Can the 'Magnificent 7' stay magnificent?

In 2024, tech stocks, especially the "Magnificent Seven," led in market gains. However, a key question for 2025 remains: Can the Magnificent Seven continue outperforming in 2025? Mike O’Rourke, chief market strategist at JonesTrading, joins Madison Mills and Brad Smith on Morning Brief to share his 2025 outlook on the Magnificent Seven and broader market trends. O’Rourke notes that Tesla's vehicle delivery underperformance in the fourth quarter could be a useful reality check for investors in terms of Magnificent Seven stocks as a whole. Despite Tesla's 2024 market gains, O'Rourke suggests, "You don't have to come out of the market, but you should be looking elsewhere for a little more, you know, protection, a little more value cushion." He elaborates, noting that the tides are changing within the Magnificent Seven, which could make those stocks less reliable. He warns, "The problem with the entire [Magnificent Seven] is they collectively trade about 50 times trailing earning, so they're expensive as a group ... people are paying a premium for those large names, so they don't represent any type of value or protection." Instead, O'Rourke suggests diversifying into mid- and small-cap stocks, which he believes can add more value. "We're making a single bet on this handful of mega caps that are going to drive everything ... as a long-term investor, you want to be buying things that represent value, that are going to be good for the next several years."
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