Big Stocks Soar to New Highs, Magnificent Seven Outperform

S&P 500’s Largest Companies Face Potential Market-Beating Setback

The asset allocation team at Jeremy Grantham’s GMO has warned that the largest companies in the S&P 500 may not be able to sustain their outperformance in the long run. According to data from 1957-2023, the nine out of ten largest stocks in the index underperformed on average in the year following their ranking. This trend is attributed to the fact that these stocks tend to become expensive and have historically exhibited poor relative returns. In fact, since 1957, the 10 largest stocks in the S&P 500 have underperformed the remaining 490 stocks by 2.4% per year.