For the past few years, the Magnificent 7 have dominated market earnings growth, at one point soaring nearly 60%. (see chart)
However, this pace is unsustainable.
As expected, the Mag 7’s (Apple, Microsoft, Amazon, Nvidia, Tesla, Alphabet and Meta) earnings growth is slowing. It’s now projected around 20%, still a strong gain.
Meanwhile, the rest of the S&P 500 is growing steadily.
This is a welcome sign, since diversification helps manage risk, (i.e., instead of home runs, the market’s delivering singles and doubles—small, steady gains that add up over time).
Let’s face it, home runs are great.
But, a well-rounded team—built on singles, doubles and solid defense—wins more games.
The same goes for diversification in investing.
What’s causing the shift?
Steady economic growth is helping drive the broader earnings, including a GDP around 2.5-2.7% and low unemployment. AI also remains a key growth driver.
It’s encouraging to see more companies contributing to earnings growth.
Granted, the right side of the chart (gray shaded area) is an estimate, but if these trends hold, we’re likely looking at a more balanced market in the coming months.
PS: If you missed it, we previously shared a detailed update on the economy: The Economy, Tariffs & Consumer Sentiment.
–David Bunker, Financial Advisor & Licensed Fiduciary
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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.