Before the bell: Thanks to the Magnificent Seven

Wall Street was unstoppable. The Magnificent Seven delivered half of the market gains! But superior returns on stocks like UCB (+144.8%), Tubize (+99.3%), and Walmart (+70%) show there’s more than just IT.

What to remember about the 2024 stock market year?

Happy New Year! The Spaarvarkens team wishes you a healthy and prosperous 2025! In tomorrow’s Beurswekker, we’ll look ahead, but for now, here’s what we should remember about the 2024 stock market year.

Wall Street and the rest

The S&P 500 gained approximately 25%, while the Nasdaq, focused on growth stocks, climbed even higher with a 30% increase. This marks the second consecutive year of more than 20% gains, which is relatively rare. Tomorrow, we’ll dive into the statistics to see what this might predict for the 2025 stock market year.

Thanks to the Magnificent Seven

Half of the gains in U.S. stocks can be attributed to seven big-tech names. You know them: the Magnificent Seven—Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla. These seven global giants grew even larger in 2024. Apple boasts a market capitalization of nearly 4 trillion dollars. Microsoft and Nvidia are trading well above 3 trillion dollars, while Tesla, the smallest of the group, has a market value of 1.6 trillion dollars. Tesla stands out, as it’s partially an industrial company, while the others thrive primarily in IT.

Together, the M7 delivered a 43% return, accounting for nearly half of the gains achieved by the 500 largest U.S. stocks in 2024. In 2023, their contribution was an even greater 63%. The M7 achieved an earnings growth of 21%, compared to 13% for the rest of the S&P 500. With valuations at 30 times forward earnings, the M7 trade at a premium compared to the 22% for the other S&P companies. However, given their higher earnings growth, this premium seems relatively justified. Everything will depend on their results in the new year.

Chip producers join the 1 trillion dollar club

Broadcom and Taiwan Semiconductor have joined the elite club of companies with market capitalizations exceeding 1 trillion dollars, thanks to investments in data centers supporting artificial intelligence.

Internet bubble déjà vu?

The enthusiasm for AI is reminiscent of the late 1990s’ internet boom and subsequent bubble. Analysts note, however, that valuations aren’t as high as they were back then. A correction will happen, but predicting whether it will occur this year or in three years is impossible. As the saying goes, “time in the market” is more important than “timing the market.” Diversification remains essential.

Belgian success stories

Never write off a market or sector too quickly. The Bel20 was one of the better-performing indices in 2024, climbing 15%, with substantial dividends on top of that. The standout performer was UCB, delivering a 144.8% return, followed by mono-holding Tubize with 99.3%. Tubize’s discount, holding only UCB in its portfolio, continued to grow. Other top performers included KBC (+32.7%), mono-holding KBC Ancora (+28.5%), Lotus Bakeries (+31.5%), and DEME (+25%), all outperforming the so-called “unbeatable” S&P 500.

The Calimero Effect

Small-cap stocks underperformed across the board. In Brussels, the Bel Mid and Bel Small indices fell 15% and 7%, respectively. This is due to the absence of investment funds, which are often strict about liquidity, and the growing preference for ETFs. However, when a company truly outperforms or its undervaluation becomes too glaring, it inevitably climbs. Last year’s examples include Campine (+72.2%), What’s Cooking (+67.2%), Exmar (+59.5%), and Jensen (+31.7%). The candidates for 2025 are already gearing up, and we’ll gladly help you discover them in time.

Did you know…

the Dow Jones delivered a 13% return, falling short of the Bel20? Walmart was the best-performing Dow Jones stock, with a return exceeding 70%. (Nvidia was added to the Dow Jones only in November.) This is yet another indication that value can be found everywhere.

This article was translated from Dutch and was originally published on Spaarvarkens.be.