The equity market sell-off over the last two weeks has been characterised as the (temporary) demise of the US ‘Magnificent-7’ stocks, which had done unusually well over the last year. A Mag-7 portfolio had gained over 40% in the year to date before the peak on 10 July, thanks to investor enthusiasm over the transformative potential of artificial intelligence.
However, the plunge is more widely spread. While the tech-heavy NASDAQ fell by 5% from July 10 to July 24, it is not the only index that has suffered. Japanese equities, as well as emerging market stocks (excluding China), have fallen by a similar amount.
The declines, therefore, appear to be more a case of broad profit-taking of the most successful trades this year, of which technology was certainly one, rather than a specific swing in investor sentiment towards AI-linked companies.
We believe the medium-term outlook for growth stocks is still positive, and we remain overweight the NASDAQ index in our multi-asset portfolios.
