
Macro Minute: Week of January 27, 2025
Astute readers of the Macro Minute will remember the referenced article in today’s note. I am going to bring back this article written by Ted Seides. https://www.capitalallocators.com/active-management-today-is-a-single-decision/
Remember this article was written in August of 2023. I never would have guessed how correct his thoughts would have been on this topic. At the time he was commenting on how concentrated the market has become in the Mag7 companies. I have written a lot about them recently and thought it would be great to update some of the numbers in this article through the end of 2024.
To do that I found this page created by First Trust. https://www.ftportfolios.com/Commentary/EconomicResearch/2025/1/8/the-sp-500-index-in-2024-a-market-driven-once-again-by-the-mag-7
From mid-2023 to the end of 2024 these companies have gone from comprising 25% of the S&P 500 to 30.6%. 53.7% of the return for 2024 in the S&P 500 was from these 7 stocks. So, since Ted wrote his piece the Mag7 has continued to dominate the indices. The image I want to highlight from the First Trust page is this.

This extreme outperformance by Mag7 has generated the lowest percentage of companies beating the index in history. The last time this happened was in the dot com boom and bust of the late 90’s. This bust resulted in a flipping in the early 2000’s of vast outperformance of the index by the average company.
I, like other market participants, have no knowledge of what will happen, but I do like to let history guide me. It is why I wrote last week on what history has shown on these lessons in the past. https://longviewfa.com/macrominute_01-20-2025/ The J.P. Morgan chart is highly illuminating. Regardless of how this turns out, I hope to do as Ted suggests and educate my readers on why I choose to stay diversified and not overweight the Mag7. “Few profess to have an edge on these types of decisions. Rather than diving in to develop a false sense of security, the lessons from peers abroad and stock pickers in emerging markets with concentrated indexes is one of communication. It’s less about what to do and more about how to educate your constituents on the choices at hand and expected outcomes to come.” So, I will endeavor to do that going forward and hopefully things will right itself without causing a large market dislocation.
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