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The Magnificent Seven — the group comprised of tech stocks Nvidia (NVDA), Alphabet (GOOG, GOOGL), Tesla (TSLA), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), and Apple (AAPL) — has been relabeled as the "Maleficent" Seven by Goldman Sachs.
Brad Smith and Madison Mills take a closer look at the analyst note as the Goldman team also cut its S&P 500 (^GSPC) year-end target to 6,200 amid recent megacap tech stock sell-offs.
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from magnificent seven to Maleficent seven. That's what Goldman Sachs is saying about those mega cap tech stocks in a note out this morning here. Goldman noting that the mag seven are responsible for over half of the S&P 500's moved towards a near correction this week. Goldman also cutting its end of year target for the S&P 500 to 6200, that is down from 6500. There you're taking a look at some of those magnificent seven names performance versus the S&P 500 and the S&P 493. So, those seven names kind of removed from it, but they've revised their base case scenario as well here saying they're expecting a similar return from a lower level. They're lowering that 2025 year end S&P 500 index target to 6200 from 6500.
The sell off that we've seen has not been very broad based. A lot of it has been in the large cap names. So, it it makes sense that they're talking about rebranding the mag seven, not so magnificent anymore if they're not going to be responsible for the majority of the market gains. I think it's really interesting that they talk about hedge funds selling off some of their risk portfolios, that's indicative of a market that could continue to have pressure moving forward here. They also talk about the recessionary outlook, obviously they've increased their odds of a recession, but still not pricing in that as their base case. They do expect slower GDP growth, which of course is something that could weigh on earnings moving forward.
Three things need to happen for ultimate trough in the market to be set here, they say. First, improvement in the outlook for the US economic activity due to either better growth data or change in tariff policy. Second, equity valuations, cyclical versus defensive. Third, depressed investor positioning here.