Beyond the MAG 7 - Why Piling Into the Other 493 Won't Help

Is the Magnificent 7 dead? Every strategist is telling you to move into the other 493 stocks, but is that really the answer? In this episode of The Money Runner, David Nelson breaks down why a shotgun approach to the market won’t cut it in 2025. With market dispersion at extreme levels, stock picking and sector rotation matter more than ever. We’ll dive into the AI trade, shifting sector leadership, and why blindly chasing the broader market could be a costly mistake. Tune in to get ahead of the curve!

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Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of principal."

Transcript

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493. That's all. Every talking head and strategist is telling their clients the Mag seven is dead. Pile into the other 493 stocks in the S&P 500. For starters, the Mag seven is nuanced, and it's time to stop treating every one of them the same. They each have different business models. And yes, as a group, most are underperforming. The broad market this year. The bigger issue, and the one I want to address right off the top is that piling into the other 493 is not going to help you. The dispersion this year is off the charts. What do I mean by that? Take a look at a breakdown of the Russell 1000 20% of the market is up over 10% year to date and we're less than five weeks into the start of the year. On the other side, almost 30% of the market is down year to date. And of those, about half are down more than the market is up. Make make no mistake, a shotgun approach to the market this year is not going to cut it. That means if you're just throwing money at the broader market, you could just as easily be catching a falling knife as riding a winner. This is not a year where beta alone is going to bail you out. Stock picking matters, sector rotation matters, and staying ahead of a news cycle that does not sleep are absolutes for 2025. Welcome to the money runner I'm David Nelson and necessity is the mother of invention. Now I have back tested this, but the dispersion this year seems a lot higher than I remember. To be sure, very important themes are playing out. Front and center is the health of the A.I. trade. And of course, all that came home to roost a couple of Mondays ago. When the news broke that deep seek, a Chinese startup had developed a large language model for their chat like app, but had done it at a fraction of the cost. And as we've learned since. The devil is in the details and it is likely that deep seek paid a lot more money than they revealed. We may never know the true answer, but the key point is that the model is a good one and has been verified by some of the brightest A.I. engineers on the planet. And as I mentioned in my post earlier this week, all in podcast member and tech guru Chamath Palihapitiya said the following about deep seek. Necessity is the mother of invention. DeepSeek headed by Liang, Wenfeng may have found a way around using Nvidia's proprietary programing language Cuda. Additionally, as A.I. transitions from training to inference, the dispersion gets even wider. Application specific integrated chip stocks or ASIC are suddenly outperforming, even Nvidia The poster child of artificial intelligence software has taken on a leadership role as the A.I. trade moves the build out of infrastructure to the next phase of applications, including a rollout across the entire industrial complex. The market cap weighted indices are at a disadvantage. Take a look at the top ten stocks by market cap. Of those, about 10 trillion in market cap aren't pulling their weight. You know the names Apple, Microsoft, Tesla and Nvidia Alphabet gave up a lot of ground on Wednesday and at least as of Thursday evening. Amazon's corner is giving investors pause. Meta is the sole hyperscalers. That seems to be translating CapEx spending into a return on investment Meta’s investments in AI are driving increased ad revenue. That's why the stock's up. Will these giants turn it around? Of course they will. But for you and me, this is a time to take advantage of an opportunity to make money without parking all the capital in a select few names. Yes, the broadening is happening, but fundamentals matter and the tide is not lifting. All boats. Make no mistake, the Sector Leadership Board is changing. Some of last year's losers are today's winners. When was the last time you saw health care near the top? It's been a while. Tech is bringing up the rear, but don't be fooled. There are a lot of double digit winners this year. Just not the usual suspects. I want to leave you with this final thought. A lot's changed since I first got in the business back in the early nineties. It's been that long. Technology has democratized investing. When I first started, it was just like Gordon Gekko in the movie Wall Street said. You are either on the inside or the outside. You have access to information or you don't. The more you paid Wall Street in commissions, the higher up the totem pole you were at gaining access. Today, that is no longer true. You have access to the same information I do when the earnings come out. You can access them at exactly the same time as I can. And it's free or almost free. Sure, you can have fancy charting programs that are cool investment software, but in the end it comes down to a newsfeed an income statement and a calculator. Do the work. And you can play at a professional level or you can hand it off to someone who will do it for you for a price. Both are valid, but someone has to do the work. Just buying the MAG seven ETF or even traditional index ETFs. That's a good choice for many, but for the first time in a while, we can all build a better mousetrap. All right. I'm going to leave it there. That's it for this week. Don't forget, if you want to learn more about yours truly or more about the money runner, go to my substack site. dcnelson123@substackcom. I'm David Nelson and this is The Money Runner.