Shifting Trends: Magnificent Seven vs. China’s Terrific Ten
A fascinating chart from Refinitiv highlights the performance of the Magnificent Seven in the US—Apple, Microsoft, Alphabet, Tesla, Meta, Nvidia, and Amazon—against China’s Terrific Ten, which includes Alibaba, Tencent, and other major Chinese tech firms.
For most of the last two years, the US tech giants dominated the market, while China’s tech sector remained largely stagnant. However, since September 2024, coinciding with the increasing probability of Trump’s return, the Terrific Ten have staged a massive breakout, surging 76%, matching the same gain seen in the Magnificent Seven over the same period.
This suggests a potential leadership shift in the markets, where underperforming, undervalued Chinese tech stocks are attracting fresh capital while the dominant US tech giants are moving sideways in a consolidation phase.
Key Takeaway: Follow the Liquidity Flows
Market trends are dictated by liquidity flows. When money exits a market (like we are currently seeing in India), it creates downtrends. Conversely, when capital starts moving into an asset class, sector, or geography, strong trends emerge.
The same pattern can be seen now in China’s markets, where a previously underperforming sector is experiencing a surge. Those who were able to identify and ride this trend early have benefited significantly over the last few months.
While it may not be easy for most investors to directly invest in Chinese equities, the broader lesson is clear: always follow the money. Sectoral or geographical narratives should take a backseat to what price action and liquidity trends indicate.
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