Global stock markets are steadily recovering from a dismal 2022. The bellwether S+P 500 is up 14% this year. And yet doubts about this rally persist, based mainly around two key worries. One, unless interest rates come down very quickly, the possibility of a recession remains very real. And two, the 2023 bounce is driven almost exclusively by tech stocks, which in turn are being led by companies who are benefiting from the boom in AI. In fact, just seven companies, the so-called Magnificent Seven, account for around 90 percent of stock market gains this year.

So who are the Magnificent Seven? They are, ranked by size …

1. Apple
Market Cap $2.9 Trillion / Up 40% 2023

2. Microsoft
Market Cap $2.5 Trillion / Up 40% 2023

3. Alphabet (Google)
Market Cap $1.6 Trillion / Up 40% 2023

4. Amazon
Market Cap $1.3 Trillion / Up 50% 2023

5. Nvidia
Market Cap $1.1 Trillion / Up 190% 2023

6. Tesla
Market Cap $0.9 Trillion / Up 120% 2023

7. Meta (Facebook)
Market Cap $0.7 Trillion / Up 130% 2023

My take on all this is that market recoveries are often led by a small subset of companies, and if interest rates fall quickly, minimising if not eliminating recession, then the bulls will rotate into a much broader stock selection. I also firmly believe that individual stock picking is far too risky and I continue to advocate investing in a global equities index for life. Such diversification reduces risk or volatility, protects you against single company (or even sector) failure and delivers solid inflation beating long term returns.

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