I constantly hear lots of the similar questions on these markets. There are issues about valuations, tariffs, inflation, Fed independence, and, most just lately, the integrity of BLS information.
However the single query I hear probably the most is about market focus. I wish to clarify why I don’t imagine that is deadly to the bull market, and what it would imply for equities going ahead.
Listed below are just a few concepts – a 30,000-foot view, just a few particular details on the bottom, and a few historical past – which can be influencing my considering.
The large image view? It’s this submit’s title: The Magnificent 493.
A lot of individuals are targeted on selecting the businesses that can most immediately profit from synthetic intelligence – a feat that’s each tough and will miss the larger image. (You understand these corporations because the Magnificent 7). When wanting on the historical past of main technological improvements, we see hundreds of corporations dashing into every era’s latest know-how. Some do properly, most crash and burn, however the largest beneficiaries are most frequently these corporations’ prospects.
Consider the tons of of corporations that produced PCs within the Nineteen Eighties and ‘90s, or contemplate the hundreds of American corporations 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 keep in mind Juniper Networks, Metromedia Fiber, and even Pets.com — all consigned to the dustbin of historical past, however large of their day.1
Their collective impression was large, even though so many of those corporations went stomach up within the 2000 dot-com implosion.
After we take into consideration web corporations, we frequently think about these slim components of the economic system targeted on particular net applied sciences. However right this moment, due to these corporations, each firm is actually an web firm. All of us have e mail, web sites, and use varied 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 many others. Public corporations host their quarterly calls on their web sites; the SEC posts all required paperwork on-line.
What firm right this moment 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 at high. It compares the Income Per Worker by S&P 500 Sector in 1991 versus 2025 (inflation-adjusted). That interval displays a big enhance in the usage of know-how — computer systems, web, cell gadgets, apps, software program, and many others. The end result was that company America has constantly elevated income per worker over time.
This demonstrates how a lot effectivity the mixing of innovation applied sciences drives. Now, acknowledge that we’re nonetheless within the early days of AI, and you may grasp why some traders don’t imagine the market is wildly overvalued.
A few of you’re considering, “High quality, Ritholtz, I’ll offer you sufficient rope to hold your self on valuation points, however what of market focus?”
Whereas some individuals are deeply involved about focus within the S&P 500 as a result of Magnificent 7, I’ve been extra targeted on what these corporations are going to do to the remainder of the index: They may make each different firm within the S&P 500, or the Russell 2000, or the Wilshire 5000, that a lot better.
A minimum of, that’s my 30,000-foot view, let’s see what is definitely occurring at floor degree.
My Bloomberg colleagues Eric Balchunas and Breanne Dougherty level out the small print:
Magnificent 7? Consider them extra because the Magnificent Seventy
“They might 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 corporations and expanded right into a dizzying array of industries – successfully functioning as conglomerates of superior know-how, whereas nonetheless rising organically. Seen this manner – as dozens of corporations inside every one – issues about their file 33% weighting within the S&P 500 miss the purpose: the index should 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 corporations collectively often known as the “Magnificent Seven — account for a few third of the S&P 500’s mixed market capitalization. This focus among the many most outstanding corporations makes some folks nervous. As a result of what if a number of of those corporations sees demand bitter and traders dump the shares?
My favourite counterargument to this concern is that these seven corporations don’t function simply seven companies.”
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Lastly, let’s contemplate what the historic file exhibits 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 500.2
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Each cycle consists of individuals arguing throughout one another, relatively 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 (moreover development and common long-term returns), these exist as properly.
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 development tales (Sam Ro, Aug 10, 2025)
The Week We All Discovered Out TCAF, Aug. 8, 2025
Are S&P 500 Corporations 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 right this moment, Chewy is a thriving enterprise in an identical area. Metromedia Fiber Community (MFN) filed for Chapter 11 chapter in 2002 and was subsequently acquired by Zayo Group in 2012.
2. Sure, I’m conscious of how the Nifty-Fifty ended — within the first a part of the 1966-82 bear market, with a 57% crash in 1973-74…
