Market performance last week highlighted a growing appetite for a broader set of values. Large European companies could benefit if this trend continues.
THE
S&P500
fell 0.3% in the first full week of March, led by three sectors, including information technology, which fell 1.1%. Nvidia stock, which has driven tech stocks higher, suffered a 5.5% decline on Friday. It was the biggest one-day decline since May, although the stock was still up 77% for the year as of Friday’s close.
Growth stocks, many of them tech, have dominated this year, as they will in 2023. But the Magnificent Seven group of mega-cap U.S. tech stocks, which together returned 111% in 2023, are no longer all up . Apple
,
Alphabet
,
and Tesla shares have posted declines for this year so far, raising questions about the group’s future performance.
At the same time, value stocks, including utilities and materials, outperformed last week, suggesting investors are looking to a broader range of market segments for gains.
If true, it could fuel gains in international stocks, particularly in Europe. The market there is becoming “unusually” narrow, according to Citi
It is
pointed out equity strategist Beata Manthey in a note on Monday. Historically, the five largest contributors to MSCI Europe have accounted for 26% of the index’s quarterly gains. So far in 2024, they accounted for 45%.
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Manthey and his team have listed seven major European companies that they say could “be key beneficiaries” if European markets continue to shrink. The list includes weight-loss drug maker Novo Nordisk; ASML, a manufacturer of semiconductor manufacturing equipment; luxury brands LVMH and Cie. Richemont Financial
,
SAP software publisher, Schneider Electric
,
which produces electrical equipment; and sports car maker Ferrari.
They have similar characteristics to their Magnificent Seven counterparts, Citi noted. For example, both groups share a sensitivity to growth, and the majority of stocks in each group will benefit from a weaker dollar.
It also helps that active U.S. investors have not materially increased their holdings in Super 7 securities since mid-2023, implying additional buying room, Citi said, citing data from the ‘EPFR, a fund flow data provider.
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Certainly, there are reasons to remain cautious. On the one hand, the Super Seven are more exposed to China and its struggling economy than the Magnificent Seven. Many names on the Super Seven list also sell high-end products, putting them at risk if economic growth slows.
The very rich are not in the business of showing off lavish possessions during a global recession. The S&P 500 might be the best choice for risk-averse U.S. investors.
Write to Karishma Vanjani at [email protected].