Will the Magnificent Seven Stay Magnificent in 2025?
So, January is now in full swing and everyone has transitioned from the holiday season, we look ahead to what 2025 might have in store for us and the markets
The majority are optimistic, believing that the incredible bull run in the S&P500 will persist, with some very bullish predictions. John Stoltzfus, the Chief Investment Strategist at Oppenheimer, has set his target for the S&P500 to reach 7,100 by the end of 2025 a hefty claim, indeed but he is not alone.
Wells Fargo forecasts the S&P500 to hit 7,007, Yardeni Research predicts 7,000, and Deutsche Bank concurs with the same number. In fact, the lowest prediction for the S&P500 in 2025 comes from UBS, with their estimate of 6,400. With the S&P500 reaching a new all-time high this year, one can understand the optimism to some extent. But this bull run has been driven by the so-called “Magnificent Seven.” So, the question I must ask is: will they stay magnificent in 2025, and if not, are there any stocks capable of taking up the mantle?
When I mention the ‘Magnificent Seven,’ I’m not referring to the 1960 classic western starring Yul Brynner. Instead, I’m talking about the mega-cap growth stocks that have been at the forefront of the S&P500 bull run. The Magnificent Seven or “Mag 7” for short are as follows: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. These tech giants have led the way with unique innovations in areas like cloud computing and artificial intelligence. As a result, they’ve seen strong returns and have been the driving force behind the S&P500’s success.
However, could things be about to change?
Let’s look at the performance of the Magnificent Seven in 2023:
| Stock | % Gain in 2023 |
| Alphabet | 59% |
| Amazon | 81% |
| Apple | 48% |
| Meta Platforms | 194% |
| Microsoft | 57% |
| Nvidia | 239% |
| Tesla | 102% |
| S&P500 | 24% |
Now, let’s look at the performance of the Mag 7 as of December 10, 2024:
| Stock | % Gain in 2024 |
| Alphabet | 26.86% |
| Amazon | 49.19% |
| Apple | 31.85% |
| Meta Platforms | 74.65% |
| Microsoft | 19.30% |
| Nvidia | 181.88% |
| Tesla | 55.87% |
While there are still gains, the overall performance of the Magnificent Seven is almost down by 50% compared to 2023.
So, is a change on the way? If so, does that mean the claims of the S&P500 reaching 7,100 in 2025 now seem far-fetched, or will the other 493 stocks help boost the index in that direction?
If there is going to be a change, what could the potential reasons be? Two words: Trump’s tariffs. A new round of tariffs on Chinese imports could significantly impact technology stocks, as well as the consumer sector. Tariffs could cut profit margins, meaning companies like Apple may have to increase prices, which could negatively affect consumer demand for luxury products. Additionally, Apple imports a significant number of iPhones and laptops from China, which could hurt its business.
Nvidia and Microsoft might also feel the pinch as tariffs disrupt the complex global supply chains these tech giants depend on. Tesla could also face challenges, particularly if the rumored tariffs on steel and aluminum hurt the car industry.
Inflation could rise again, leading to reduced consumer demand, which would impact companies like Amazon. In 2022, when inflation was running rampant, companies like Alphabet and Meta struggled due to a significant drop in online advertising revenue. This could happen again.
So, while the Magnificent Seven aren’t likely to vanish entirely, it’s clear they could face headwinds in 2025. Their performance could take a hit, which might hold back the S&P500 from reaching the dizzy heights of 7,100.
However, are there other companies that might step up to give the S&P500 the boost it needs?
First, CSX, based in Florida, is one of the largest rail transportation operators in the U.S. CSX could benefit from Trump’s tariffs since the majority of its revenue comes from domestic shipments. Companies looking to source products from the U.S. instead of international suppliers could lead to a boost for CSX.
Another company to consider is J.B. Hunt Transport Services, a major trucking company. A large portion of J.B. Hunt’s business involves transporting containers to and from railcars. If CSX sees a boost, J.B. Hunt could see more demand for its services.
Lastly, Steel Dynamics, one of the largest steel producers in the U.S., could also benefit from tariffs on steel and aluminum imports. As a domestic producer, Steel Dynamics may stand to gain in this environment.
So, while 2025 is certainly going to be an interesting year, it’s likely the Magnificent Seven won’t be as magnificent as they were in previous years. But that doesn’t mean the S&P500 won’t still thrive, especially if other sectors can step up to fill the gap.
Written By James Trescothick
Head of Market Research and Market Analysis at OneRoyal
