BREAKING: After a 15-year bullish call, Yardeni goes underweight the Mag7
This one won’t go unnoticed. Given that this shift comes from one of the long-term bulls of the mega cap tech stocks.
As Bloomberg reports:
Yardeni Research, Inc. now recommends effectively going underweight the Magnificent Seven megacap technology stocks versus the rest of the S&P 500, expecting a shift in earnings growth ahead.
“We see more competitors coming for the juicy profit margins of the Magnificent 7,” and expect that the productivity and profit margins of the rest of the S&P 500 will be boosted by tech, said Wall Street research veteran Edward Yardeni. He added that in effect, “every company is evolving into a technology company.”
The strategist said that it no longer makes sense to continue recommending overweighting the Information Technology and Communication Services sectors in an S&P 500 portfolio, after having kept that weighting since 2010, according to the research note Sunday. The firm recommends market-weighting of the two sectors by adding to overweights in financials and industrials, and overweighting health care.
The Magnificent 7 merits special caution as “they’re competing more aggressively against each other and they’ve got more competition coming out of nowhere” Yardeni said in an interview with Bloomberg Television on Monday. In particular, he cited the recent doubts about OpenAI’s dominance as well as the emergence of China’s DeepSeek earlier this year.
A gauge of the Magnificent 7 stocks has risen more than 600% since the end of 2019, while the S&P 500 has gained 113%. That has come amid a Covid-pandemic-fueled trend toward Big Tech as well as a more recent boom in artificial intelligence.
Yardeni also sees little reason to continue overweighting the US in the all-country world MSCI portfolio, especially after global peers have beaten the US this year on cheaper valuations, the weaker dollar and resilience of worldwide corporate earnings.
“The US now accounts for 65% of the market cap of the world’s stock market, so it’s hard to recommend overweighting something that is already quite overweight,” he told Bloomberg TV.