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观点 | “七巨头”主宰美股既不是唯一,也不会是永远

Opinion | "The Seven Giants" dominating the US stock market is neither the only nor will it be forever.

巴倫週刊 ·  Jul 10 21:47

In investment community nowadays, there seems to be nothing more important than the 'Magnificent Seven'. According to Dow Jones Market Data, as of June 2nd, these seven large-cap American technology stocks have contributed about $4.18 trillion, accounting for two-thirds of the increase in market cap of $6.21 trillion this year. The weight of the 'Magnificent Seven' in the S&P 500 index is so great that Piper Sandler's strategists wrote in a report released on June 3rd that they will no longer set a target price for the S&P 500 index because these seven stocks' huge influence means that the S&P 500 index no longer represents the US stock market. However, having a few stocks with significant influence is neither a unique nor a lasting phenomenon in history. Rob Arnott, the founder and chairman of Research Affiliates, who is also a fan of film research, pointed out that people may forget that in the classic 1960 movie 'The Magnificent Seven', four of the seven people died in the end. During the burst of the internet bubble in 2000, many internet companies suffered a similar fate.$S&P 500 Index (.SPX.US)$Out of the $6.21 trillion increase in market cap this year, the seven large-cap American technology stocks, known as the 'Magnificent Seven', contributed about $4.18 trillion, approximately two-thirds of the total, according to Dow Jones Market Data. These 'Magnificent Seven' stocks have such a great weight in the S&P 500 index that Piper Sandler's strategists wrote in a report released on June 3rd that they will no longer set a target price for the S&P 500 index because these seven stocks' huge influence means that the S&P 500 index no longer represents the US stock market.

Please use your Futubull account to access the feature. The weight of the 'Magnificent Seven' in the S&P 500 index is so great that Piper Sandler's strategists wrote in a report released on June 3rd that they will no longer set a target price for the S&P 500 index because these seven stocks' huge influence means that the S&P 500 index no longer represents the US stock market.

However, having a few stocks with significant influence is neither a unique nor a lasting phenomenon in history. Rob Arnott, the founder and chairman of Research Affiliates, who is also a fan of film research, pointed out that people may forget that in the classic 1960 movie 'The Magnificent Seven', four of the seven people died in the end. During the burst of the internet bubble in 2000, many internet companies suffered a similar fate.

In fact, every decade has its own series of market champions, and these 'leaders' are ultimately deposed due to the preference for creative destruction by capitalism and technology. Bridgewater Associates conducted an interesting study of US market history and found that very few companies or industries can maintain their dominant position in the face of innovation.

Railroads were still dominant in the early 20th century, but they began to be replaced by automobiles and airplanes from the 1920s onwards. From the 1930s to the 1960s, conglomerates in the chemical industry became the champions of the market. The famous line from the movie 'The Graduate' in 1967 was "Just one word: plastics."

From the 1920s to the 1960s, automobiles were the champions of the market until the market share of the Big Three automakers in Detroit was taken over by their Japanese competitors. Before the breakup of AT&T in 1984, it dominated the market. In the 1980s, oil companies were the most popular stocks (after oil prices rose sharply in the previous decade). [An interesting phenomenon is that from 1900 to 2010, the AT&T or its predecessor was one of the top ten most popular stocks in every decade.]$AT&T (T.US)$With the Internet bubble reaching its peak in 2000, tech stocks became the champions of the market, and this period is often compared to the current 'Magnificent Seven' era. It is surprising that Apple is the only tech company to have recovered from that bubble, while the former champion Microsoft is now far behind. Meanwhile, two of the 'Magnificent Seven' companies - Google and Facebook - would have been classified as middle-cap stocks during the internet bubble.$Exxon Mobil (XOM.US)$It is surprising that Apple is the only tech company to have recovered from that bubble, while the former champion Microsoft is now far behind. Meanwhile, two of the 'Magnificent Seven' companies - Google and Facebook - would have been classified as middle-cap stocks during the internet bubble.

However, having a few stocks with significant influence is neither a unique nor a lasting phenomenon in history. Rob Arnott, the founder and chairman of Research Affiliates, who is also a fan of film research, pointed out that people may forget that in the classic 1960 movie 'The Magnificent Seven', four of the seven people died in the end. During the burst of the internet bubble in 2000, many internet companies suffered a similar fate.$Microsoft (MSFT.US)$It is surprising that Apple is the only tech company to have recovered from that bubble, while the former champion Microsoft is now far behind.$Cisco (CSCO.US)$ and $Intel (INTC.US)$Meanwhile, two of the 'Magnificent Seven' companies - Google and Facebook - would have been classified as middle-cap stocks during the internet bubble.$Apple (AAPL.US)$ and $NVIDIA (NVDA.US)$Currently, former champion Microsoft is far behind, while two of the current 'Magnificent Seven' companies - Alphabet and Facebook - may be considered middle caps during the dotcom bubble.

It is surprising that some of the companies in the 'Magnificent Seven' did not even exist or were still just 'babies' during the internet bubble. Google's search engine and Facebook did not even exist then, and Amazon was just a company selling books and CDs, with AWS cloud business not born for many years.$Alphabet-A (GOOGL.US)$As with past market champions, most of today's 'Magnificent Seven' are driven by promises of the future, which is currently focused on AI. As Arnott recently pointed out in an interview, the market has always been correct in evaluating the potential of technology, but this often hasn't brought returns to the then-popular stocks.$Meta Platforms (META.US)$Google's search engine and Facebook did not even exist then, and Amazon was just a company selling books and CDs, with AWS cloud business not born for many years.$Amazon (AMZN.US)$As with past market champions, most of today's 'Magnificent Seven' are driven by promises of the future, which is currently focused on AI. As Arnott recently pointed out in an interview, the market has always been correct in evaluating the potential of technology, but this often hasn't brought returns to the then-popular stocks.

Like the champions of past eras, most of today's 'Magnificent Seven' are driven by promises for the future, which recently revolve around artificial intelligence. As Arnott recently said in an interview, the market has always been correct in assessing the potential of technology, but this has not always translated into returns for the popular stocks of the time.

The actual change brought about by the Internet is much deeper than what people imagined at the peak of the internet stock boom, and many of the famous companies of that time have become mere footnotes in history. Arnott recalled that when Palm was spun off from 3Com, the PalmPilot produced by the company once became a must-have device for everyone until the early 21st century when BlackBerry was ubiquitous among business users, and then until the iPhone appeared.

From this, we can summarize some experiences and lessons: Today's market champions will often not dominate the future, and some future winners may not even exist or be listed yet. The biggest weighted stocks in market value-weighted indices such as the S&P 500 are boosted due to positive outlooks on their future prospects and the indexation mechanism. This is where the risk lies. Index fund investors will inevitably invest the most money in the most overvalued stocks.

Bridgewater's research found that more than one third of typical US market value-weighted investment portfolios allocated their funds to current market champions. According to Bridgewater's definition of champions, this includes...$Broadcom (AVGO.US)$, $Eli Lilly and Co (LLY.US)$, $JPMorgan (JPM.US)$...as well as "The Magnificent Seven." The top ten US market champions also account for nearly 20% of the world's investment portfolios, the highest proportion in more than 50 years.

Bridgewater wrote in the research report: "In a hypothetical alternative scenario, considering the creative destructive forces of the past century, an equally weighted investment portfolio offers higher and more stable returns than a portfolio that allocates funds based on market value."

Today, exchange-traded funds (ETFs) offer a cheap and easy way to implement this strategy, including...$Invesco Exchange Traded Fd Tr S&P 500 Equal Weight Etf (RSP.US)$.$Ishares Msci Usa Equal Weighted Etf (EUSA.US)$ and $Invesco Russell 1000 Equal Weight Etf (EQAL.US)$...with broader exposure.

$Powershares Exchange Traded Fd Tst Ftse Rafi Us 1000 Portfolio (PRF.US)$uses a fundamental factor index based on Research Affiliates, which allocates stock weights based on enterprise size (sales, profits, book value, dividends plus share buybacks) rather than market value. Therefore, it is more inclined towards value and does include growth stocks, but their weights are smaller than indices allocated by market value. The weight of "The Magnificent Seven" in this ETF is 16%, about half of...$SPDR S&P 500 ETF (SPY.US)$...the market value-weighted index. Arnott said that this type of ETF has higher returns than typical value indices. As described in a Barron's Advisor article on July 3, the Invesco RAFI US 1000 ETF has outperformed the heavily promoted Ark Innovation Fund over the past three years.

Due to their excellent performance in a bull market, many investors have poured into market value-weighted index funds. If the performance of "The Magnificent Seven" is no longer as strong, such concentrated investment may go against the original intention of simple index investment.$ARK Innovation ETF (ARKK.US)$.

Due to their strong performance in bull markets, many investors have flooded into market-cap weighted index funds. If the "seven giants" no longer perform as strongly, such concentrated investment may run counter to the simple investment approach of index investing.

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