Mag Seven Pullback Screams Concentration Risk

Last week’s market pullback should remind investors of the influence of a handful of stocks.

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Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: etf.com Staff
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Edited by: James Rubin

Investors and financial advisors last week got a sense for how concentration in equity markets can feel when things start to reverse course.

The abrupt pullback on Wednesday that saw the S&P 500 Index fall by more than 2% for the first time in nearly a year, was largely attributed to the weaker-than-expected earnings reports from the tech sector, led by Tesla Inc. The electric car maker is part of the Magnificent Seven companies that have been carrying stocks higher for the past few years.

As the market illustrated on Wednesday when Tesla shares dropped more than 13% at one point, the Mag Seven is now determining larger market trends. 

etf.com: TSLT three-month flows

Since the start of the year, the S&P has gained 15%, but seven companies account for more than half that return, led by a 130% gain by Nvidia Corp.

Meta Platforms Inc., Alphabet Inc. and Amazon Inc. are all up between 21% and 32% this year.

Even laggards Microsoft Corp. and Apple Inc. are respectable with gains in the 14% range.

Tesla Performance Sags

But the world has turned for Tesla, which is now down nearly 12% for the year, ranking it number 447 among the companies in the S&P 500.

That’s a stark contrast from 2023 when Tesla’s 102% gain ranked it as the tenth best performer in the index.

Down the list, the respective performance of the Mag Seven companies last year ranked one, two, 10, 20, 47, 49 and 63, according to data compiled by Liz Ann Sonders, chief investment strategist at Charles Schwab & Co.

So far this year, the Mag Seven rankings have dropped to two, 32, 76, 105, 161, 170, and 447.

Put another way, according to Sonders, 10% of S&P 500 companies have outperformed the index over the past 12 months, but that percentage of outperformers has steadily climbed over the past six months to now represent 56% of the companies in the index.

It would be difficult to find a more glaring signal of a market expansion.

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.

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