May 16, 2025 | The U.S. Stock Market Needs Magnificent Seven Leadership

A group of seven leading companies — the Magnificent Seven known as Mag 7 — which has led the U.S. stock market for several years was lagging the market by a large margin in 2025, until the recently announced 90-day partial reprieve on tariffs on Chinese imports.

Making up one-third of the value of the S&P 500, the Mag 7 will determine the direction of the stock market for the next year or two.

The companies included in the Mag 7 are Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia and Tesla. They are the most valuable companies in the S&P 500.

The broad index was down 15 percent at its worst, after the rout triggered by the April 2 announcement on tariffs called “Liberation Day”.

But all those year-to-date losses were recovered this week when the S&P 500 index regained its January 1 value.

However, The Mag 7 is still lower than its level in January although the gap has narrowed from its widest level reached in mid-April.

Source: Bloomberg

Mag 7 is down about 7 percent from the start of the year versus no change for the S&P 500.

Perhaps the lag is because the valuation for the Mag 7 is at extreme levels. The average PE ratio of the other 493 stocks is about 20, while for the Mag 7 it is 32.

Source: Bloomberg

The top nine companies in the S&P 500 by capitalization are Apple, Microsoft, NVIDIA, Amazon.com, Meta Platforms, Berkshire Hathaway, Alphabet Class A, Broadcom and Tesla. Only Berkshire Hathaway (Warren Buffett) and Broadcom are not included in the Mag 7.

At the first of the year, all companies in the S&P 500 were worth about $50 trillion and the Mag 7 about $18 trillion. On May 13, 2025, those numbers were $50T and $16.7T respectively. The Mag 7 was worth “only” $13.6 trillion on April 8.

Valuations peaked in 2021-22 at levels not since the 1999-2000 market bubble. From the 2000 peak the market declined more than 50 percent, while some leaders lost more. Amazon, for example, went down 90 percent during that bear market.

Source: Bloomberg

Here are three examples:

Apple is the most valuable at $3 trillion. Its PE ratio is 32; average for the Mag 7. Apple faces serious issues with China tariffs, as it manufactures major components of the iPhone there.

NVIDIA has a market cap of $2.8 trillion. But NVDA is worried about export limits on its main product — computer chips — for AI. NVIDIA announced a write-off of $5.5 billion recently.

Tesla manufactures and sells a significant number of its automobiles in China. Elon Musk, who enjoys special access to President Trump, earned exemptions from some tariffs.

The market cannot enter a new bull market without a significant and lasting upturn in the Mag 7. But solving the China tariff issue is critical for that market upturn.

Some CEOs have convinced President Trump to pause the China trade war.

But will they be able to convince Trump to permanently abandon his obsession with punitive tariffs?

Hilliard MacBeth

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Hilliard MacBeth May 16th, 2025

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