Ed Yardeni, a veteran of the US stock market and founder of Yardeni Research, is currently advising investors to substantially reduce their holdings in the "Big Seven" tech stocks relative to other S&P 500 components, anticipating a shift in future earnings growth.
This long-time bullish Wall Street veteran said, "We see more competitors eyeing the 'Big Seven's' huge profit margins." He expects technological advancements to drive up productivity and profit margins for the rest of the S&P 500.
Yardeni added that, in essence, "every company is evolving into a technology company."
In his research report on Sunday, he noted that he has consistently recommended "overweighting" information technology and communication services since 2010. The current approach of using certain sectors is no longer reasonable.
The company recommends adjusting these two sectors to "equivalent market weighting," while increasing the "overweight" ratio for the financial and industrial sectors and implementing an "overweight" strategy for the healthcare sector .
Includes Nvidia The "Big Seven" index, which includes top U.S. tech companies such as Meta and Alphabet (Google's parent company), has surged over 600% since the end of 2019, far exceeding the S&P 500's 113% increase during the same period. This phenomenon stems from the tech giant boom fueled by the COVID-19 pandemic and the recent surge in artificial intelligence... The field is booming.
Yardeni also believes that there are no longer sufficient reasons to continue overweighting US stocks in the MSCI Global portfolio, especially given that other global markets have outperformed the US this year with lower valuations, a weaker dollar, and resilient corporate earnings.
With less than a month left until the end of 2025, emerging market stock markets are highly likely to outperform US stocks for the first time in five years. As of the end of November, the MSCI Emerging Markets Index, denominated in US dollars, was up 27% from the end of last year, and up 25% in local currencies, both higher than the S&P 500's 16% gain.
Takahide Irimura, chief economist at Mitsubishi UFJ Asset Management, recently stated that the impact of various countries' loose monetary policies on the economy and businesses remains to be seen. However, diversification and reducing reliance on US assets will be a medium-term investment theme.
(Article source: CLS)
