Thank you for reaching out to us. We have received your submission. The current belief is that only a small number of stocks have driven the S&P 500 to new highs. There is a claim that the hype around artificial intelligence (AI) has propelled the “Magnificent 7” Tech stocks into a 2000-era bubble. However, this notion is incorrect. It merely attempts to dismiss the bull market that only a few people foresaw. In reality, this bull market is a celebration of the return to normalcy, and the fact that so few people understand this indicates that it has a long way to go. Let me explain.
It is true that the Magnificent 7, which includes Alphabet (Google’s parent), Amazon, Apple, Meta (Facebook’s parent), Microsoft, Nvidia, and Tesla, have experienced significant growth since the bear market bottom in 2022. With the exception of Tesla, these companies are in the Tech industry or have AI exposure. However, every bull market has its leaders and laggards. It is normal for the categories of stocks that decline the most in a bear market to experience the biggest bounce in the next bull market. Therefore, the significant bounce in Tech and Tech-like stocks should not come as a surprise.
But it’s not just Tech. Overseas markets that have minimal exposure to the Tech sector are also experiencing significant growth in sectors such as industrials, financials, and utilities. In local currencies, markets that have reached all-time highs in total returns this year include Australia’s ASX 200, Britain’s FTSE 100, the MSCI Denmark, France’s CAC 40, Germany’s DAX, the MSCI India, Ireland’s ISEQ, Italy’s MIB, Japan’s TOPIX, Netherland’s AEX, and Spain’s IBEX. This indicates that the current market is significantly global and much broader than perceived.
In 2023, nearly 75% of the MSCI World’s more than 1,400 stocks experienced growth, with 548 stocks outperforming the World’s 23.8% return. The notion of a seven-stock, bubble-like myth is a prime example of “The Pessimism of Disbelief.”
Sir John Templeton once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” It seems that naysayers believe that we have quickly transitioned from pessimism to euphoria. However, the lack of initial public offerings (IPOs) in the market indicates otherwise. This skepticism and doubt are not characteristic of a bubble. It takes a long time for pessimism to transition into euphoria, and we may currently be somewhere between skepticism and optimism.
The return of normal, pre-pandemic economic growth and inflation rates is largely misunderstood. Before the collapse driven by the lockdowns in 2020, the US routinely grew between 1.7% and 2.9% annually, while the global growth rate was around 3%. The economic data went haywire in 2020, initially collapsing and then bouncing back significantly. The IMF data show that the American and global growth rates were at 5.9% and 6.3% in 2021, but reverted to historically normal rates of 2.1% and 3.5% in 2022, with 2023 estimates falling somewhere in between. This is simply a return from the rapid growth of 2021 to the old normal.
The old normal growth rates were favorable for stocks, as they supported healthy sales and profits. This was evident in the longest-ever bull market from 2009 to 2020. The same is true for the current magnificent bull market.
The founder and executive chairman of Fisher Investments, Ken Fisher, is a four-time New York Times bestselling author and a regular columnist in 21 countries globally.
