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Are we in the Late Innings with the Magnificent 7? Today’s WeeklyLT continues from last week’s discussion, focusing on those heavily invested in the “Magnificent 7” - Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta & Tesla. What inning of the game are we in, and is the market too crowded on one side of the boat? Investing is often seen as a game of managing probability and risk. Looking back, only a few companies from my youth have withstood the test of time. Many draw comparisons between today’s Magnificent 7 and the “Nifty Fifty”, a group of 50 large-cap stocks on the New York Stock Exchange that were highly favored by institutional investors in the 1960s & 1970’s. Names like IBM, General Electric, Xerox, Polaroid & Coca-Cola were among them. Much like the Magnificent 7 today, investors were attracted to these companies for their consistent earnings growth and perceived stability – LEADING TO INCREDIBLY HIGH PRICE MULTIPLES. However, during the bear market of the early to mid 1970’s, those lofty valuations became unsustainable as the broader market declined. Later, the rise of the Internet further disrupted many of these once-dominant companies. Some argue the Magnificent 7 might not meet the same fate. These companies continue to pour billions into research & development, aiming to stay ahead of technological disruptions from upstarts. They are not just participants in innovation; they are leaders, potentially creating barriers for future competitors. Yet, the combined worth of the Magnificent 7 is now a staggering $15.4 trillion combined, as illustrated in a recwnt analysis Visual Capitalist. https://lnkd.in/gD98_pPv To put that into perspective, in 2000, Apple, Microsoft, Amazon, and Nvidia had a combined value of just $244 billion. Alphabet (Google) was still a private company, and Meta (Facebook) and Tesla weren’t even founded yet. I don’t have a crystal ball, nor can I pinpoint what inning these companies are in. However, it seems increasingly likely that the market may be LEANING TOO HEAVILY ON ONE SIDE, and history suggests that good times rarely last across multiple generations. One reason for the massive inflows into these stocks has been the “carry trade” discussed in last week’s post. Demographics have also played a key role. As these trends begin to reverse, coupled with interest rates higher than they’ve been in years, it might be wise to REASSESS THE RISKS. The probability of continued exponential growth for these stocks may be lower than many anticipate. Investing for retirement requires us to envision what the world might look like decade(s) from now. Are we playing too much confidence in today’s leaders, or should we be considering the broader shifts on the horizon?