Non-Mag 7 equities are a 'once in a generation opportunity'

The "Magnificent Seven" Big Tech stocks are aiming to recoup losses in Monday's trading session after last week's global sell-off which significantly impacted the sector. As investors prepare for a week packed with economic and inflation data releases, questions arise about the implications for broader market trends (^DJI, ^IXIC, ^GSPC).

Richard Bernstein Advisors CEO Richard Bernstein joins Catalysts to share his market outlook during this busy period for Wall Street.

Bernstein identifies the upcoming Consumer Price Index (CPI) data as a key focus for investors this week. However, he emphasizes his "fundamentally-driven" approach rather than being "event-driven," suggesting that the July CPI report won't significantly alter his market positioning.

"I think the biggest story for true fundamental investors is not so much inflation, it's not actually the Fed, it's actually earnings," Bernstein states. He highlights that small caps (^RUT) and emerging markets are projected to have stronger earnings growth than the Magnificent Seven in the second half of the year, calling this "the big story that is going unnoticed right now."

Bernstein likens the current stock market dynamics to "a see-saw." On one side are the Magnificent Seven stocks, while "everything else in the global equity markets" is on the other. He suggests that the opportunities lie in the non-Magnificent Seven side, describing it as a "once in a generation opportunity."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video transcript

Let's turn now to another big story that we are watching here and that is Big Tech in the magnificent seven.

You're taking a look at just four of those seven stocks right now on your screen you've got in the alphabet, Amazon and Microsoft here.

You can see that in video is moving up to the upside alphabet to the downside and Amazon to the upside here.

But this comes after we saw the broader market flipping this morning to the downside after volatile week for markets, particularly in the big tech trade lost a lot of value last Monday but regained some of the losses toward the end of the week.

And investors wondering whether we continue to see that rotation out of big tech and into small caps that got a bit derailed by the broader market.

Sell off.

So what's next for Big Tech joining us now?

We got Rich burns in the Ceo Richard Bernstein advisers joining us remotely rich.

Great to have you on here.

So listen, we were just talking about the data prints to come for this week.

And I'm curious from your perspective, what is the biggest print that you're going to be watching and how are you positioning around that?

So, uh good morning guys.

Um I think clearly the big one this week is, is the CP I, we are not event driven managers, so we are not going to change our positioning regardless of what comes out.

Uh In that report, we're very fundamentally driven.

And I think the biggest story for true fundamental investors, it's not so much inflation, it's not actually the fed, it's actually earnings and earnings in the second half of the year.

And the reason I bring that up is simply because by the end of this year, analysts are forecasting analysts in the street are forecasting small caps, uh emerging markets and the world X the mag seven, as you just referred to them, uh X the mag seven, all those groups are gonna have stronger earnings growth by the end of this year than the Magnificent seven themselves.

We think that is the big story that's going unnoticed right now.

But Richard, if you take a step back and even just coming off the volatility last week, is it too early?

Given the flow of factors that, that, that we could see really dry volatility here at least in the short term.

Is it too early to say that we are in the clear and do investors very much still need to be on watch?

Oh, well, I think look, I mean, bond volatility is up and bond volatility, we haven't seen at these levels in quite some time that's going to translate to stock volatility.

There's, there should be no doubt about that.

At the same time, the lagged effects of the fed, raising rates and withdrawing liquidity from the financial markets that that's gonna have an effect on volatility too, volatility tends to go up after the fed tightens, not while the fed titans but actually after the fed titans.

So we should expect more volatility rather than less.

I think that that should be the norm going forward here.

I want to go back to what you said about the broadening that you are anticipating in the growth, the earnings growth that we're going to have outside of the Magnificent Seven and small and mid cap em global equities.

I wonder is that a concern because so much of the market gains that we did see in the first half of this year were driven by those gains?

Magnificent seven.

Can we still see a happy year end for those?

And the price targets if we get the rotation?

Right.

Well, we don't make S and P price targets for a reason and, and one of the reasons is exactly the issue that you're coming up with.

Look, we've described the stock market as a seesaw with the S and P being the full criminal of that seesaw.

On one side of the seesaw, we clearly have the Magnificent Seven and on the other side of the seesaw we, we have everything else in the global equity markets.

Obviously, our portfolios are positioned on that other side of the seesaw.

That's where we think the opportunity is.

In fact, we described it as a once in a generation opportunity.

But you're right, if the mag seven comes under pressure and they dominate the indices and if volatility goes up, it's hard to make the argument that the market, the way people like to talk about it is going to do.

Well, I think the bigger story is going to be which side of the seesaw you're on.

Not necessarily the market the way you described it.