MW Magnificent Seven still set to outperform in 2025, Bank of America says

By Louis Goss

The stocks of the 'Magnificent Seven' technology giants will likely continue to outperform in 2025, even though a market crash is now "inevitable," Bank of America's analysts have said.

In a note, analysts led by Benjamin Bowler explained that interest rate cuts and the continuing artificial intelligence boom are likely to see America's mega-cap technology companies continue rallying next year.

In the view of Bank of America's analysts, the situation means investors still have more to gain by staying invested in the 'Magnificent Seven' tech companies in 2025, despite the risks surrounding the bubble popping.

"Not owning enough US stocks or large-cap stocks or Tech stocks has been a painful stance for many years, and we think it's still a major risk in 2025," the Bank of America analysts said.

Bank of America's analysts, nonetheless, said they believe it is now inevitable the rally that started with the launch of ChatGPT in Nov. 2022 will end in some form of "bust."

"While de-regulation or technological innovations have historically supercharged equity booms, such booms have also always been followed by busts," the analysts said.

Bank of America's analysts noted the biggest stock market booms have historically been followed by the largest crashes, with the two biggest booms in history ending in the Wall Street Crash of 1929 and Black Monday in 1987.

"With the current S&P draw-up already exceeding >30% and valuations approaching stretched levels, history suggests it's too late to avoid a bust at this point," the Bank of America analysts added.

-Louis Goss

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December 17, 2024 08:02 ET (13:02 GMT)

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