Magnificent Seven Slump Sent Momentum Stocks to Their Fourth Worst Performance in 22 Years. Here's What Happens 70% of the Time.

Dow Jones18:06

"Magnificent Seven" stocks shed 6% on an equal-weight basis last week compared to the other 493 stocks in the S&P 500 climbing 0.7%.

"Magnificent Seven" stocks are impinging on investors' returns, according to Citigroup - and it's triggered the fourth-worst day for momentum stocks in 22 years.

Citigroup's measure of momentum stocks fell after Magnificent Seven stocks slumped. The 3.5 percentage point outperformance of the S&P 500 equal weight to the S&P 500 was the fourth best out of 1903 weekly periods since 1990, according to Stuart Kaiser, head of U.S. equity trading strategy.

It was also the best outperformance of the equal-weight version of the index since Nov. 2020.

It comes as investors have grown concerned again about increased spending on artificial intelligence, with uncertainty over whether large capital expenditure will yield strong returns. This skepticism brought the Nasdaq Composite COMP down for five trading days in a row and led to a 5% decline in the past month.

Kaiser said the divergence can be put down to Magnificent Seven - which includes Alphabet $(GOOGL)$, Amazon (AMZN), Apple $(AAPL)$, Meta $(META)$, Microsoft $(MSFT)$, Nvidia (NVDA)and Tesla $(TSLA)$ - shedding 6% on an equal-weight basis compared to the other 493 stocks in the S&P 500 climbing 0.7%.

Despite the negative returns, more stocks have risen than fallen in the past seven days, and for 11 out of 12 sessions because of an apparent rotation out of some of the major tech stocks and into laggards like software IGV.

He says rotation can take two forms. It can be in flat to higher market, in which case investing in laggards like software or shorting momentum stocks should work, or it could be through a de-grossing event, where momentum stocks are sold off and the markets are broadly lower. In that case, puts on the Nasdaq 100 would be the best hedge. But he said 70% of of momentum drawdowns fall into the first category.

-Nora Redmond

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June 29, 2026 06:06 ET (10:06 GMT)

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