Don’t worry about a Magnificent Seven bubble burst: Jonathan Levin

In the ever-growing concern over market concentration, the Magnificent Seven mega-cap growth stocks, comprising 29% of the S&P 500, raise comparisons to the dot-com bubble. However, recent earnings reports reveal a diverse performance among them, showcasing the power of diversification. Despite the concentration, historical market top-heaviness isn't new, and the Magnificent Seven's robust growth and earnings make a case for their current valuations. While the debate over market-weighted and equal-weighted indexes persists, the latest earnings do little to signal the end of this market era.

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By Jonathan Levin

Investor worries about market concentration aren't going away, and it's easy to understand why: the so-called Magnificent Seven mega-cap growth stocks now constitute about 29% of the S&P 500 Index by market weighting, eliciting ominous comparisons to the peak of the dot-com bubble. Index investors simply have too many eggs in too few baskets, the thinking goes. And they're pricy baskets, to boot! 

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