- Dow Jones Industrial Average: +12.6%
- S&P 500: +23.4%
- Nasdaq Composite: +42.6%
A key catalyst for the robust performance of the 'Magnificent Seven' tech stocks in 2023 was the burgeoning excitement around artificial intelligence. NVIDIA, a standout in this group, saw its stock soar by over 240% due to its pivotal role in the AI revolution. The company's advanced GPUs, essential for AI computations, witnessed soaring demand as industries increasingly adopted AI technologies. These developments, alongside innovations like OpenAI's ChatGPT and Google’s Bard, and progress in natural language processing and computer vision, resulted in the rally of aforementioned company stocks. Contributing to their appeal was the improved analyst forecasts on the growth of their sales and profitability.
Rising Appetite for Risk: In 2023, the US stock market saw an interesting shift towards riskier assets, including cyclical industries and small-cap stocks. Cyclical sectors like information technology (ETF: XLK +55%), communication services (ETF: XLC + 46%), and consumer discretionary (ETF: XLY + 40%) led the stock market in early 2023. During the last few weeks we can also see that investors are getting more optimistic about small cap stocks as well. Small caps, typically considered companies with a market capitalization between $300 million to $2 billion, have also been performing very well since the end of October. ETF IWM, which tracks the Russell 2000 index has grown more than 20% since bottoming on October 27th.
The growth of the S&P 500, Nasdaq Composite, and Dow Jones in 2023 was driven by several interdependent factors. A key influence was the easing of inflation. As inflationary pressures moderated, investor sentiment improved which fueled market optimism. Central bank policies (particularly that of Federal Reserve) were critical. Shifting from aggressive rate hikes to a pause, Fed signaled a less restrictive monetary stance, which balanced combating inflation and fostering economic growth.
Magnificent 7: In 2023, the performance of the "Magnificent 7" was remarkable, with all seven companies experiencing significant growth in their stock prices. The Magnificent 7 includes:
Nvidia (NVDA) up 240% year to date Meta (META) up 168% year to date Tesla (TSLA) up 135% year to date Amazon (AMZN) up 75% year to date Apple (AAPL) up 58% year to date Microsoft (MSFT) up 55% year to date Alphabet (GOOGL) up 49% year to date
