The “Magnificent Seven” tech giants have led the stock market’s rebound over the past month. This marks a shift from earlier in the year when “old economy” stocks were favored. Since April 8, the tech sector has surged nearly 20%, with Microsoft, Broadcom, and Meta Platforms being major contributors.
Other members like Amazon, Alphabet, and Tesla also performed well. Strategists attribute this rally to several factors. Todd Ahlsten of Parnassus Investments points to the structural advantages these companies have, making them attractive during volatile times.
“It’s not overly surprising that if the market is going to snap back, investors are going to look to those companies that are in very good positions… and are part of a secular tailwind [of artificial intelligence],” Ahlsten said.
Tech stocks drive market resurgence
Strong earnings results and positive guidance from companies like Microsoft and Apple also supported investor confidence despite the uncertain trade landscape. The group’s history of powerful outperformance played a role too. Mark Hackett of Nationwide emphasized that investors have developed a habit of turning to megacap tech stocks during both market highs and lows.
“When the market’s good, buy tech, when the market’s bad, buy tech—that’s been the philosophy coming into this period,” Hackett explained. However, Hackett expects this phenomenon to fade in the coming months. Many challenges remain, such as pressure on valuations and a narrowing gap between big tech and the rest of the market.
Investors may return to value, quality, and international markets once the current emotional market phase calms down. More volatility is anticipated ahead. The recommendation is to overweight value stocks and underweight growth stocks, which are believed to still be trading at a premium.
