Why it's time to retire the Magnificent Seven as a stock-market talking point, say these strategists

By Steve Goldstein

Just as FAANG is no longer discussed, so too should be the Apple- and Microsoft-led grouping, say Citi strategists

It's time to usher the phrase "Magnificent Seven" into retirement, argue Citi strategists.

Magnificent Seven as a group is underperforming the broader market this year, but strategists at Citi argue it no longer makes sense to even think about them as a grouping.

"In our view, the Mag 7 is dead as a construct for assessing large-cap growth dynamics, and it has been for some time," say strategists at Citi, led by Scott Chronert. The grouping comprised Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN), Meta Platforms (META), Nvidia (NVDA) and Tesla (TSLA).

It wouldn't be the first grouping to quietly disappear. "When was the last time you thought about FAANG? the strategists asked, talking about the grouping that referred to Facebook (Meta), Amazon, Apple, Netflix and Google (Alphabet).

The first reason it doesn't make sense is that the stocks no longer trade as one, given their differing positions in the AI infrastructure build-out. The fact that Broadcom (AVGO) earlier in the year overtook Meta Platforms and Tesla in terms of weight in the SP 500 was "a trigger for our view that the Mag 7 terminology no longer made sense and was failing to capture the index level impact of AI themes developing under the surface."

But even a Mag 8 didn't really make sense as Micron Technology (MU) and then Advanced Micro Devices (AMD) surged in value.

So, Mag 10 then? No. "Even a Mag 10 breakout would miss significant earnings contributors such as INTC, AMAT, CSCO, and LRCX," referring to the ticker symbols of Intel (INTC), Applied Materials (AMAT), Cisco Networks (CSCO) and Lam Research (LRCX).

Instead, they say the best way to think about the market is just to group all sectors into three buckets - cyclicals, defensives and growth.

 
Cyclicals Industry Group Cluster  Defensives Industry Group Cluster       Growth Industry Group Cluster 
Consumer Durables & Apparel       Pharma, Biotech & Life Sciences         Semiconductors & Semi Equipment 
Consumer Services                 Health Care Equipment & Services        Software & Services 
Banks                             Commercial & Professional Services      Technology Hardware & Equipment 
Financial Services                Household & Personal Products           Media & Entertainment 
Insurance                         Food Beverage & Tobacco                 Automobiles & Components 
Materials                         Consumer Staples Distribution & Retail  Consumer Disc Distribution & Retail 
Energy                            Telecommunications Services 
Transportation                    Utilities 
Capital Goods                     Real Estate 
Source: Citi 

"The advantage of this approach relative to Mag X vs rest of index is the Growth cluster here picks up the 'Mega Caps', as well as the overwhelming majority of index names tied to the AI infrastructure buildout that have made an outsized earnings growth contribution thus far this year," they say.

There are a few examples that are debatable. Tesla for instance drags the automotive sector into growth, just as Amazon does for consumer discretionary and retail. But overall, the three groupings help to tell the tale of the market, they say.

 
Earnings-per-share growth, by 'cluster' (2026 estimated) 
Year                                                      Cyclicals  Defensives  Growth  S&P 500 
2022                                                      19.40%     3.90%       -8.90%  4.10% 
2023                                                      -5%        -10%        15.60%  12% 
2024                                                      3.40%      4.90%       23.40%  10.40% 
2025                                                      6.90%      7.10%       21.80%  12.40% 
2026                                                      19.10%     4.20%       41.90%  24.30% 
Source: Citi 

For instance, the growth cluster has delivered a consistent beat-and-raise dynamic for this year as well as upward revisions to 2027 estimates. "The magnitude of revision in growth cluster earnings expectations is bordering on surreal," they say.

-Steve Goldstein

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07-20-26 0602ET