I would like to give a special shoutout to Tesla and congrats to all the bulls.
This week's new all-time highs mark an end to the longest and largest drawdown in company history.
Here’s the chart:
And now we can officially say that all of the Magnificent Seven stocks have made fresh all-time highs this cycle (and this year).
How magnificent. But it gets better.
After somewhat of a drought in the back half of the year, these mega-cap growth names are once again the market leaders.
December has been all about big tech. Here’s a performance chart showing the recent relative strength:
The Roundhill Magnificent Seven ETF $MAGS is up over 9%, while the equal-weight S&P 500 $RSP is -3%. That’s a huge performance gap in just two weeks.
The broader market has basically been falling the entire month of December while the largest stocks in the world rip higher.
I think these leaders are being used as ATMs by many investors. Think about it. These stocks are up 100% to 1,000% this cycle. The gains have been astronomical.
When the broader market starts to lead and participation expands, money comes out of them. Remember all those major rotation days this summer and fall?
But it also works in reverse.
After some major post-election gains in emerging leadership areas like small caps or the speculative growth trade, investors appear to be ringing the register and putting their money back in the bank… or the Magnificent Seven.
These stocks are teflon. Why shouldn’t investors treat them like cash? And as it keeps working, it will only happen more and more. You won’t find this kind of return in the money market.
But there’s an even more powerful force at play here. It is called “window dressing.”
This is the act of making something appear better than it is. Retailers do it, accountants do it… and asset managers also do it.
Despite this summer's volatility, owning these mega-cap leaders is still the winning playbook.
To illustrate this, here’s MAGS making new all-time highs not just on absolute terms but also relative to the broader market.
And the truth is, these are the stocks investors want to be in.
They were the only game in town when this bull market began, and the sentiment of the crowd is slow and resistant to change.
Imagine opening your year-end statement to find you underperformed the market and you didn’t own Nvidia. Your advisor knows this. He wants to watch football on New Years, not answer your phone call.
And it’s not just advisors. Hedge funds and other financial institutions deal with similar pressures.
It’s why we saw the best stocks get chased into year-end last year. And it’s why we’re seeing the same thing now.
I talked to a good friend who runs an RIA today and asked him if they’re dressing the windows again.
He said, “it’s human nature.”
I couldn’t agree more. And you know what else it is?
It’s bull market behavior.
So here’s to the window dressers. Drinks are on them tonight.
I plan to ride these names higher as money managers pretty up their portfolios for the end of the year.
In fact, we just put on some XLK calls to add juice to this theme. If you want the details on this trade and others, join our Breakout Multiplier team.
If you are in the business, or have an opinion on this, I’d love to hear it. Shoot me a note.
And tune in next week to the Morning Show. We’re going to have Roundhill’s Dave Mazza on Wednesday to discuss the Magnificent Seven ETF and some of their other funds.
