Bravos Research breaks down why the Magnificent 7 quietly dropping 20% while the S&P sits near record highs is a warning sign worth watching.
Key Points
Key Highlights:
- The Magnificent 7 is down almost 20% since late last year even as the S&P rallied close to 50%, which is weird since these are the exact stocks supposed to be driving the whole market
- This looks like the dot com era when tech made up 30% of the index and started quietly weakening before everything else crashed, except today's tech giants are almost 40% of the S&P, even more concentrated
- The difference is earnings, back in 2000 tech earnings actually rolled over, today mega cap earnings are still growing fast, which usually means buy the dip not sell the top
- The best signal to watch is bank lending standards, tightening above 40% preceded every major crash, today it is only 8%, way down from 40% in 2023
Takeaway Buying the S&P today means betting everything on one theme, not 500 different companies. Nothing says a crash is coming right now, but the setup for one is sitting there waiting.
