The Magnificent Seven now account for almost 30% of the total market cap for all the S&P 500 companies. This is the highest market concentration (in terms of the market caps of the seven-largest companies as a percentage of total market cap) since the 1980s, at least (see Chart 2). No doubt this rising trend is due, at least in part, to the growing popularity of index-linked exchange-traded funds (ETFs). As the market caps for the top performers rise, demand for their shares from passive funds will have to grow in tandem, resulting in even higher prices.
There is no question that the US stock market is currently being dominated by just a handful of stocks — seven to be precise, going by the moniker of the “Magnificent Seven” (coined by analysts and news media). It is this group of mega caps that has been the primary driver behind the S&P 500’s all-time record high levels — accounting for 62.1% and 40.1% of gains in 2023 and so far this year, respectively. Without the Magnificent Seven, market gains would have been far more tempered. In fact, the broader market consolidated in 2H2023, before rising anew (see Chart 1).
