The so-called Magnificent Seven — Nvidia, Alphabet (Google), Microsoft, Apple, Meta (Facebook), Amazon and Tesla — accounted for nearly 30% of the total S&P’s value in late September and had been the driver for nearly 65% of the market’s gains, according to the investment firm BlackRock. Opinions are now greatly divided on whether these firms are overvalued or have room for yet more growth in 2024.
Meanwhile, a consensus is developing that the gains are likely to rest on a much broader base in the coming months. That adds fuel to arguments against concentrating investments in a small group of assets.
McGregor said that, even in a year like 2023 when the biggest gains came from only a few stocks, it’s hard to make a sound argument against portfolio diversification. In any given year, she said, the chance that the S&P 500 will fall in value is 26%. That turns into a 6% chance of losses for investors who keep their money in the market for a decade, she said.
“So we really try to stress to our clients that trying to time the market is truly a fool’s errand,” McGregor said. “It’s about being invested for the long term, especially for the growth and innovation that’s happening in our economy.”
Looking beyond stocks, Marcelli said she and her colleagues at UBS now look at bonds much more favorably than they have in years past. Since bond prices generally move inversely to yields, falling interest rates seem poised to push up the value of fixed-income investments.
Marcelli said next year could be almost the mirror image of 2022, when rising interest rates sent the stock and bond markets reeling.
“I think 2024 will be sort of the opposite of that, at least the first half of the year, where it’ll be a supportive environment for both,” she said.