I remember reading this headline and then going and looking at the XMAG index[0].
YTD: +15.5%
1 year: +9%
Since inception (Oct 2024): +14%
Comparing that with S&P500
YTD: +16.7%
1 year: +13%
Since XMAG inception: +18%
The article should start with such a comparison but it just seems like a lot of text with very little numerical comparison, which makes it not very useful to conclude what the case is.
The MSN link on the post doesn't have the charts the original WaPo article [0] contains, which provide just such a comparison, though over a longer period (from 2019), showing 132% vs 1057%. (No idea if that is right or more/less meaningful, just pointing out it's missed off this link.)
Neither Nvidia nor Tesla were top 7 by valuation in 2019 though - this seems like it heavily relies on cherry picking the most successful stocks over the past 6 years and comparing them against everything else.
If we made a similar comparison to the SP500 index since its inception in 1926, and made a chart of total returns difference over 1 year sliding window, between index and index minus it's top 7 performing stocks, i bet we will see this recent period isn't at all exceptional. Every economic boom is propelled by one or two sectors that have a limited number of players.
Good point, but you also need to correct for inflation - which was about 9.5% if I'm looking it up correctly. Adding a 2% yearly EUR inflation, that eats up 11.5% of the value.
This gives 4% real value growthy for XMAG - and 5.2% for MAG7. It also needs to account that Trump's election and the tariff craziness was almost exactly a year ago, so the numbers might be a bit unreliable.
This raises interesting questions about the profitability of AI - if AI was economically valuable, we'd see network effects on companies that produce AI inputs - power, datacenter, servers etc. or other companies becoming more valuable as a result which doesn't seem to be tha case.
If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulders of only 1.4% of those 500 companies then what is the point of looking at the 500 companies in the first place.
Make an S&P10 then instead. or in addition to the S&P500
That would probably be a good way to look at it anyway. Looking at the trend of the S&P10 vs. S&P500 and if they agree then thumbs up, but if they disagree then things might not be as rosy as everyone thinks
The problem with that approach is you miss out on the gains of tracking a company from when its market cap is small to when it is large, and only capture the opposite as it leaves the top 10.
This is one reason people are so concerned with companies going public later. If they just appear in their fully formed embodiments then you can only capture their growth after they are large and their death.
> If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulders of only 1.4% of those 500 companies then what is the point of looking at the 500 companies in the first place.
It's valid to argue that success of companies in the S&P 500 is not evenly distributed, but if you really want to understand the impact of that distribution on the economy you have to look at the value of each company rather than treating them equally.
The top 7 companies might only be 1.4% of the companies in the S&P 500, but they represent roughly 35% of the market cap of companies in the index. Because of that, they have an impact on the broader economy much larger than the raw number of companies would suggest. "Just" Nvidia doing well is going to have a much larger economic impact than just Newell Brands, which I have never heard of but is apparently one of the smallest on the index. In fact Nvidia's market cap is roughly 1000 that of Newell Brands with presumably similarly disproportionate economic impact.
Interesting idea, even average would probably already work, it would give high performers some impact but not as much as now.
But it kinda misses what the S&P is in my pov. An index tracking how the value of those companies developed over the years measures by what you would have now if you would have invested in each of them
No, it's about relative value. Obviously it's a tautology to announce that you've discovered that stocks that did really well outperformed ones that didn't.
The interesting thing is that the aggregate market gains are almost entirely concentrated in those stocks. It's not a statement about sorting, it's a statement about distribution.
So if you want to invest in the top companies, you either need to think they won’t change anymore, or you need to find when to buy and sell.
Index funds solve this problem for you, albeit with slightly lower returns in the short term.
It works until it doesn't. And it can stop working very fast. Which is the scary part. But then it also depends on entry point. If you entered early even going down say 40% or 60% might not make you go red.
> So a viable strategy would be to only buy the best 7 stocks? Like the Dogs of the Dow, but reversed? (The Gods of the Dow?)
Or go with a NASDAQ 100 index: you'll generally get higher returns than the S&P 500 or Russell 3000, but you'll also get higher volatility. How well would you sleep at night with drops of -20% more often?
This is probably ok if you consistently sell stuff that exits the top7 and buy stuff that enters, but I kinda doubt it's all that much better. Same as the s&p500 and the Russell 5000 have really similar returns.
You'll be more exposed to screwing things up when companies enter/leave.
Different than when the railroads dominated the market, or the industrials dominance in the 20s and 30s, or the nifty fifty, or the communication dominance in the late 90s?
Does the S&P 493 reveal a different economy or does it reveal that the author published an article based on feelings instead of research?
Problem is, eventually everything ends badly. You can make this argument about "average S&P500 company", and the time in which it ends badly has gone down over time. In the last 10 years the average S&P500 company ends badly after about 18 years.
If memory serves it was about 30 years in 2000, and much longer before that.
By contrast most of these mania lasted a lot longer.
For those that think that the popular indexes (e.g., cap-weighted S&P 500) are too heavily concentrated, there are equal weight indexes and funds available:
US equity markets / stocks look to have outperformed other markets over the last few years, it may be more that US tech stocks have been the outperformers (rather than US stocks generally):
> Looking at this data, there are two distinct periods of extended U.S. outperformance—the late 1990s and today. And what do these two periods have in common? The rise of U.S. technology stocks. Bespoke Investment Group recently created this chart illustrating this phenomenon:
> Now that the U.S. technology sector makes up over 30% of the S&P 500 (as it did back in 2000), this begs the question: Is U.S. outperformance just a technological fad?
The stock market has been dominated by a single industry many times in history: railroads (Union Pacific), oil (Standard Oil, later Exxon), steel (U.S. Steel), banking (JPM), industrials (GE), telecom (ATT), computer hardware (IBM, MSFT, Intel), smartphones (Apple), consumer internet (Facebook, Google, Amazon) and now "AI" (Nvidia, Magnificent 7).
Isn't the interesting question now: what follows? Or does history end with Mag7?
In previous years, I could have excused such shoddy journalism. In the age of LLMs that can do the work for you, it’s inexcusable that the author didn’t pick 3-5 sample strong economies from the past to judge today by.
Such as? (edit: to clarify, since you apparently downvoted me for asking [lmao], what exactly are these 3-5 alleged success stories for monopolism/crony capitalism that ChatGPT told you about?)
A user cannot downvote a comment that’s directly in reply to their own.
It was likely other user(s) who downvoted a comment that they perceived as low-effort and adding little to the discussion, which I could easily see if the entire comment was something like “Such as?”
I see, thanks. FWIW I was succinct because I didn't think a comment to the effect of "I prefer to let AI do my thinking for me" merited a substantive response. I was (and still am) also genuinely curious what these 3-5 examples were. South Korean chaebols? Roman latifundia? Perhaps we'll never know
I mean... You could always ChatGPT it yourself, could you not? Your ability to find information around this doesn't appear to be hampered by anything other than your imagination.
I would be curious as to what your prompt ends up being (and the reply obviously) if you choose to do so.
they won't even show a chart in the article. 493 is up ... look at a 2025 5y chart. not that "basically flat" (actually 2023) chart google tries to feed you as a top result.
The thing is, there are three distinct interpretations of the word "economy", and depending on which of the definitions you subscribe (or belong) to, either of "the economy is good/okay/bad" can be true!
1) being the economy for the (uber) rich, "big tech", "big seven", FAANG, however you want to call it. That economy is running hot on 'roids "thanks" to the AI ouroboros / bubble / incestuous investment relationships. Money printer go brr. You get it. The only thing you have to take care about now if you belong to that bubble is to slowly unwind enough bags onto clueless retail gamblers before the bubble pops.
2) being the economy for the pension funds, the value of all the "dumb capital", S&P 500/DAX/MSCI and the likes. That economy is doing ... okay-ish, partially thanks to the AI bubble, but when that bubble pops, it's going to have Covid/2007ff effects on the pension funds.
3) being the economy for the 99% - and that economy is in the gutter. On the income side, job losses run rampant across the board, especially "entry level" jobs but also skilled jobs like translators are getting wiped out by AI, and in other industries (advertising, "luxury" goods) the cause is people cutting back on spending because they don't have any money left or are holding their money together because they fear a serious macro-economic disaster. On the expense side, cost of living have been exploding for years without adequate salary hikes - rents, basic groceries, cable TV and its replacement of half a dozen of streaming services, gas, electricity, the impact of Trump's tariffs, whatever.
Not recognizing (or ignoring) these wildly different realities is what killed Trump 1, Biden and is now killing Trump 2. You can't go and yap on the big screen about the economy being at record highs while the actual reality on the ground is everything but that. And it's not just the US that has these problems either, it's the same across the board in Western countries. The only thing the US has "exclusively" is the tariffs.
lol Adam Smith called this. The Wealth of Nations is all about how nominal increases in how the rich measure their wealth aren't really 'good economy', it's the goods and services and upward economic mobility everyday people have access to
I remember reading this headline and then going and looking at the XMAG index[0].
YTD: +15.5%
1 year: +9%
Since inception (Oct 2024): +14%
Comparing that with S&P500
YTD: +16.7%
1 year: +13%
Since XMAG inception: +18%
The article should start with such a comparison but it just seems like a lot of text with very little numerical comparison, which makes it not very useful to conclude what the case is.
0: https://www.defianceetfs.com/xmag/
The MSN link on the post doesn't have the charts the original WaPo article [0] contains, which provide just such a comparison, though over a longer period (from 2019), showing 132% vs 1057%. (No idea if that is right or more/less meaningful, just pointing out it's missed off this link.)
[0] https://www.washingtonpost.com/business/2025/11/24/sp500-sto...
Neither Nvidia nor Tesla were top 7 by valuation in 2019 though - this seems like it heavily relies on cherry picking the most successful stocks over the past 6 years and comparing them against everything else.
Isn't that the entire point? To see what the economy is doing outside of the current bubble?
https://archive.is/qOjdE
Correct! Backtest and compare ratios to common indexes!
If we made a similar comparison to the SP500 index since its inception in 1926, and made a chart of total returns difference over 1 year sliding window, between index and index minus it's top 7 performing stocks, i bet we will see this recent period isn't at all exceptional. Every economic boom is propelled by one or two sectors that have a limited number of players.
Good point, but you also need to correct for inflation - which was about 9.5% if I'm looking it up correctly. Adding a 2% yearly EUR inflation, that eats up 11.5% of the value.
This gives 4% real value growthy for XMAG - and 5.2% for MAG7. It also needs to account that Trump's election and the tariff craziness was almost exactly a year ago, so the numbers might be a bit unreliable.
This raises interesting questions about the profitability of AI - if AI was economically valuable, we'd see network effects on companies that produce AI inputs - power, datacenter, servers etc. or other companies becoming more valuable as a result which doesn't seem to be tha case.
real url https://www.washingtonpost.com/business/2025/11/24/sp500-sto...
Without paywal: https://archive.is/qOjdE
Yes, it would be good if the URL could be changed to this as the MSN link misses out all the charts, which are rather crucial.
So if we look at companies that didn't do as well, we find that they didn't do as well as those that did really well?
I guess the story here is more like
If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulders of only 1.4% of those 500 companies then what is the point of looking at the 500 companies in the first place.
Make an S&P10 then instead. or in addition to the S&P500
That would probably be a good way to look at it anyway. Looking at the trend of the S&P10 vs. S&P500 and if they agree then thumbs up, but if they disagree then things might not be as rosy as everyone thinks
The problem with that approach is you miss out on the gains of tracking a company from when its market cap is small to when it is large, and only capture the opposite as it leaves the top 10.
This is one reason people are so concerned with companies going public later. If they just appear in their fully formed embodiments then you can only capture their growth after they are large and their death.
> If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulders of only 1.4% of those 500 companies then what is the point of looking at the 500 companies in the first place.
It's valid to argue that success of companies in the S&P 500 is not evenly distributed, but if you really want to understand the impact of that distribution on the economy you have to look at the value of each company rather than treating them equally.
The top 7 companies might only be 1.4% of the companies in the S&P 500, but they represent roughly 35% of the market cap of companies in the index. Because of that, they have an impact on the broader economy much larger than the raw number of companies would suggest. "Just" Nvidia doing well is going to have a much larger economic impact than just Newell Brands, which I have never heard of but is apparently one of the smallest on the index. In fact Nvidia's market cap is roughly 1000 that of Newell Brands with presumably similarly disproportionate economic impact.
Them not agreeing isn't a bug. I bet it's pretty historically normal.
How about S&PMedian? Wonder how this would do over the time.
Probably not well. You'll be consistently betting against the market with very little reason to believe you're really adding information.
Also, cap weighting reduces your need to trade and thus your overhead and tax costs.
Interesting idea, even average would probably already work, it would give high performers some impact but not as much as now.
But it kinda misses what the S&P is in my pov. An index tracking how the value of those companies developed over the years measures by what you would have now if you would have invested in each of them
The problem is that the set that "did really well" consists of only seven companies.
No, it's about relative value. Obviously it's a tautology to announce that you've discovered that stocks that did really well outperformed ones that didn't.
The interesting thing is that the aggregate market gains are almost entirely concentrated in those stocks. It's not a statement about sorting, it's a statement about distribution.
And those companies still did extremely well. It just so happens that the top 7 of them did insanely well.
So a viable strategy would be to only buy the best 7 stocks? Like the Dogs of the Dow, but reversed? (The Gods of the Dow?)
Yeah, investing in the top companies leads to higher returns for most periods when looking short term.
Over longer periods, the top companies by market cap tend to change though. https://www.investmentnews.com/equities/only-one-of-the-worl...
So if you want to invest in the top companies, you either need to think they won’t change anymore, or you need to find when to buy and sell. Index funds solve this problem for you, albeit with slightly lower returns in the short term.
It works until it doesn't. And it can stop working very fast. Which is the scary part. But then it also depends on entry point. If you entered early even going down say 40% or 60% might not make you go red.
It's only a "strategy" because you know what happened to the share price. If you can tell the future why not buy the lottery instead.
> So a viable strategy would be to only buy the best 7 stocks? Like the Dogs of the Dow, but reversed? (The Gods of the Dow?)
Or go with a NASDAQ 100 index: you'll generally get higher returns than the S&P 500 or Russell 3000, but you'll also get higher volatility. How well would you sleep at night with drops of -20% more often?
* https://www.investopedia.com/nasdaq-100-or-s-and-p-500-the-b...
Reminder that US stocks can do badly (and the only thing that could save US domestic investors is bonds):
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
This is probably ok if you consistently sell stuff that exits the top7 and buy stuff that enters, but I kinda doubt it's all that much better. Same as the s&p500 and the Russell 5000 have really similar returns.
You'll be more exposed to screwing things up when companies enter/leave.
Yes. If you know which stocks will do best over the next year (or other time period), only buy those.
Different than when the railroads dominated the market, or the industrials dominance in the 20s and 30s, or the nifty fifty, or the communication dominance in the late 90s?
Does the S&P 493 reveal a different economy or does it reveal that the author published an article based on feelings instead of research?
All those ended pretty badly, right?
Problem is, eventually everything ends badly. You can make this argument about "average S&P500 company", and the time in which it ends badly has gone down over time. In the last 10 years the average S&P500 company ends badly after about 18 years.
If memory serves it was about 30 years in 2000, and much longer before that.
By contrast most of these mania lasted a lot longer.
For those that think that the popular indexes (e.g., cap-weighted S&P 500) are too heavily concentrated, there are equal weight indexes and funds available:
* https://www.spglobal.com/spdji/en/indices/equity/sp-500-equa...
* https://www.ishares.com/ch/professionals/en/products/328658/...
* https://www.invesco.com/ca/en/financial-products/etfs/invesc...
US equity markets / stocks look to have outperformed other markets over the last few years, it may be more that US tech stocks have been the outperformers (rather than US stocks generally):
> Looking at this data, there are two distinct periods of extended U.S. outperformance—the late 1990s and today. And what do these two periods have in common? The rise of U.S. technology stocks. Bespoke Investment Group recently created this chart illustrating this phenomenon:
> Now that the U.S. technology sector makes up over 30% of the S&P 500 (as it did back in 2000), this begs the question: Is U.S. outperformance just a technological fad?
* https://ofdollarsanddata.com/do-you-need-to-own-internationa...
Reminder that US stocks can do badly (and the only thing that could save US domestic investors is bonds):
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
132% in the past five years is still a pretty picture if you ask me
The stock market has been dominated by a single industry many times in history: railroads (Union Pacific), oil (Standard Oil, later Exxon), steel (U.S. Steel), banking (JPM), industrials (GE), telecom (ATT), computer hardware (IBM, MSFT, Intel), smartphones (Apple), consumer internet (Facebook, Google, Amazon) and now "AI" (Nvidia, Magnificent 7).
Isn't the interesting question now: what follows? Or does history end with Mag7?
I think that the overall point is that gargantuan big tech capex is hiding an overall weakness in the economy.
In previous years, I could have excused such shoddy journalism. In the age of LLMs that can do the work for you, it’s inexcusable that the author didn’t pick 3-5 sample strong economies from the past to judge today by.
Such as? (edit: to clarify, since you apparently downvoted me for asking [lmao], what exactly are these 3-5 alleged success stories for monopolism/crony capitalism that ChatGPT told you about?)
A user cannot downvote a comment that’s directly in reply to their own.
It was likely other user(s) who downvoted a comment that they perceived as low-effort and adding little to the discussion, which I could easily see if the entire comment was something like “Such as?”
I see, thanks. FWIW I was succinct because I didn't think a comment to the effect of "I prefer to let AI do my thinking for me" merited a substantive response. I was (and still am) also genuinely curious what these 3-5 examples were. South Korean chaebols? Roman latifundia? Perhaps we'll never know
I mean... You could always ChatGPT it yourself, could you not? Your ability to find information around this doesn't appear to be hampered by anything other than your imagination.
I would be curious as to what your prompt ends up being (and the reply obviously) if you choose to do so.
All words, not one chart or graph.
Only because this is a crap link.
https://www.washingtonpost.com/business/2025/11/24/sp500-sto...
https://archive.is/qOjdE
Why the fuck is TSLA ever included in this list?
Because of how well its stock has done since 2020 compared to the s&p 493.
It’s barely beat the market. Lots of huge companies have outperformed Tesla over the last five years. Eli Lilly, as one random example.
propaganda. "the economy isn't actually good!"
they won't even show a chart in the article. 493 is up ... look at a 2025 5y chart. not that "basically flat" (actually 2023) chart google tries to feed you as a top result.
> propaganda. "the economy isn't actually good!"
The thing is, there are three distinct interpretations of the word "economy", and depending on which of the definitions you subscribe (or belong) to, either of "the economy is good/okay/bad" can be true!
1) being the economy for the (uber) rich, "big tech", "big seven", FAANG, however you want to call it. That economy is running hot on 'roids "thanks" to the AI ouroboros / bubble / incestuous investment relationships. Money printer go brr. You get it. The only thing you have to take care about now if you belong to that bubble is to slowly unwind enough bags onto clueless retail gamblers before the bubble pops.
2) being the economy for the pension funds, the value of all the "dumb capital", S&P 500/DAX/MSCI and the likes. That economy is doing ... okay-ish, partially thanks to the AI bubble, but when that bubble pops, it's going to have Covid/2007ff effects on the pension funds.
3) being the economy for the 99% - and that economy is in the gutter. On the income side, job losses run rampant across the board, especially "entry level" jobs but also skilled jobs like translators are getting wiped out by AI, and in other industries (advertising, "luxury" goods) the cause is people cutting back on spending because they don't have any money left or are holding their money together because they fear a serious macro-economic disaster. On the expense side, cost of living have been exploding for years without adequate salary hikes - rents, basic groceries, cable TV and its replacement of half a dozen of streaming services, gas, electricity, the impact of Trump's tariffs, whatever.
Not recognizing (or ignoring) these wildly different realities is what killed Trump 1, Biden and is now killing Trump 2. You can't go and yap on the big screen about the economy being at record highs while the actual reality on the ground is everything but that. And it's not just the US that has these problems either, it's the same across the board in Western countries. The only thing the US has "exclusively" is the tariffs.
lol Adam Smith called this. The Wealth of Nations is all about how nominal increases in how the rich measure their wealth aren't really 'good economy', it's the goods and services and upward economic mobility everyday people have access to
Predictably, if you say anything sane on the internet, you get a longwinded rude nonsense reply for your effort.
The consistent message from social media in the last 10 years is: don't try to talk sense. That will be punished.
> Predictably, if you say anything sane on the internet
Your comment wasn't sane, it was literally just what I quoted and one additional sentence of unsubstantiated rambling.