In his latest weekly commentary, Siegel argued that investors are increasingly moving beyond the tech megacaps that have dominated market gains in recent years.
- The economist added that the falling oil prices, easing bond yields, and improving inflation prospects are fueling a rotation into value and cyclical stocks.
- Siegel said that investors are now piling into cyclical and value-oriented sectors as the investment thesis shifts toward lower inflation, lower interest rates, and more attractive valuations.
- He also said that the U.S. economy continues to show “remarkable resilience,” citing stronger-than-expected growth and labor market data.
Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, on Tuesday said on Tuesday that the recent shift away from the Magnificent Seven stocks isn’t a warning sign for investors.
In his latest weekly commentary, Siegel argued that investors are increasingly moving beyond the tech megacaps that have dominated market gains in recent years, calling the trend an important internal rotation rather than the start of a broader correction.
“The long-term AI story remains compelling, but leadership within the equity market is rotating. That is typically a sign of a healthier bull market rather than a weaker one,” he wrote, pointing to one of the strongest recent relative performances by value stocks versus growth in years.
What’s Fueling The Move Out Of Mag 7 Stocks?
The economist added that the falling oil prices, easing bond yields, and improving inflation prospects are fueling a rotation into value and cyclical stocks. “The sharp retreat in oil prices has dramatically altered the market narrative. Just weeks ago, investors feared a renewed inflation shock from the conflict with Iran,” he added.
Siegel said that investors are now piling into cyclical and value-oriented sectors as the investment thesis shifts toward lower inflation, lower interest rates, and more attractive valuations.
Meanwhile, the Global X Artificial Intelligence & Technology ETF (AIQ) was up 0.22% in Tuesday’s pre-market trade, while the iShares U.S. Technology ETF (IYW) was flat.
Siegel Says US Economy Displaying ‘Remarkable Resilience’
Siegel said the U.S. economy continues to show “remarkable resilience,” citing stronger-than-expected growth and labor market data.
He noted that first-quarter (Q1) GDP was revised higher to about 1.5%, largely due to improved trade data, while estimates for second-quarter (Q2) growth have converged on 2.5%, even though a wider-than-expected trade deficit reported later could trim that figure modestly.
The Wharton professor also pointed to encouraging signs across the broader economy. Weekly jobless claims have improved, durable goods orders have topped expectations, and forecasts for payroll growth have strengthened.
Just a few months ago, many economists expected monthly job gains to settle between 0 and 50,000, but expectations have since climbed back to above 100,000, reflecting what Siegel described as a surprisingly healthy labor market.
Siegel said this week’s employment report will be a key test of that narrative. A payroll gain comfortably above 100,000, coupled with easing energy prices and lower Treasury yields, would reinforce the view that economic momentum remains intact even as inflation moderates, creating what he called an unusually constructive backdrop for equities.
At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.11%; the Invesco QQQ Trust ETF (QQQ) rose 0.15%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.12%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in ‘bearish’ territory.
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