Investors who piled onto the "Magnificent Seven" S&P 500 rally this year are paying for it now. Losses are now approaching $2 trillion.
The collective value of the so-called Magnificent Seven stocks, including Apple, Tesla and Microsoft, plunged $1.8 trillion and counting from their individual highs this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such a giant shredding of wealth underscores how the S&P 500's fall sell-off isn't leaving many safe spots for investors. Keep in mind investors' typical safe havens are down, too. The iShares Core U.S. Aggregate Bond ETF is down nearly 9% from its high in the past year.
"The Magnificent Seven, which have been driving returns this year and are dominated by tech names, will still have a major impact on the earnings season," said Rob Swanke, strategist for Commonwealth Financial Network. "But the tech sector as a whole is expected to see middling growth in earnings ... despite the fact that tech firms are valued at a 36% premium to their 20-year average."
Trouble In S&P 500 Magnificence
Coming into late July, it looked like nothing could go wrong by owning the Magnificent Seven. But soaring interest rates changed the math.
Now, the seven stocks are down an average 15% from their individual highest points of the past 52 weeks. That's worse than the indexes, challenging the idea that these stocks are financial rocks. The S&P 500 is down 10.4% from its 52-week high on July 31. And the Nasdaq 100 is off 10.2% from its high on July 18.
And some of the individual drops in Magnificent Seven stocks are jaw-dropping. Electric vehicle maker Tesla comes to mind. Shares of the company are down more than 30% from their 52-week high on July 19. That wiped out $294.9 billion in shareholder value. In other words, Tesla has shed more value than 480 individual S&P 500 companies are worth. The stock's plunge gained speed following disappointing third-quarter results.
But that's not the largest loss in the Magnificent Seven.
Giant Market Value Losses
When a company is worth $2.6 trillion like Apple, a 15% drop destroys a massive amount of paper wealth. Nearly $500 billion in this case.
Apple's market value plunged $475 billion from its July 19 high to be exact. That makes it the largest loss of value among all the Magnificent Seven stocks. Apple investors are contending with a giant tech stock that's not growing. Analysts think Apple's adjusted profit per share this fiscal year will fall almost 1%. That's not what growth investors paying 28 times trailing earnings are looking for.
And that's only part of the issue. Once S&P 500 companies get as big as each of the Magnificent Seven, market value losses get huge. Microsoft stock gained following its better-than-expected third-quarter results. But the stock is still down 10.2% from its 52-week high notched on July 18. As a result, the company's value is down $278 billion.
Some think the Magnificent Seven stocks' problems are just temporary. "We still believe U.S. large caps are the most productive equity investment, but having a realistic view on volatility is important," said Nicholas Colas, co-founder of DataTrek Research.
Magnificent Seven investors will hope the pain ends soon. It's starting to get expensive.
Magnificent Seven Losses In The S&P 500
From individual 52-week highs
| Company | Symbol | Ch. from 52-week high | Market value lost ($ billions) | Sector |
|---|---|---|---|---|
| Apple | -15.3% | -$475.1 | Information Technology | |
| Tesla | -31.0 | -294.9 | Consumer Discretionary | |
| Microsoft | -10.2 | -277.7 | Information Technology | |
| Alphabet | -13.8 | -243.1 | Communication Services | |
| Nvidia | -19.7 | -244.1 | Information Technology | |
| Amazon.com | -12.5 | -188.7 | Consumer Discretionary | |
| Meta Platforms | -10.5 | -89.6 | Communication Services |
