Latest news with #MichaelHartnett
Globe and Mail
4 days ago
- Business
- Globe and Mail
The "Magnificent Seven" Stocks Could Help This Unstoppable Vanguard ETF Turn $200,000 Into $1 Million in Under 15 Years
In 2023, Wall Street analyst Michael Hartnett from Bank of America assigned a nickname to a group of seven of America's largest technology stocks -- not just for their size, but also their ability to consistently beat the S&P 500 (SNPINDEX: ^GSPC) index. He called this group the "Magnificent Seven," and they have delivered a median return of 886% over the last 10 years, compared to a return of 185% for the S&P: NVDA data by YCharts In other words, investors who haven't owned the Magnificent Seven stocks over the last decade have probably underperformed the broader market by a very wide margin. But here's the good news: The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) offers investors a simple way to buy them all, with a splash of diversification. It's an exchange-traded fund (ETF) that invests exclusively in America's largest companies, and the Magnificent Seven account for over half of the total value of its entire portfolio. Here's how the ETF could turn an investment of $200,000 into $1 million over the next 15 years (or less). The Magnificent Seven represent half of the value of this ETF The Vanguard Mega Cap Growth ETF tracks the CRSP U.S. Mega Cap Growth Index, which invests in the top 70% of the cumulative market capitalization of the CRSP U.S. Total Market Index. The CRSP U.S. Total Market Index holds each of the 3,537 stocks listed on American exchanges. The U.S. Mega Cap Growth Index (and by extension, the Vanguard ETF) only holds 69 stocks, which highlights the incredible concentration of wealth in corporate America. To put it another way, just 69 companies represent 70% of the entire value of the 3,537 companies listed on American stock exchanges. It isn't entirely surprising considering the Magnificent Seven stocks have a combined market capitalization of $17 trillion, which they have accumulated by dominating various subsegments of the technology industry including cloud computing, semiconductors, e-commerce, social media, and electric vehicles. As a result, the Magnificent Seven stocks alone represent 56.3% of the total value of the Vanguard ETF's portfolio of 69 stocks: Data source: Vanguard. Portfolio weightings are accurate as of May 31, 2025, and are subject to change. Each of the Magnificent Seven companies are now focused on artificial intelligence (AI), which could be their largest financial opportunity ever. Microsoft, Amazon, and Alphabet have created their own AI models and chatbots, but they also operate some of the world's best data centers, which they rent to other AI developers for profit. Even the smallest Magnificent Seven company, Tesla, is now a leading developer of AI-powered autonomous driving software. But it's Nvidia that has become the poster child for the AI revolution thanks to its graphics processing units (GPUs) for the data center, which are the most powerful chips for developing AI models. As I mentioned earlier, the Vanguard Mega Cap Growth ETF gives investors an opportunity to own the Magnificent Seven stocks in a more diversified manner than buying them outright. Within its top 20 holdings, investors will find several popular non-technology stocks like Visa, Eli Lilly, Costco Wholesale, McDonald's, and Intuit. Turning $200,000 into $1 million in under 15 years The Vanguard Mega Cap Growth ETF has delivered a compound annual return of 13% since it was established in 2007, beating the S&P 500 which has generated an average annual gain of 10.1% over the same period. A 13% annual return would be enough to turn an investment of $200,000 into $1 million within around 13 years and three months. In fact, the ETF could still deliver a fivefold return within 15 years even if its annual return slowed to 11.3%. However, returns appear to be accelerating instead. The ETF has delivered an annual gain of 16.1% over the last 10 years, a 17.8% annual gain over the last five years, and a 20.7% annual gain over the last three years. The surging dominance of the Magnificent Seven stocks and their peers across the tech and tech-adjacent industries are the main drivers of those increased returns. I'm not suggesting they will remain at those elevated levels over the long run, but AI could certainly help the Vanguard ETF maintain its above-average performances for the next few years at least. Global consulting firm PwC predicts AI will add $15.7 trillion to the global economy by 2030, and a lot of that value will be driven by the tech giants in this ETF. Nevertheless, it's never a good idea to put all of your eggs in one basket. This Vanguard ETF is a great buy primarily for investors with a diversified portfolio that has little or no exposure to the Magnificent Seven stocks already. Should you invest $1,000 in Vanguard World Fund - Vanguard Mega Cap Growth ETF right now? Before you buy stock in Vanguard World Fund - Vanguard Mega Cap Growth ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Mega Cap Growth ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,821!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $886,880!* Now, it's worth noting Stock Advisor 's total average return is791% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Costco Wholesale, Intuit, Meta Platforms, Microsoft, Nvidia, Tesla, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
CNBC
5 days ago
- Business
- CNBC
International stocks are the best trade for the next five years, according to Bank of America investor survey
Investors are really pumped about the future of international stocks. Bank of America's latest fund manager survey showed investors expect equities outside the United States will prove the best-performing asset class over the next five years. "Less than [one quarter] think U.S. assets will continue to dominate ranked returns, and just 5% anticipate bonds to perform best," strategist Michael Hartnett wrote. The rest of the world is trouncing the U.S. stock market this year. The iShares MSCI All-Country World Index ex-U.S. ETF ( ACWX ) is up 15% in 2025, far outpacing the S & P 500's 2.6% advance. That marks the ACWX's largest outperformance over the S & P 500 since the fund's inception in 2008. This comes as positioning in the U.S. dollar reached lows not seen in more than 20 years. ACWX .SPX YTD mountain ACWX vs SPX in 2025 Investors have been pulling away from the dollar this year as many of President Donald Trump's policies, particularly on trade, put the U.S. currency's safe-haven status into question. Trump earlier this year unveiled steep tariffs on imported goods, many of which were later halted for 90 days while the U.S. entered into trade negotiations with leading partners. Along with heightened tensions in the Middle East and Europe, that's led investors to load up on gold. Hartnett noted that "'long gold' is the most crowded trade for the third month running (per 41% of investors), confirming that the 24-month streak for 'long Magnificent 7' (now 23%) as most crowded trade has come to an end." Investors surveyed also rotated more into emerging markets and global equities in June, Hartnett added. "In June, investors are most overweight Eurozone, EM, and banks vs most underweight U.S. stocks, the U.S. dollar, and energy," he said. Elsewhere Tuesday morning on Wall Street, Truist lifted its price target on Etsy by 9%, to $60 from $55, implying about 11% upside compared with Monday's closing price, saying investors should buy the dip in the stock. "While the company does have exposure to the De Minimis exemption being eliminated in China, we believe it's relatively better insulated than some of its competitors including Temu (owned by PDD, [not rated]) and Shein (private) which have started raising prices on goods as a result of the Chinese Tariffs, and the end of the De Minimis exemption," analyst Youssef Squali wrote.
Globe and Mail
5 days ago
- Business
- Globe and Mail
Gold is the most crowded trade, say global fund managers
Daily roundup of research and analysis from The Globe and Mail's market strategist Scott Barlow BofA Securities strategist Michael Hartnett summarizes his monthly survey of global fund managers and finds, among other things, that gold is the most crowded trades according to money managers, 'Investor sentiment recovers to pre-Liberation Day 'Goldilocks bull' levels as trade war & recession fears abate; cash level drops to 4.2 per cent (was 4.8 per cent in April) but not worrying low … Investor UW [underweight] in US$ largest in 20 years … Biggest summer pain trade is long the buck … Global growth expectations improve but still weak (net 46 per cent); big reversal in recession odds (net 42 per cent 'likely' in April to 36 per cent 'unlikely' in June); 66 per cent expect soft landing (8-month high - 16 per cent = no landing, 13 per cent = hard landing); One Big Beautiful Bill to increase U.S. growth say 33 per cent vs 81 per cent to increase U.S. deficit; investors say corporate balance sheets in best health since Dec'15, and most since Jul'13 want companies to return cash to shareholders. On Returns, Risks, Crowds: best performing asset next 5 years … 54 per cent say international stocks, 23 per cent U.S. stocks, 13 per cent gold, 5 per cent bonds; expectation of higher bond yields most since Aug'22; most crowded trades…long gold (41 per cent), long Magnificent 7 (23 per cent), short US$ (20 per cent); #1 tail risk still trade war recession, but down from 80 per cent in April to 47 per cent' *** Purpose-built rental housing construction is supporting the real estate construction sector, 'Canadian housing starts continue to hold up despite weak buyer demand. Starts for homeownership and condos have trended at around 110k annualized units (seasonally adjusted) so far this year, which is down more than 20 per cent from recent norms through 2022 and 2023. Purpose-built rental starts, however, have filled the gap, also trending at right around 110k annualized units so far this year. In fact, the longstanding gap between ownership/condo starts and purpose-built rental starts has now closed. The supply-demand dynamic for the rental market— a sudden cooling of immigration-led demand, but long lead times on supply—is likely to pressure rents down in the year (or more) ahead. At the same time, this does little to alleviate shortages of family-sized single-detached housing, especially in the major cities' 'BMO: Purpose-built rental construction holding up the sector' – (research excerpt, chart) Bluesky *** Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, respects strong technicals but does not love the longer-term market outlook, 'Survey-based sentiment suggests ample room for equities to climb the 'wall of worry,' and better financial conditions have helped normalize implied stock volatility, fueling the rally. Market-leadership factor composition suggests a tilt toward economic reacceleration and upside surprises. Tactically, we must respect these technical … Not only has reduction of tariff and tax policy uncertainty been limited, but geopolitical risks have persisted, as the labor market hints at a turn. We also remain skeptical that improved operating margin leverage is imminent. Last week, we outlined potential contours of a new bull case dependent on 'ooking through' 2025 and faith in capex-fueled productivity gains. That remains plausible, but for now we are proceeding with caution given limited visibility. Consider increasing active stock-picking, as the passive index undergoes compositional rotation, with the Magnificent Seven no longer a correlated block. Use risk-asset repricing to rebalance and position for potential 5–10-per-cent U.S. equity returns amid more volatility, higher real rates and a weaker U.S. dollar, noting this isn't the time to count on valuation expansion. Add diversifying positions in international equities, commodities and hedge funds. Energy/energy infrastructure is our most favored tactical long recommendation. Overweighting short-to-neutral-duration investment grade and municipal bonds still makes sense' *** Bluesky post of the day: Diversion: 'AI transforms new drug development with simultaneous analysis of 21 chemical reactions' –
Business Insider
07-06-2025
- Business
- Business Insider
Stocks are on the verge of flashing 2 big sell signals as investors pile into the market at a historic pace, BofA says
Things have been good for stocks over the last two months. Maybe too good, according to a new report from Bank of America. Since its most recent low on April 8, the S&P 500 and Vanguard's Total World Stock Index are up 20% as investors have piled into the market at a near-record pace. On an annualized basis, 2025 has seen the second-highest inflows into global stocks ever, trailing only 2024, BofA's Chief Investment Strategist Michael Hartnett said in a client note Friday. For US stocks, it's the third-highest year ever, after 2024 and 2021. Yet, amid the bullish frenzy, Hartnett said global stocks are approaching two sell signals. The first is the amount of money flowing into global stock funds. If they hit 1% of their current assets under management within a four-week span, the sell signal is activated. Over the last four weeks, flows totaled 0.9% of the funds' AUM. To hit 1%, flows would have to hit $30 billion in the "coming weeks," Hartnett said. The second is a breadth indicator that says when 88% of the ACWI countries' indexes trade above both their 50-day and 200-day moving averages, it's a sign that things are frothy and investors should sell, Hartnett said. Currently, 84% of ACWI countries' indexes are higher than their moving averages, meaning the market is in "overbought territory," Hartnett said. Both of Hartnett's sell indicators are in line with the conventional wisdom of contrarian investing espoused by legends like Warren Buffett. When the market is overwhelmingly bullish, good news is already priced in. When investors are bearish, it's an opportunity to buy stocks at a discount, the thinking goes. But sentiment gauges have sent mixed signals over the last couple of months. While inflows are strong, the AAII Investor Sentiment Survey shows investors are still net bearish. Bank of America's own Bull/Bear indicator shows the market's aggregate attitude hovers somewhere between optimism and pessimism, with a slight tilt toward the former. Breadth indicators are broadly in line with Hartnett's measure. Stocks of all stripes are doing well. Like Hartnett, Liz Ann Sonders, the chief investment strategist at Charles Schwab, said in a May 27 report that the robust breadth levels could be a cause for concern in the near-term. "Early-April setup was ripe for rally on good news given washed out sentiment/breadth and deeply oversold market," she wrote in a note co-authored with Kevin Gordon, a senior strategist at Schwab. "Setup now is not at opposite extreme." While breadth and sentiment can be contrarian indicators, it should be noted that the momentum factor has been king over the last decade and a half. What has done well (mega-cap tech stocks and popular indexes) has continued to do well, and steep declines in the broader market have generally been short-lived. That could still be the case going forward. Beyond technical indicators, investors are also monitoring fundamental measures of the economy's health. The macroeconomic picture remains unclear as business owners and consumers digest President Trump's tariffs. Concerns persist about how the import taxes will affect consumer prices and growth. The US economy added 139,000 jobs in May, more than economists expected, but the number wasn't a sure sign that the labor market remains solid, as April and March data were revised down. Long-term Treasury yields also continue to rise as Trump's tax bill fuels investor concerns around inflation and the US budget deficit. A negative catalyst in the form of rising unemployment or higher inflation could spark a reversal in the ultra-bullish signals Hartnett is watching.
Yahoo
06-06-2025
- Business
- Yahoo
BofA's Hartnett Says Stocks Are Close to Setting Off Sell Signal
(Bloomberg) -- Global stocks are close to triggering a sell signal as both fund inflows and the market breadth are running too hot, says Bank of America Corp. strategist Michael Hartnett. Next Stop: Rancho Cucamonga! ICE Moves to DNA-Test Families Targeted for Deportation with New Contract Where Public Transit Systems Are Bouncing Back Around the World US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn The Global Struggle to Build Safer Cars He cited a data point that stock and high-yield bond inflows have totaled 0.9% of fund managers' overall assets in the past four weeks. In his view, investors should sell if the ratio increases to more than 1%. At the same time, about 84% of country indexes are trading above their 50- and 200-day moving averages, suggesting the market is in overbought territory, Hartnett said. Global equities hit a record high this week on optimism around US-China trade negotiations and as robust economic data eased recession fears in the US. The focus later on Friday is on the US jobs report as investors look for confirmation of a healthy labor market. In terms of flows, global equity funds have attracted about $515 billion so far this year, tracking their second-biggest inflows on record, according to the weekly Bank of America note citing EPFR Global data. Hartnett has recommended international equities over US stocks, adding that the S&P 500's rebound is not supported by earnings growth. The index closed Thursday at 5,939.30 points, about 3% below its February record. --With assistance from Michael Msika. Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
