Bank of America Predicts End of Magnificent-7 Stock Dominance

Bank of America analysts suggest the era of Magnificent-7 stocks dominating the US market may be nearing its end. Savita Subramanian, head of US equity and quantitative strategy, notes that while history favors continued cap-weighted dominance, potential Fed rate cuts and a shift to a Recovery regime could signal a reversal.

The first quarter of 2024 saw significant pressure on tech giants like Apple and Tesla, with tariff threats eroding their market leadership. This created space for smaller index constituents to narrow the performance gap. The S&P 500's top 50 stocks have outperformed the benchmark by 73 percentage points since 2015 - a pattern last seen before the dot-com bubble burst.

Subramanian's team draws parallels to the early 2000s, when market leadership rotated from megacap growth to value and small-cap stocks. Current conditions suggest similar dynamics may emerge, potentially reshaping equity market hierarchies.