The stock market is dominated by a short list of tech titans.
The market isn’t representative of the whole economy, but the might of these companies has intertwined their performance with the broader health of corporate America. So far in 2024, the so-called “Magnificent Seven” – Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), NVIDIA (NVDA), Tesla (TSLA), and Meta (META) — have driven more than 40% of the S&P 500’s total performance.
In other words, the U.S. stock market is quite top heavy, relying more on the performance of a few large companies than hundreds of smaller ones.
Lessons From History
Major indexes have recently reached all-time highs at least in part thanks to the strength of these companies. But some investors see this extreme concentration as risky. After all, the pendulum can also swing the other way, especially given the heavy reliance on the technology sector.
But the situation isn’t unprecedented. In the late 1960s, a similar, albeit larger, group of stocks called the “Nifty Fifty” was the driving force behind a bull market. And the tech boom in the late 1990s was largely powered by just four companies — Microsoft, Cisco (CSCO), Oracle (ORCL), and Intel (INTC).
Concentration can be risky, but it can also boost performance as it has in these examples.
Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.