Don’t hold your breadth waiting for a rotation in market leadership this year. After an unusually strong two-year run for U.S. stocks, investors are wondering if the rally can continue and what can drive it. For Wolfe Research and UBS, the answer to the second question is the same names that have already propelled the market higher: megacap tech. This concentrated performance has come as artificial intelligence dazzled investors for more than a year. Investors have cheered the “Magnificent Seven,” a group of the largest tech names, for its leadership in the bull market. Looking ahead, Wolfe chief investment strategist Chris Senyek said the concentrated gains should continue as companies continue pouring money into the technology. “One of our most out of consensus calls for 2025 is Technology and Communication Services (our two favorite sectors along with the Mag 7) will continue to outperform,” he wrote to clients in a Tuesday note. “Our call is based on our belief that solid fundamentals and an increase in AI spending will result in another year of outperformance vs. the market.” In this vein, he noted that the technology sector has the largest share of companies expected to notch revenue growth above 10% in 2025. Additionally, he said that stocks considered more cyclicalwithin the Magnificent Seven — specifically Amazon , Meta and Nvidia — will be especially attractive to investors amid periods of uncertainty stemming from monetary policy or politics. Market participants have frequently discussed the narrow leadership in today’s market. UBS found 2023 and 2024 were two of only three years since 1985 where under 30% of S & P 500 constituents outperformed the broad index as a whole. Still, investing chief David Lefkowitz said AI-exposed segments of the market should continue outperforming. While he cautioned that U.S. stock valuations are historically high, Lefkowitz said that profit growth matters more. “There will almost certainly be bouts of volatility in the year ahead, potentially driven by tariffs, fiscal battles in Congress, inflation trends, Fed actions, and the outlook for economic growth,” he told clients in a Monday night note. But, “we think the bull market remains intact driven by solid economic and corporate profit growth.”
Wall Street can’t quit the Magnificent Seven, sees Big Tech leading market once again