Is US stock rally near Magnificent Seven turning point?
By some measures, this small clutch of tech titans' profits, market cap and valuations as a share of the wider market has never been bigger. Broader indices are at record highs, but strip out these firms and the picture is much less rosy.
Indeed, since the beginning of 2023, the S&P 500 composite – the benchmark market-cap index increasingly dominated by the Magnificent Seven – has gained 67 per cent, more than double the equal-weight index's 32 per cent.
Only two years ago, the S&P 500 composite/equal-weight ratio was 0.66, meaning the composite index was worth around two-thirds of the equal-weight index. That ratio is now 0.84, the highest since 2003.
There's good reason for that.
According to Larry Adam, chief investment officer at Raymond James, 12-month forward earnings estimates for the S&P 500 have outpaced estimates for the equal-weight index by 14 per cent. And Tajinder Dhillon, senior research analyst at LSEG, notes that the Magnificent Seven last year accounted for 52 per cent of overall earnings growth.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
Many investors and analysts consider it unhealthy to have the fate of the entire market dependent on so few companies. It may be fine when they're flying high, but not so much if one or two of them take a dive.
Plus, it makes stock picking more difficult. If the market basically follows the Magnificent Seven or Nvidia, why should an investor bother buying anything else? That's a recipe for market inefficiencies.
Yachts and all boats?
There have recently been nascent signs that the market may be broadening out beyond tech and artificial intelligence-related names, largely thanks to positive news on the trade front. Last week, the equal-weight index eclipsed November's high to set a fresh record.
Raymond James' Adam notes that the equal-weight index outperformed the S&P 500 last week for the fourth week in the last 13. More of the same this week would mark its first monthly outperformance since March.
Can it hit this mark? Around 160 of the S&P 500-listed companies report this week, including Meta, Microsoft, Amazon and Apple. It's not a stretch to say these four reports will move the market more than the rest combined.
LSEG's Dhillon says the Magnificent Seven's share of total earnings growth is expected to fall to 37 per cent this year and 27 per cent next year. The expected earnings growth spread between these stocks and the wider index in the second quarter – 16.4 per cent versus 7.7 per cent – is the smallest since 2023, and will shrink more in Q3, he adds.
Adam, however, thinks the recent market broadening is a 'short-term normalisation' rather than a 'material shift'. He thinks the earnings strength of the tech-related sectors justifies the valuation premium on these stocks.
Regardless, what we know for sure is that fears about the market's concentration and narrowness have been swirling for years and there has yet to be a reckoning. The equal-weight index's rise to new highs last week suggests the rising tide is lifting all boats, not just the billionaires' yachts.
Essentially, the Magnificent Seven and large caps are outperforming, but if you peel back the onion, other sectors such as financials and industrials are also doing well. And look around the world. Many indices outside the US that aren't tech-heavy are approaching or printing new highs also, such as Britain's FTSE 100 and Germany's DAX.
'To see the largest names leading isn't a worrisome sign, especially as they are backing it up with very strong earnings,' says Ryan Detrick, chief market strategist at Carson Group. 'This isn't a weak-breadth market, it is broad-based and a very healthy rally.'
This week's earnings might go some way to determining whether this continues for a while yet. REUTERS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
11 minutes ago
- Business Times
‘Champions League' mindset drives more SEA founders to US
FELIX Lee still keeps his diary from the one-month solo trip he took to San Francisco in 2018. Then 19 and fresh out of pre-university, the Singaporean entrepreneur had just sold his trip-planning startup, Packdat, to an Indonesian-listed SIM card provider. Meeting at least three new people each day on that trip, Lee jotted down everything he saw, heard, and learned. His goal? To answer one question: Why do amazing ideas seem to be born only in Silicon Valley? Later, it clicked: 'What we lack, in South-east Asia, is not resources, but the guts,' said Lee. Many founders in Silicon Valley do not rely on earning credentials or establishing networks before starting a company, he observed. Instead, they head straight to San Francisco in hopes of building the next billion-dollar startup. Lee did not see the same spirit in Singapore. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Fast forward to today, he has spent over half a year in San Francisco building ADPList, a platform connecting individuals with mentors, mostly within tech. Lee is not the only South-east Asian founder who's making the US their home base, though. With funding in South-east Asia declining for three straight years, it's no surprise that more founders in the region are chasing other markets. Regional investors have also tended to stick to tried-and-tested sectors such as e-commerce and fintech, compared to their US counterparts who have large risk appetites. This makes the latter more attractive to emerging and deep tech companies. Tech in Asia has compiled a list of 78 South-east Asian founders of 66 companies that are now based in the US. Among these founders, 19 relocated after building firms in the region, while the rest have been based in the country from the start. While not exhaustive, the list paints a picture of an increase in founders choosing to grow their businesses in a market that they think gives them the best shot at becoming a global company. If you are a founder considering moving to the US, our list can be a starting point for you. Go big, go stateside Nearly two-thirds or 52 of the founders on our list are based in California, which tops our list of US states. Most are AI startups, and of these, a majority, or 14 of 15, are located there. It's no surprise, AI founders want to be where Big Tech lives. New York ranks second with 14 South-east Asian founders. Half of them are building firms in the healthtech and fintech sectors in the state, the world's top financial centre and a rising healthtech hub. That said, not every founder heads to the hubs of the West or East Coast. Cuong Pham, co-founder and CEO of Eureka Robotics, recently relocated his family from Singapore to Atlanta, Georgia. In June, his company, a supplier of robotics solutions to manufacturers, opened its fourth office in the US state, following Singapore, Vietnam, and Japan. Atlanta is a major transportation hub that helps the company reach customers across the US, according to Pham. Eureka Robotics co-founders Hung Pham (left) and Cuong Pham. PHOTO: EUREKA ROBOTICS 'From day one, I knew I'd have to come to America,' he recalls. That moment came after Eureka Robotics raised US$10.5 million in a series A round in December 2024. The US offers a massive opportunity in manufacturing. The market is 5x to 6x larger than Japan's and hundreds of times bigger than Singapore's, Pham shares. But it's not just about market size. In the US, it takes six months to go from initial conversation to a confirmed order. That's 2x to 3x faster than in Singapore or Japan. US buyers are also more willing to sign larger contracts with new vendors. 'Generating revenue quickly is paramount for a startup,' Pham explained. 'That's why, as CEO, I have to be in the US to drive sales myself.' He expects revenue from the US to surpass the total from all other markets starting in 2026. Like Pham, ADPList's Lee has observed that US users make up a sizable share of his customer base. Currently, 38 per cent of the platform's users and 80 per cent of its revenue come from the country. To test if the product truly resonated in the US, Lee spent three months in the country in mid-2022 and organised ADPList's first meetup. The turnout exceeded his expectations. Since then, he has been spending increasing amounts of time in San Francisco. He's also preparing to move there full-time later this year. This planned move signals his commitment to the market, especially to investors, because it shows he's serious, said Lee. Big league, bigger costs Every rose has its thorn, and the US market is no exception. For Kenneth Lou, co-founder and CEO of healthtech firm Mito Health, moving to New York in 2024 meant entering an intensely competitive arena. His team, spread across the US and Singapore, is 'up against some huge monsters', he said. These include US-based Superpower and a16z-backed Function, which has raised US$53 million to date. In contrast, Mito Health has raised only US$3.5 million so far. Still, the country offers a much larger market than South-east Asia, considering its huge population and deeper pockets. From left: Mito Health founders Dr Ryan Ware, Kenneth Lou, Joel Kek, and Tee-Ming Chew. PHOTO: MITO HEALTH Another key hurdle for South-east Asian founders in the US is labour cost. There are also the challenges that come with managing a team across 12- to 14-hour time differences. For the same role, each headcount in the US can cost twice as much as in Singapore, as per Eureka Robotics' Pham. As such, less than 10 per cent of the company's 60 employees are based in the US. They handle crucial on-site roles such as sales and engineering support. Meanwhile, the core R&D engineers remain in Singapore and Vietnam. For small startups such as ADPList and Mito Health, US-based hires are focused on functions that require deep local insight, like growth or marketing. Its engineering or design teams, meanwhile, are still in South-east Asia. Relocating staff to the US remains a tall order, even for well-funded companies. Not every employee volunteers for the move, and those who do face unpredictable visa hurdles under Donald Trump's administration. Ambition's price tag Not everyone is cut out for a big move across the world, however. Melvin Yuan, who first moved to the US in 2013 in search of a larger market for his real-time location analytics startup, YFind Technologies, knows this first-hand. Today, he lives in San Francisco, running Stellar – a company that handles back-office operations for firms in both Singapore and the US. Stellar founder and CEO Melvin Yuan. PHOTO: STELLAR Relocating to the country, for him, meant restarting life in a pricier, unfamiliar place. For those with families, uprooting and helping kids adjust to a new school system is doubly challenging. 'You have to work extra hard to set up life all over again, build a whole new network to get into the market,' Yuan shares. 'If you are not ambitious, you probably don't want to be here.' Mito Health's Lou echoes this sentiment. He said that it was 'not easy' for him and his wife to leave their families, especially his mother, who lives alone in Singapore. But Lou thinks the sacrifice is worth it.
Straits Times
2 hours ago
- Straits Times
Here are the 10 best-performing ETFs on SGX
Sign up now: Get ST's newsletters delivered to your inbox As at June, Singapore's ETF market comprised 47 listings with total assets under management reaching $14.3 billion, up 32 per cent year on year. SINGAPORE - Exchange-traded funds (ETFs) listed on the Singapore Exchange (SGX) have recorded net inflows of $700 million in the first half of 2025, according to the local bourse's latest ETF Market Highlights report. This is supported by $1.2 billion in net creations across 22 ETFs, alongside $500 million in net redemptions from 13 ETFs. As at June, Singapore's ETF market comprised 47 listings with total assets under management (AUM) reaching $14.3 billion, up 32 per cent year on year. Equity and gold ETFs led the growth, with turnover increasing by 69 per cent and 62 per cent, respectively. Retail segment turnover also saw strong momentum, climbing 67 per cent. Inflows for Singapore-focused ETFs stood at $568 million, driven by declining Singapore dollar rates and robust market momentum. In particular, the combined AUM of the SPDR Straits Times Index ETF and Nikko AM Singapore STI ETF hit a record high of $2.8 billion in June. Here are the top 10 SGX-listed ETFs in terms of total returns for the first half of 2025. As a gauge, the US S&P 500 is up more than 8 per cent this year. 1. SPDR Gold Shares The SPDR Gold Shares ETF tracks the performance of gold bullion, with its underlying index being LBMA Gold Price PM. As such, it provides investors with direct exposure to gold prices without the need to hold physical metal. Its return rate was the highest among all SGX-listed ETFs for the half year at 17 per cent. With growing geopolitical uncertainties and robust safe-haven demand, the ETF saw record inflows and AUM, as holdings surged 75 per cent year on year to reach $2.4 billion in June 2025. 2. Phillip SING Income ETF The top Singapore equity ETF for H1 of this year offers exposure to 30 high-yielding SGX-listed stocks screened for quality and financial health. Its interest is in income-focused strategies and has a dividend yield of 3.6 per cent. It tracks the Morningstar Singapore Yield Focus Index and saw a return of 11.9 per cent for the half year and nearly 26 per cent for the full year. 3. Lion-Nomura Japan Active ETF (Powered by AI) An actively managed ETF using artificial intelligence (AI)-driven models to select constituents from Japan's Tokyo Stock Price Index, its returns for the first half year was at 11.7 per cent. Its total returns for one year stood at 13.8 per cent. The Lion-Nomura Japan Active ETF is the second best performing equity ETF on SGX for the half year. 4. Lion-OCBC Securities Hang Seng Tech ETF The ETF tracks the Hang Seng Tech Index, and provides exposure to 30 of the largest Chinese tech firms listed in Hong Kong, such as Tencent, Alibaba, and Meituan. Its first half year return stood at 10.4 per cent. The Lion-OCBC Securities Hang Seng Tech ETF continued to perform well amid China's stimulus efforts and optimism on AI-related technologies despite broader macro challenges. Its top three sectors are consumer discretionary, communications and information technology, with its AUM standing at $378 million as at May 2025. 5. Lion-OCBC Securities APAC Financials Dividend Plus ETF This ETF tracks top dividend-paying financial stocks across Apac via the iEdge APAC Financials Dividend Plus Index, with a 9.9 per cent return recorded for the period. It is able to offer stable income and quality exposure to the region's banking and insurance sectors, and benefits from regional rate cut expectations. The Lion-OCBC Securities APAC Financials Dividend Plus ETF is the fourth top-performing equity SGX-listed ETF for the half year. 6. Xtrackers FTSE Vietnam Swap UCITS ETF This ETF offers exposure to Vietnam's equity market, which made gains on manufacturing recovery and foreign direct investment inflows. It tracks the FTSE Vietnam Index, and benefits from Vietnam's export-driven growth and regional supply chain shifts. For the first half, its return stood at 9.9 per cent. It is the fifth top-performing equity SGX-listed ETF for the half year. 7. CGS-Fullgoal Vietnam 30 Sector Capped ETF The CGS-Fullgoal Vietnam 30 Sector Capped ETF tracks 30 of Vietnam's top-performing sectors with caps to prevent over-concentration. It gives investors balanced exposure across financials, industrials, and consumer sectors – key growth drivers in the country's economy. The ETF's underlying index is the SGX iEdge Vietnam 30 Index, and recorded a first-half return of 9.7 per cent. 8. Xtrackers MSCI Singapore UCITS ETF The ETF benefited from the recovery in property and banking stocks, and Singapore dollar-focused investor sentiment amid falling local rates. It provides exposure to large-, mid-, and small-cap Singapore companies by tracking the MSCI Singapore Investable Market Total Return Net Index, with a first half return of 9.7 per cent. 9. UOB APAC Green REIT ETF Focused on high-yield real estate investment trusts (Reits) across Apac with strong ESG credentials, the UOB APAC Green Reit ETF achieved the best half year performance among the five Reit ETFs listed on the SGX. It tracks the iEdge-UOB APAC Yield Focus Green Reit Index, with a first half half return at 9.3 per cent. The ETF recorded the highest returns among SGX's sustainability-linked ETFs as well for H1 of this year. 10. Xtrackers MSCI China UCITS ETF This ETF offers broad exposure to Chinese equities including tech, financials, and consumer names, as its underlying index is the MSCI China TR Net Daily USD Index. For the half year, its returns stood at 8.9 per cent. It tracks the performance of large and mid-cap Chinese companies across A Shares, H Shares, B Shares, Red Chips, P Chips and foreign listings. Reit ETFs see new AUM all-time high; S-Reits record strong distribution yield Amid the current murky geopolitical and global trade climate, SGX-listed Reit ETFs displayed strength in the first half, with S-Reit ETFs offering highest returns in June. S-Reit ETFs also have the highest gross dividend indicated yields of up to 6 per cent now. The AUM value of Reit ETFs achieved a new record of nearly $1.2 billion, surpassing the last high in September 2024 of around $1 billion. UOB APAC Green Reit ETF recorded the top half-year returns level of 9.3 per cent followed by Phillip APAC Div Reit ETF with 7.5 per cent. CSOP iEdge S-Reit ETF was the best performer for the month of June, returning 4.7 per cent. The five Reit ETFs pay out an average dividend of close to 5.2 per cent, with the CSOP iEdge S-Reit ETF's 12-month gross yield at about 6 per cent. According to SGX data in June, retail investors were the net buyers of S-Reits, as the sector received a total net retail inflow of around $400 million as at June 26.
Business Times
2 hours ago
- Business Times
US explores better location trackers for AI chips, official says
[TAIPEI] The US is exploring ways to equip chips with better location-tracking capabilities, a senior official said, underscoring Washington's effort to curtail the flow of semiconductors made by the likes of Nvidia to China. Washington has espoused working with the industry to monitor the movements of the sensitive components, part of a broader plan to curtail smuggling and ensure American technology remains dominant. Last week, Beijing summoned Nvidia representatives to discuss US efforts around location-tracking and other alleged security risks related to its H20 chips. 'There is discussion about potentially the types of software or physical changes you could make to the chips themselves to do better location-tracking,' said Michael Kratsios, one of the architects of a US artificial intelligence (AI) action plan unveiled by US President Donald Trump last month. 'That is something we explicitly included in the plan,' the White House Office of Science and Technology Director said. Trump's blueprint has provoked a backlash in Beijing, which for years railed against alleged US surveillance and Washington's efforts to curtail its tech sector. The Chinese government is particularly sensitive to semiconductor sanctions designed to counter Huawei Technologies or rising AI developers such as DeepSeek. Trump officials recently pledged to lift export restrictions on the H20 to China as part of a trade deal they say will secure sales of rare-earth magnets to the US. But Washington is also focused on curtailing the smuggling of chips. Kratsios said on Tuesday that he's not had conversations 'personally' with either Nvidia or Advanced Micro Devices about exploring location-tracking technology. Last week, Nvidia said that it does not have 'backdoors' in its chips. Kratsios, who was in South Korea to attend an Apec Digital Ministerial Meeting, took aim at China's own AI action plan, which involves forming a global organisation to devise governance and technology standards. 'We believe each country should set their own destiny on how they think about regulating artificial intelligence,' he said. 'The US model, which puts innovation first, will be the most attractive.' BLOOMBERG
