I persistently hear lots of the identical questions on these markets. There are considerations about valuations, tariffs, inflation, Fed independence, and, most lately, the integrity of BLS information.
However the single query I hear most frequently is about market focus. I need to clarify why I don’t consider it is a deadly situation to the bull market, and what it’d imply for equities going ahead.
There are a couple of main traces of thought – a 30,000-foot view, a couple of particular info on the bottom, and a few historical past– which can be behind my considering.
The large image view? The title of this submit: The Magnificent 493.
Numerous persons are targeted on selecting the businesses that may most straight profit from synthetic intelligence, however that is each troublesome and will miss the larger image. After we take a look at the historical past of main technological improvements, we see hundreds of firms speeding into every era’s latest expertise. Some do nicely, most crash and burn, however the greatest beneficiaries are most frequently these corporations’ prospects.
Consider the a whole lot of firms that produced PCs within the Nineteen Eighties and ‘90s, or think about the hundreds of American firms that entered the auto trade. Maybe probably the most accessible instance is the Web and the dot-com startups shaped within the Nineties. Most individuals don’t bear in mind Juniper Networks, Metromedia Fiber, and even Pets.com, all consigned to the dustbin of historical past, however enormous of their day.1
Their collective affect was large, even if so many firms went stomach up again within the 2000 dot-com implosion.
After we take into consideration Web firms, we regularly think about these slim elements of the financial system targeted on particular internet applied sciences. However as we speak, due to these corporations, each firm is basically an web firm. All of us have electronic mail, web sites, and use numerous internet-based instruments for work. We share movies, audio, and written content material on-line. We do our consumer updates by way of Zoom or Google Meet; new consumer inquiries are on-line, as are compliance filings, and so forth. Public firms host their quarterly calls on their web sites; the SEC posts all required paperwork on-line.
What firm as we speak is NOT an web firm?
Now apply the identical considering the new new factor: Synthetic Intelligence. Each firm that thoughtfully applies AI goes to be extra environment friendly, productive, and worthwhile.
Take a look on the chart on the prime. It compares the Income Per Worker by S&P 500 Sector in 1991 versus 2025 (inflation-adjusted). That interval displays a major improve in the usage of expertise — computer systems, web, cell units, apps, software program, and so forth. The outcome was that company America has persistently elevated income per worker over time.
This merely demonstrates how a lot effectivity drives the combination of innovation. Now acknowledge that we’re nonetheless within the early days of AI< and you may get a grasp as to why some buyers don’t consider the market is wildly overvalued.
A few of you might be considering, “Superb, Ritholtz, I’ll offer you sufficient rope to hold your self on valuation points, however what of market focus?”
Let’s handle that: Whereas some persons are deeply involved about focus within the S&P 500 because of the Magnificent 7, I’ve been extra targeted on these corporations which can be going to make each different firm within the S&P 500, the Russell 2000, and the Wilshire 5000 so a lot better. A minimum of, that’s my 30,000-foot view, let’s see what is definitely happening at floor degree.
My Bloomberg colleagues Eric Balchunas and Breanne Dougherty level out the main points:
Magnificent 7? Consider them extra because the Magnificent Seventy
“They could go by the Magnificent Seven, however the reality is that they act extra just like the Magnificent Seventy. Collectively, the Seven have acquired over 800 firms and expanded right into a dizzying array of industries – successfully functioning as conglomerates of superior expertise, whereas nonetheless rising organically. Seen this manner – as dozens of firms inside each – considerations about their file 33% weighting within the S&P 500 miss the purpose: the index should still be as diversified as ever. (8/7/25)
Sam Ro described this phenomenon thusly:
“Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla — the trillion-dollar firms collectively often called the “Magnificent Seven — account for a couple of third of the S&P 500’s mixed market capitalization. This focus among the many most distinguished firms makes some individuals nervous. As a result of what if a number of of those firms sees demand bitter and buyers dump the shares?
My favourite counterargument to this concern is that these seven firms don’t function simply seven companies.”
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Lastly, let’s think about what the historic file reveals about focus.
David Marlin (of Marlin Capital) factors out that the Magazine 7, AT 35% of the SPX, just isn’t an outlier. Railroads have been 63% of the U.S. Inventory Market in 1881. A newer instance comes from the Nineteen Seventies, lengthy earlier than passive indexing existed. Again then, the Nifty Fifty was greater than 40% of the S&P 500.
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Each cycle consists of individuals arguing throughout one another, somewhat than with one another. This one appears no completely different. If you wish to discover causes to be out of this market, you possibly can. In order for you a rationalization to remain lengthy (in addition to pattern and common long-term returns), these exist as nicely.
I’ll gladly admit to this being an train in affirmation bias on my half. Nevertheless, you need to admit, it’s a pretty convincing one.
See additionally:
Eye-popping stats from the market’s massive progress tales (Sam Ro, Aug 10, 2025)
The Week We All Discovered Out TCAF, Aug. 8, 2025
Are S&P 500 Firms Actually Doing Extra With Much less? Sure, and I’ve three charts to show it. (Matt Cerminaro, Aug 6, 2025)
Beforehand:
All Time Highs Are Bullish (June 26, 2025)
A Spectacularly Underappreciated 15 Years (April 28, 2025)
Handle the Noise (June 17, 2025)
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1. Juniper Networks peaked in 2000 at $77 billion market cap; 1 / 4 century later, it’s about $13.3 billion. Pets.com shut down in 2000, however as we speak, Chewy is a thriving enterprise in an analogous house. Metromedia Fiber Community (MFN) filed for Chapter 11 chapter in 2002 and was subsequently acquired by Zayo Group in 2012.
