After experiencing sharp declines in July and August, the familiar Magnificent 7 is back again?

Currently, US technology stocks are picking up momentum again, with investors showing renewed enthusiasm for the Magnificent 7. On Friday, the S&P 500 index hit a new historical high, with technology stocks leading the gains.

The stock price of Magnificent 7 has recently shown outstanding performance, with related ETFs rising by 1.7% this week, and soaring by about 12% over the past three weeks. From$Roundhill Magnificent Seven ETF (MAGS.US)$ In terms of performance, the recent rise of Magnificent 7 is almost about to offset the previous months' decline.

Regarding the recent rise of Magnificent 7, Barron's commented that we have already passed the (tech stock frenzy) stage. Over the past three months, investors' focus has shifted to$S&P 500 Index (.SPX.US)$the other 493 stocks (small cap stocks) in China. However, sustained growth in small cap stocks requires investors to believe that the significant Fed rate cuts are sufficient to prevent an economic recession.

But it seems that the economy has not gone that far at the moment. Meanwhile, the exacerbated geopolitical tensions in the Middle East have not helped improve the economy. In a world full of uncertainties, investing in large companies seems to be a better choice.

The report further points out that the sustained attraction of the Magnificent 7 may be another evidence of the extremely low market efficiency, as investors have ceased to price stocks in a rational manner.

AQR Asset Management partner Clifford Asness pointed out in a recent paper that from 1950 to the Internet bubble period (1995 to 2001), the stock market was relatively efficient, and this determination can be verified by comparing the pb ratios of the most expensive large cap stocks and the cheapest stocks. Over a period of about 50 years, this ratio remained relatively stable until it surged during the Internet bubble period and rose again in the past decade, indicating that investors have ceased rational pricing.

Asness believes that there are three reasons for the current market transformation: indexing, long-term low interest rates, and new technologies driving the rise of retail traders, leading to the overvaluation of "retail frenzy stocks" like$GameStop (GME.US)$Asness's recommendation is to invest in "value stocks."

As the Fed's rate cuts open a global central bank easing cycle, European inflation continues to fall, the People's Bank of China has introduced a series of "policy gifts" to boost the international market, investors are beginning to reassess their portfolios and stock selection. The Magnificent 7 of the US stock market ( $Alphabet-C (GOOG.US)$N/A.$Amazon (AMZN.US)$and$Apple (AAPL.US)$Please use your Futubull account to access the feature.$Meta Platforms (META.US)$N/A.$Microsoft (MSFT.US)$,$NVIDIA (NVDA.US)$,$Tesla (TSLA.US)$Still the powerhouse of the US stock market.

The Mag 7 market has experienced ups and downs, with Wall Street bullish on the U.S. stock market.

In the first half of this year, the U.S. tech giants Mag 7 have been viewed as the key engine of U.S. stock growth. As of June, Mag 7 contributed to nearly 60% of the S&P 500 index's return. However, since July, this momentum has quickly stalled.

In July and August this year, the Mag 7 have seen varying degrees of significant declines. According to statistics, from July to early August, the market cap of Mag 7 plummeted by an astonishing nearly $2 trillion. In September, the downward trend of the Mag 7 stabilized somewhat, entering a phase of overall rebound.

Regarding the large drop at the time, analysts pointed out that the massive investments of the Magnificent 7 companies in the AI field raised market doubts about their ability to monetize. At that time, funds began to flow into small cap stocks, leading to a shift in market style. Meanwhile, due to Magnificent 7's high market cap, the concentration of the US stock market reached a historical high. Deutsche Bank analyst Jim Reid stated that historically high valuations and high concentration often accompany subsequent market adjustments.

After this recent decline, Mag 7 company's market cap still accounts for over 30% of the s&p 500 index.

However, the market outlook for the future trend of the s&p 500 index is optimistic, with Wall Street's highest target set at 6100 points. Some well-known sell-side institutions on Wall Street predict that the year-end target for the s&p 500 index ranges from a low of 4200 to a high of 6100.

In addition, Goldman Sachs found that from 1996 to 2023, the average daily trading volume of stocks and options peaks in October. Since October is the earnings season, listed companies typically manage their performance up to the end of the year and provide guidance for the next year's performance, making the next few weeks a crucial period for trading activity.

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