The largest stocks in the market have an outsized influence on the performance of funds that track market value-weighted indexes, like the S&P 500.
If you follow financial news, you’ve been reminded of this almost every day in recent years as the ”Magnificent 7” — Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla — have driven much of the stock market’s gains.
What happens when these market leaders lag and slowly fall out of the ranks of the most valuable companies?
History says it’s not bearish for long-term investors. In fact, it’s a regular occurrence in the upward-trending stock market.
Let’s consider a few charts.
