We are surely witnessing one of the greatest market asymmetries ever seen in the allocation of capital between small-cap and larger stocks because, rightly so initially, these are the fastest growing. What could have been a virtuous circle a few months ago because money has logically taken over the global economy, This can start to become a vicious cycle.. Essentially, if the high growth expectations for the Magnificent Seven’s expected colossal profits are not realized, which is far from the case at the moment after these companies finished the third quarter of the year improving in average of 32% over one year in their profits, higher than forecasts. Tesla, Alphabet, Apple, Amazon, Microsoft, Meta and Nvidia will achieve a combined profit of half a trillion dollars this year. And they will add another hundred billion in profits per year in the years to come.
However, The Magnificent Seven accounts for almost 25% of the gains of the entire S&Pand algorithms momentum This makes many of the remaining 493 stocks in the S&P 500 not seem as visible, like many others in global markets, which are far from reflecting their true value. The irrationality is starting to be excessive, especially considering that these seven companies have almost half their weight in the main American index. Oddly enough, this won’t stop the balloon from continuing to grow. Ireland has just approved the Amundi MSCI USA Mega Cap Ucits ETF and to ETF iShares S&P 500 Top 20 Ucits. Separately, European index funds recorded record net flows in September, totaling €2.9 billion, bringing inflows for the quarter to €3.9 billion, according to morning star. Demonstration that in the market, talking about common sense and logic must be suspended because the trend is your friend.
In the United States, ETFs increased from five trillion dollars in 2020 to ten trillion. More than half of the North American market. “But far from being a threat, it is an opportunity because the market is more inefficient than ever: no matter how good the management team, no matter the valuations… it’s all automation. Soulless investing creates opportunities for all of us who look at companies in the long term and their valuation”, commented Tomás Pintó (Bestinver) a few days ago.
In the case of the Eco30 portfolio, which elEconomista.es builds with international values and constitutes the basis of the recommended fund Eco30 Braided Wallet – which in six years of life reaches an annualized profitability of 7.8% – a PER of 12.3 times is paid in 2025 – which represents an expected revaluation of 8.1% – compared to the 21.7 times that They are paid in the S&P and 13.15 in the Stoxx 600.
