The second quarter started with a slight broadening of stocks away from some of the Magnificent Seven with two of the seven even down through the first four months of 2024. By the end of the quarter, the mega tech leaders continued their winning ways with even Apple and Tesla starting to regain their luster. While the S&P 500 index was up approximately 15% for the first half of the year, it is important to note that the average stock in the index was up only 4.1%.
The S&P 500 is being driven by a handful of mega cap stocks with the largest 10 components comprising 36% of the index. In fact, the largest three Microsoft, Apple, and Nvidia currently represent over 20% of the 500-stock index now
that all three have well over $3 trillion market capitalization. Investors are realizing the long-term revolution of AI and have re-established the Magnificent Seven as the ideal way to participate in the benefits of AI. There will be better ways to participate, especially as expectations and valuations soar here. The energy usage in powering these massive data centers made utilities a cost effective way to participate this past quarter after a bout of lagging performance in the sector. Sometimes it is better to select such lesser expectation (lower risk) ways to participate, especially as valuations continue to escalate. Investors will need to be disciplined should such oversized gains continue into the second half of the year.
