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after the sharp decline in july and august, the familiar mag 7 is back?

currently, u.s. technology stocks have resumed their upward trend, and investors have once again shown their enthusiasm for the big seven (mag 7). the s&p 500 hit another record high on friday, with technology stocks leading the gains.

mag 7’s stock price has performed well recently, with the related etf rising 1.7% this week and about 12% in the past three weeks. judging from the performance of the roundhill mag7 etf, mag 7’s recent gains have almost erased the losses in previous months.

regarding the recent rise in mag 7, "barron's" commented that we have already passed this stage (tech stock mania). over the past three months, investors' focus has shifted to the other 493 stocks in the s&p 500, known as small-cap stocks. however, continued gains in small-cap stocks require investors to believe that the federal reserve's deep interest rate cuts will be enough to prevent a recession.

but at the moment, the economy doesn’t seem to have gone that far. at the same time, rising geopolitical tensions in the middle east have not helped the economic recovery.in a world full of uncertainty, investing in big companies seems like a better option.

the newspaper further stated thatmag 7's continued appeal may be yet another piece of evidence that markets are so inefficient that investors have stopped pricing stocks in a rational manner.

clifford asness, a partner at aqr asset management, pointed out in a recent paper that from 1950 to the internet bubble period (1995 to 2001), the stock market was relatively efficient. this can be judged by comparing the most expensive large-cap stocks with the cheapest stocks. verify the price-to-book ratio. this ratio was relatively stable for about 50 years until it spiked during the dot-com bubble and has risen again over the past decade, showing that investors had stopped pricing rationally.

asness believes that the three reasons for the current market change are: indexation, long-term low interest rates, and the rise of retail traders driven by new technologies, making "retail group stocks" such as gamestop far beyond reasonable valuations. asness's advice is to invest in "value stocks."

as the federal reserve cut interest rates to start a easing cycle for global central banks, european inflation continued to fall, and the people's bank of china launched a series of "policy packages" to boost the international market, investors began to re-examine their investment portfolios and stock selections.the seven giants of the u.s. stock market (google parent company alphabet, amazon, apple, meta, microsoft, nvidia, and tesla) are still the powerhouse of the u.s. stock market.

mag 7 market has experienced a roller coaster, wall street is bullish on u.s. stocks

in the first half of this year, the us stock technology giant mag 7 has been regarded as a key engine for the growth of us stocks. as of june, mag 7 contributed nearly 60% of the return of the s&p 500 index. however, since july, this momentum has quickly stalled.

in july and august this year, mag 7 experienced sharp declines of varying degrees. according to statistics, from july to early august, mag 7’s market value dropped by an astonishing nearly 2 trillion us dollars. during september, mag 7's sharp decline stabilized and entered the overall recovery stage.

regarding the sharp drop at that time, market analysts pointed out that mag 7’s huge investment in the field of ai triggered market doubts about its ability to monetize. at that time, funds began to flow into small-cap stocks, and the market style also switched accordingly. at the same time, due to mag 7’s high market capitalization, u.s. stock market concentration reached a record high. deutsche bank analyst jim reid said that historically high valuations and high concentration are often accompanied by subsequent market adjustments.

after this decline, the market value of mag 7 companies still accounts for more than 30% of the s&p 500 index.

however, the market view is more optimistic about the subsequent trend of the s&p 500 index, with wall street looking at a peak of 6,100 points. some well-known sell-side institutions on wall street predict that the year-end target point for the s&p 500 index will range from a low of 4,200 to a high of 6,100.

additionally, goldman sachs found that from 1996 to 2023, average daily trading volume for stocks and options peaked in october. the coming weeks will be an important period for trading activity as october is earnings season, when public companies typically manage their results through the end of the year and provide guidance for the coming year.