The Mag Seven

In 2013, CNBC’s Jim Cramer coined the term FANG, referring to the four high-growth technology stocks, including Facebook, Amazon, Netflix, and Google. In 2017, he expanded the acronym by adding an additional “A” to FAANG, including Apple. Technology is ever evolving at an accelerated pace, and in 2023, Bank of America analyst Michael Hartnett began using the phrase “Magnificent 7” to refer to the leading technology stocks, including Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), Nvidia (NVDA), Meta (META), and Tesla (TSLA).

As the chart highlights, six Mag 7 stocks are among the top seven publicly traded companies with market caps over $1.3 trillion. Tesla, the lagging Mag 7 stock, is worth just over $730 billion.

As the 2024 U.S. election approaches, tax policies over the coming years could dictate the path of least resistance of these leading technology stocks. The MAGS ETF product tracks the seven leading technology stocks that tend to lead the sector.

Incredible appreciation compared to the leading technology index

• The QQQ ETF, tracking the tech-heavy NASDAQ 100 composite at the $471 level, is 15% higher than the 2023 closing $409.52 per share level.
• The MAGS ETF at $44.75 per share was 33.8% higher than the 2023 $33.45 closing level.
• NVDA has more than doubled since the end of last year, while TSLA is down around 9%.

The Mag 7 dominates investment savings

• Technological innovation, market dominance, financial performance, branding, research and development, multinational tentacles, and vast liquidity make the Mag 7 companies the stocks of choice for individual investors, mutual funds, and many pools of capital.
• The combined market cap of $15.25 trillion is a substantial percentage of the total market cap of publicly traded companies.
• The Mag 7 reflects only 0.07% of companies, while it controls 13.9% of the market cap.
• Investors seek liquidity and performance. The Mag 7 offers both.

These companies have made their founders and early investors billionaires

• The Mag 7 have made their founders and early investors very wealthy.
• Seven of the world’s richest people are founders or early investors in the Mag 7.
• Elon Musk is number one from Tesla and his other companies.
• Jeff Bezos is number two from Amazon and other investments.
• Mark Zuckerberg is number four from Meta, formerly Facebook.
• Bill Gates is number five from Microsoft.
• Larry Page is number eight from Alphabet.
• Steve Ballmer is number nine from Microsoft and other investments.
• Sergey Brin is number ten from Alphabet.

Tax policy over the coming years could support or inhibit more gains

• A favorable tax policy has created incredible wealth.
• An issue in the 2024 U.S. election is increasing taxes on the wealthiest people and billionaires.
• Proponents argue they do not pay their fair share on a percentage basis.
• Opponents argue they pay far higher nominal taxes, and their investments spur economic growth.
• The November U.S. election will determine tax policy if one party dominates.
• Gridlock or one party controlling the legislature and another occupying the White House would not likely have dramatic tax consequences.

Taxes on unrealized gains- Nowhere to run, nowhere to hide

• One proposal by Democrats is to tax unrealized gains on those with net worths above $100 million.
• Founders and early investors faced with an unrealized capital gains tax would likely have to sell shares to pay their tax bills.
• Bulky sales would weigh on share prices for the most widely held stocks.
• The sales could trickle down to small investors and retirement accounts as share prices decline.
• Tax cuts would likely spur higher gains and incentivize technological innovations.
• The odds favor gridlock, as the popularity of taxing billionaires could shift to an unpopular stock market correction, that would affect most investors.

The Mag 7 stocks have attracted tremendous investment activity. The November U.S. election will determine tax policy over the coming years. Gridlock is the most likely result. Expect the leadership baton to pass among the Mag 7. However, the market caps reflect dominance that will likely continue to attract significant investment flows.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!