‘Forgotten 493’ indicates US market becoming less dependent on Magnificent 7

The ‘Forgotten 493’ suggests that the US market is becoming less dependent on the Magnificent 7 for equity gains, according to HSBC Private Bank and Premier Wealth global CIO, Willem Sels.

Sels noted that US equities had delivered broad gains so far this year, with the S&P 500 up by 13.3 per cent, the Nasdaq 14.5 per cent, the Dow Jones 12.3 per cent, and the Russell 2000 21.6 per cent, as at 10 August.

When looking at the Forgotten 493, these stocks had gained 15.4 percent compared to 4.8 per cent for the Magnificent 7 between 1 January and 10 August.

While US equities have outperformed other developed markets so far this year, emerging markets remained the strongest performers, driven by significant gains in South Korea and Taiwan.

In July, the S&P 500 remained almost flat, although seven of the 11 sectors posted gains, including energy at 12.5 per cent.

The technology sector, meanwhile, fell by 3.5 per cent in July amid an internal rotation, as while systems software gained 17.9 per cent, semiconductors and semiconductor equipment fell by 8.5 per cent and 32.5 per cent respectively.

HSBC Private Bank noted that valuations remained elevated in certain tech industries, especially semiconductor equipment.

It added that the earnings outlook remained supportive, with FactSet forecasting S&P 500 earnings growth of 27.4 per cent in Q3, 25.2 for Q4, 30 per cent for full-year 2026, and 13.6 per cent for 2027.

Technology was expected to retain a substantial earnings growth advantage, the private bank said.

“We remain overweight on US equities as the US continues to offer a strong combination of earnings visibility, AI leadership, innovation and corporate quality,” commented Sels.

“US equities have outperformed other developed markets YTD, while broader participation from small caps, cyclicals and the Forgotten 493 suggests that the US market is becoming less dependent on the Magnificent 7.

“Technology remains a key overweight in our strategy. The sector continues to lead in semiconductors, software, cloud infrastructure and data-centre investment and is expected to retain a substantial earnings and revenue-growth advantage through 2027.

“Technology valuations remain elevated, but valuation risk is increasingly concentrated in select industries rather than across the wider sector. This reinforces the importance of selectivity where high multiples require continued exceptional earnings delivery.”

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