece. For additional insights, please refer to Biggest Black Swan in 2024? Analyst Warns of Tech Bubble Popping as Magnificent 7 Market Cap Exceeds $12 Trillion
Soft Landing to Diminish Allure of Tech's Big Seven
Beyond the perspective of Societe Generale's analysts, there's another view that could bring headwinds for the 'Magnificent Seven': economic soft landing could present challenges for tech titans' performance in the upcoming year.
The surge in the Magnificent Seven in 2023 can be attributed to their stable earnings growth amid escalating recession fears. These tech behemoths boast robust cash flows and solid balance sheets, positioning them as defensive equities in turbulent times. Investors anticipate a soft landing for the economy next year, which could favor the broader US stock market, potentially overshadowing the dominance of the leading seven tech giants.
The only way they stay the Magnificent Seven is if we have less than a perfect landing," said Rhys Williams, chief strategist at Spouting Rock Asset Management.
Why the US Economy Is Expected to Achieve a Soft Landing
US inflation cooled again in November. University of Michigan survey revealed a significant 14 percent increase in consumer sentiment, signaling enhanced public confidence that the most intense inflationary period in recent memory is receding. Additionally, the proportion of survey participants who foresee their earnings keeping pace with or exceeding the rate of inflation in the upcoming year has risen to 55 percent, a notable increase from the 49 percent recorded in October.
The buoyant mood on Wall Street, coupled with the US's low unemployment rate, has led analysts to predict that the economy is now set for a soft landing.
There is mounting evidence that the post-pandemic inflation scare is over and we expect interest rates to be cut significantly next year," said Andrew Hunter, economist at research firm Capital Economics.
Source: Financial Times, Bloomberg, Societe Generale
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Jalapenoterry65 : Yah, yah, that’s all I can say!
Robin Brown1 : I’m trying to find my coach that made contact with me So that I can learn how to pick out good stocks
151345481 : Analysts sang for a year, and in '23, NASDAQ rose 50% under the leadership of large-cap stocks. I have to say these idiots' predictions are inverse indicators
151159669 : I wouldn't bother with speculation, the market has a cycle, follow that. Tech may cool sideways when indicators are overheated but tech as a whole, is in a boom and won't be popping any time soon.