Move Over, Magnificent 7, as Other Stocks Rise to Glory

The Magnificent Seven is slightly less magnificent lately, as other stocks gain value in the current bull run.

Since the Oct. 27, 2023, market low, names other than the mega-cap tech Seven have been on a tear, too, Truist Advisory Services pointed out in a research note.

The S&P 500 is up 22% since the low. That is just below its all-time high (the index lost 0.6% Tuesday as Palo Alto Networks Inc. delivered a weak revenue forecast for the year) and now is partly powered by plenty of less-celebrated stocks than the Seven.

The overall result is “a broad-based rally,” wrote Keith Lerner, Truist’s co-CIO and chief market strategist, and the report’s author. “The market rally that we have seen since October is broader than many investors give it credit for.”

The tech sector is ahead 28.8% during the period. Wall Street braced Wednesday for chipmaker Nvidia Corp.’s financial results, due after the market close, with expectations high for blowout revenue.

The financial sector is up 26.2%, near its all-time high, and industrials have jumped 22.9%, Lerner observes. Financials are benefiting from a resilient economy, he explains. Plus, “financials are not just banks.”

He names credit card companies, such as Visa Inc., and Berkshire Hathaway Inc., the segment’s biggest member, as propellants for the category. One indication of the possible gains in the sector is Capital One Financial Corp.’s $35 billion bid to acquire Discover Financial Services, which would create the nation’s largest card issuer.

The industrial sector includes air carriers like Delta Air Lines Inc. and freight colossus FedEx Corp. The reasons for industrials’ increase, says Lerner, are “large fiscal stimulus that is still hitting, onshoring, defense spending and inventories rebounding from depressed levels.”

Formerly battered small-cap and mid-cap stocks also have returned more than 20% since October, he adds. Meanwhile, the S&P 500 Equal Weight Index is ahead just under 20% for the period, further underscoring the non-Mag-Seven’s surge.

An example of a winner outside the Seven is drugmaker Eli Lilly and Co., up 34.6% since the October low, beating the S&P 500. Lilly has a large roster of best-selling drugs, including diabetes treatment Humalog and anti-depressant medication Prozac.

Some on Wall Street suggest that Lilly should replace Tesla Inc., in the Magnificent Seven. The electric vehicle maker, the smallest member of the Seven by market capitalization, is valued less than Lilly ($717 billion versus $617 billion). Further, unlike the pharma giant, Tesla’s stock is below the October market nadir, losing 6.7% since then.

In Lerner’s view, “Although we remain overweight tech, a cooling period would not be a surprise after the runup.”