The Magnificent 7 prevented a market crisis even as Nvidia cratered
Another silver lining from Monday’s market rout: though one tech titan lost more value than any other company has before, crucially, US megacap tech giants did not decline in unison.
Apple — perhaps because of its dearth of AI prowess — had a huge rally, as investors seemingly flocked from Nvidia to the iPhone maker. Meta booked a solid gain as well, while Amazon also inched higher.
Call it protective rotation. Even on a very dark day for stocks, more money seemed to move between the Magnificent 7 cohort than out of the market completely, the latest piece of momentum behind a trend that’s generally been gaining strength for well over a year.
We’ve discussed at length how low correlations between these trillion-dollar companies are the key feature of this market backdrop that’s kept realized volatility suppressed. It was one of our top charts to watch for a reason, and just passed a pretty challenging test.
Occasionally — but not always — this holds true even on no good, awful days for the market. Monday’s session was something of a positive outlier in this regard. Some things worth highlighting when we look at the 35 sessions in which at least two members of this cohort fell by at least 3% since the start of June 2023 (when news mentions of “Magnificent 7” started to ramp higher):
We don’t have that many instances of two or more members of this club falling in excess of 3% in the same session — this happens about two times every five weeks. That’s a big reason why realized correlations and volatility have been low for most of this period, to begin with!
Of the 20 times besides Monday when exactly two Magnificent 7 stocks have fallen at least 3%, we’ve tended to see broader downside participation.
