With four of the magnificent seven tech stocks expected to report this week, all eyes are on the mega-cap AI cohort, but analysis from IG indicates these stocks have underperformed parts of the UK this year.
According to research from trading platform IG, the magnificent seven cohort has lost money this year, shedding 1.2% in sterling terms based on Bloomberg data.
Chris Beauchamp, chief market analyst at IG, said: “No investment theme works all the time.
“The ‘magnificent seven’ moniker has felt out of date for a while, given the decidedly mixed performance of some members of this once-illustrious group, and this data underlines the fact that this group of seven big names is not powering the market as it once did.”
By contrast, some of the most overlooked sectors in the FTSE 350 have outperformed.
For example, the FTSE 350 consumer staples sector is up 2% over the same period, a 3.2 percentage point outperformance. For comparison, consumer staples represent just 12.9% of the FTSE 350’s index weight, according to data from FTSE Russell.
Investors would have performed even better in sectors including telecoms or industrial metals, which have surged 13.7% and 20% respectively this year. The report noted even investing in a “traditionally” defensive sector such as FTSE 350 utilities would have beaten the US tech cohort by 7 percentage points.
Beauchamp added: “As fears about over-valuation and huge cash burn continue to play on investors’ minds, the group has seen its performance lag behind other much less exciting sectors.
“This is not to suggest that the magnificent seven are doomed to fall further and further behind, but it is a reminder to investors that they shouldn’t become too attached to one sector or theme.”
See also: Why the magnificent seven has become an ‘obsolete term’
