The Mag 7’s Fall From Grace & Why Investors Shouldn’t Worry

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Schedule A Call To investors, The Magnificent 7 stocks have been a large driver of investment returns for millions of Americans over the last few years. But the darlings of the stock market have now fallen from grace. Carson Group’s Ryan Detrick writes “the Mag 7 down year-to-date and the 493 [other stocks] up more than 13% year-to-date is one of the most incredible stories from an incredible year so far. It wasn’t that long ago that most client meetings were all about why don’t we only invest in these 7 stocks?” Thankfully, indexes are a team sport and the other 493 stocks have helped the S&P 500 stay positive to the tune of 9% since the start of 2026. It is uncommon to have the entire market driving investor profits though. Lance Roberts points out that “research spanning 1926–2025 finds that just 41% of US stocks outperformed Treasury bills over their lifetimes, with only 46 companies generating half of the market’s $91 trillion in cumulative wealth creation.” This is a good historical fact to understand, but it doesn’t excuse the poor performance from the Mag 7. In hindsight, the sell-off and lack of performance shouldn’t be surprising. These seven stocks became more than 30% of the S&P index at one point, which highlights just how dominant the businesses were compared to peers. Some will argue the relative weakness over the last six months is a cooling off period. While there may be some truth to that theory, I don’t think you can exclusively rely on it as the driver for the most popular stocks suddenly losing steam. It is more likely these stocks are suffering from higher inflationary pressures from the Iran war (reminder: growth stocks are long duration assets that are very sensitive to these issues) and big questions around the expected ROI from the insane CAPEX spending from the hyperscalers. I can’t have a conversation with a public market investor without them asking my opinion on whether AI adoption is going to slow down. So many of these investors are scared of their own shadow and genuinely believe there could be some sort of boogeyman where the world suddenly doesn’t find this new technology valuable. I obviously disagree with their concerns and believe AI adoption is going to accelerate from here. But my opinion won’t prop up the Mag 7, nor will it prevent investors from rotating their capital into smaller stocks they deem cheaper from a valuation standpoint. Another thing to keep in mind is that the Mag 7’s breathtaking performance in the last few years occurred against a backdrop of insane fiscal and monetary policy. These bad decisions drove all asset prices, including these seven companies, higher at a rate that outpaced even the most bullish investors. Trillions of dollars printed and rates at zero. That is a bull market cocktail if I have ever seen one. Thankfully, investors in the Mag 7 shouldn’t go cry in the corner for long. We are starting to return to the ridiculous bad policies. Charlie Bilello writes “the debt ceiling was raised by $5 trillion less than a year ago. And US national debt has already increased by over $3 trillion. At this pace, we’ll be back debating another “ceiling” in 2027.” The US government can’t help themselves. They only know how to spend more and more money. It doesn’t matter how much funding they receive from taxes. If that can’t fund their dreams, they just print the balance. I doubt anyone with half a brain thinks it is sustainable to increase the national debt by $3 trillion per year, but here we are pretending like everything is fine while the house goes up in flames. So the money printer is going to work hard to make sure investor portfolios keep growing to the sky. Don’t believe me? Just look at the S&P 500 over the Fed’s balance sheet . Not exactly what you want to see if you believed you were a stock market genius who didn’t rely on the Fed to create paper gains for your portfolio. However, the more important question in my mind is whether there are data points from the companies themselves that give me confidence that brighter days could be ahead? Absolutely. Barry Schwartz writes the “S&P 500 profit margins [are] up 58% since 2011. Historical P/E multiples have zero relevance.” I tend to agree with Barry. It is hard to point to stock valuations before the iPhone was invented when you have trillion dollar companies growing revenue at 50% year-over-year. This type of growth, at this scale, was previously unfathomable. But this is the result of a digital economy that benefits from capital and information moving at the speed of light. Everything happens faster, including companies making more money and valuations surging higher. This acceleration creates outsized returns for investors. Bilello highlights “the S&P 500 is up 15.6% per year since the start of 2020, on pace for its strongest decade since the 1990s.” It is hard for investors to complain about the destruction of the US dollar or the rise of the K-shaped economy when the root cause is also enriching them. Add in the fact that stocks, particularly the Mag 7, will continue to benefit from the US economy being artificially propped up by stimulus and you can quickly see why there is not much panic in the market. Investors have been conditioned to believe the Fed and US government will essentially guarantee financial returns. You just have to be disciplined and courageous enough to risk your capital and then hold on for the ride. Hope everyone has a great start to their week. I will talk to you next time. - Anthony J. Pompliano Founder & CEO, ProCap Financial (Nasdaq: BRR) The Biggest Pivot In AI History Is Happening Right Now Jordi Visser is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack . In this conversation , we discuss the AI pivot happening with hyperscalers, the rise of open source models, what the Mythos/Fable 5 situation means for governments and investors, Kevin Warsh's first Fed press conference, where inflation is actually headed, and why bitcoin is still in a bear market and what needs to change. Podcast Sponsors Figure – True DeFi Democratized Prime to earn ~9% APY! 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