Quick Notes on the ‘Magnificent Seven’ in the S&P 500

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The S&P 500 is up by a 13.51% year-to-date. Though it has come down a bit from the peak in summer it is still a decent return. However a substantial portion of the returns have come from the top 7 stocks in the next dubbed as the ‘Magnificent Seven’. These are Apple(AAPL), Amazon(AMZN), Microsoft(MSFT), Alphabet (GOOGL). Tesla(TSLA), Meta Platforms Inc (META) and  NVIDIA Corp (NVDA). All except Meta and Tesla have market capitalization in excess of $1.0 Trillion with Apple topping at $2.76T. The growth of these firms in the past few years have been astonishing to say the least. With that said, the YTD and 5-year returns of these stocks are shown below.

Year-to-date Returns:

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5-Year Returns:

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Source: Yahoo Finance

Some of these hi-fliers have nose-bleed valuations. For instance, the Forward P/E of NVDA is 41.49 while on TTM basis it is 108. In addition, NVDA has common shares outstanding of over 2.4 billion. Not to be outdone, social media darling Facebook (aka Meta) has outstanding shares of 2.6 billion. Apple has over 15.0 billion shares outstanding.

These tech stocks have not only survived but thrived even during these times of high interest rates and inflation. It remains to be see if they can maintain their upward growth trajectory the reminder of this year and beyond.

Disclosure: No positions

The 2023 US Morningstar Andex Chart

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The Morningstar Andex chart for the US equity market is one powerful one-page that packs a ton of information for investors. The chart shows the growth of $1 from 1926 to 2022 in various asset classes. It also other useful information such as economic expansions and contractions, S&P P/E, inflation and interest rates, geo-political events, etc.

Over the time period shown in the chart US small cap stocks were the best with an average annual return of 11.8% while large caps returned 10.1%. It should be noted however that it is unlikely there is some investor that held their investments all the way from 1926 till 2022.

Source: Morningstar

Note: You can view the 2023 chart at the Morningstar directly by clicking here.

Emerging Country Equity Returns 2003 Thru 2022: Chart

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The top five best and worst performing and emerging equity markets from 2003 to 2022 are shown in the chart below. In 2022, Turkey was the best performer as the country recovered from economic and currency crisis. Chile came in at second followed by Brazil. From 2003, we can observer at least one country from Latin America appears almost every year with the top returns among emerging markets.

Note: The returns shown above are in British Pound Sterling

Data Sources: MSCI. Data for individual countries from 2003 through 2022 came from MSCI Price Indices, which measure market price performance only.

Source: Lazard Asset Management

Related ETFs:

  • iShares MSCI South Korea ETF (EWY)
  • iShares MSCI Taiwan ETF (EWT)
  • iShares MSCI India ETF  (INDA)
  • iShares MSCI Emerging Markets ETF (EEM)
  • Vanguard MSCI Emerging Markets ETF (VWO)

Disclosure: No Positions

Annual Returns of Developed Markets 2002 to 2021: Chart

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One of the strategies for success with investing in stocks is diversification. It is probably the easiest way to reduce risk while allowing room to capture any profit potential. The most popular chart that visually demonstrates the importance of diversification is The Callan Periodic Table of Investment Returns. Similar to the performance variance of sectors year over year, the returns of country indices also vary. A country’s equity market may be the top performer in one year while becoming the worst next year. No country consistently remains as the best market every year.

The following chart shows the annual returns of 22 developed markets from 2002 to 2021:

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Past performance is no guarantee of results. In USD. MSCI country indices (net dividends) for each country listed. Does not include Israel, which MSCI classified as an emerging market prior to May 2010. MSCI data © MSCI 2021, all rights reserved.

Source: Which Country Will Outperform? Here’s Why It Shouldn’t Matter, Wealthscape