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Market performance set to broaden, says Capital Group chief

S&P 500 index’s return skewed by the Magnificent Seven stocks; as performance broadens, actively managed funds are likely to benefit

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Genevieve Cua

Genevieve Cua

Published Mon, Nov 20, 2023 · 07:34 PM
    • Performance of broad indices like the S&P 500 is skewed by the Magnificent Seven stocks. Of the seven, Nvidia has generated the strongest return year to date of over 230 per cent.
    • Performance of broad indices like the S&P 500 is skewed by the Magnificent Seven stocks. Of the seven, Nvidia has generated the strongest return year to date of over 230 per cent. PHOTO: REUTERS

    CONCENTRATION risk in broad indices such as the S&P 500 and even the MSCI World is likely the highest it has ever been, thanks to the outsized weighting of the so-called “Magnificent Seven” stocks.

    But Capital Group’s new president and chief executive Michael Gitlin believes the market will begin to shift, and equity returns broaden over the next year or two. This shift, he said, will most likely see outperformance of actively managed funds.

    Capital Group chief executive Michael Gitlin says markets are at an inflection point. He expects monies to begin to shift out of money market funds into fixed-income and balanced strategies. PHOTO: CAPITAL GROUP

    “We have a skewed market, and that skew has been exacerbated by passive investing. When you buy the benchmarks or market-cap weighted indices and not active management, those stocks become even bigger. There are many opportunities outside of just seven companies.

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