Bank of America issued a cautionary note recently, suggesting that the renowned “Magnificent Seven” stocks could be on the verge of losing their grip on the S&P 500 index. Should the U.S. economy experience a significant slowdown, the collective impact of these stocks on the market might wane. The Nasdaq 100 and other tech indices have already seen a drop in recent weeks as investors pivot from mega caps to smaller companies in anticipation of potential rate cuts.
Michael Hartnett of Bank of America remarked that while some investors view this market correction favorably, others are concerned it could pave the way for a substantial decline, particularly if the forthcoming job reports paint a grim picture.
Adding to the apprehension, economists have observed a deceleration in U.S. job growth, with the unemployment rate climbing to 4.1% in June, marking its highest point since November 2021.
Bears are quick to highlight alarming signals like the steepening U.S. Treasury yield curve and the drop in commodity prices, both traditionally associated with an impending recession. The underwhelming earnings reports from Tesla and Alphabet have fueled speculation about the sustainability of this year’s AI-driven market surge.
Despite the prevailing pessimism, market optimists are quick to point out reassuring signs such as stable credit spreads and the ability of key benchmarks—like the Nasdaq 100 to hold above 18,700 and London copper prices to remain above $9,000 per metric ton.
Top Pick Among the Magnificent Seven
Anotating the Magnificent Seven—comprising Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia, and Tesla—analysts are particularly bullish on Nvidia, foreseeing significant upside potential. With a price target of $142.74 per share, this stock could deliver over 27% returns in the foreseeable future.
