Analyst: Insufficient breadth in U.S. stock gains is not a new problem; the “Magnificent Seven” are actually backed by hundreds of companies

AT A GLANCE

The analyst said that U.S. stock-market returns have long been concentrated in a small number of companies, with the “Magnificent Seven” actually backed by a vast business system.

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BlockBeats news,October 9, Bloomberg ETF analyst Eric Balchunas said in a post that concerns about insufficient breadth in U.S. stock gains have been repeatedly raised recently, but this phenomenon does not necessarily mean that investors need to worry. Citing market data from the past 100 years, he said that only about 4%of stocks created all of the net increase in wealth in the U.S. stock market, while about half of companies underperformed U.S. Treasury bonds over the long term, indicating that stock-market returns have long been highly concentrated in a small number of companies.

Balchunas further noted that the large technology companies currently driving U.S. stock gains differ from large companies in the traditional sense: through extensive mergers and acquisitions, they have integrated vast business systems. For example, the companies acquired by Microsoft and Google each number approximately 270. Therefore, he believes investors should not understand their market influence solely through the names of individual listed companies, but should view the “Magnificent Seven” of U.S. stocks (Mag 7) as a business system comprising hundreds of companies, even jokingly calling it “Mag 700”.

He also mentioned that if YouTube, a Google subsidiary, were listed independently, it could, by his estimate, rank among the top 500 companies by market capitalization in the S&P 20 Index. The scale and influence of these businesses far exceed those of individual corporate entities, which may explain why, even though current U.S. stock indexes are rising on the strength of a small number of large technology stocks, broad corporate assets and businesses still support them.

Original link https://m.theblockbeats.info/flash/371026

Key points

Eric Balchunas said that insufficient breadth in U.S. stock gains is not a new problem.
Citing market data from the past 100 years, he said that approximately 4%of stocks created all of the net increase in wealth in the U.S. stock market.
About half of companies underperformed U.S. Treasury bonds over the long term.
The companies acquired by Microsoft and Google each number approximately 270.
He believes the “Magnificent Seven” of U.S. stocks are backed by hundreds of companies, and called it “Mag 700」。
He estimated that if YouTube were listed independently, it could rank among the top 500 companies by market capitalization in the S&P 20 Index.

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

The article’s core view is that the concentration of U.S. stock gains in a small number of large technology companies is not an entirely new phenomenon. The analyst believes these companies have integrated numerous businesses through mergers and acquisitions, so their scale and influence cannot be understood solely by the names of the listed companies.

Why it matters to readers

This provides a business-scale explanation for the phenomenon of U.S. stock-index gains being concentrated in a small number of large technology companies, but the article did not deny the concentration of gains itself.

“Breadth of gains” refers to the range of stocks participating in an advance. The view here is that an advance apparently driven by a small number of companies may, behind the scenes, encompass many businesses integrated through those companies’ acquisitions.

Risks and unknowns

The views in the article were relayed by BlockBeats, which did not provide Eric Balchunas’s original post.
The original source of the market data from the past 100 years was not clearly identified in the evidence.
The number of companies acquired by Microsoft and Google and YouTube's market capitalization ranking are statements or estimates in the text and have not yet been verified by other sources in the evidence.

Analyst: Insufficient breadth in U.S. stock gains is not a new problem; the “Magnificent Seven” are actually backed by hundreds of companies

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