What the Magnificent Seven’s $1.7 trillion meltdown tells us about the economy

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The key question for investors is whether this is just a correction in what has been quite an ebullient market – or something more threatening.

In just seven trading days, the “Magnificent Seven” of the US sharemarket lost just over $US1 trillion of their market value within an overall market down almost 4.5 per cent.

The first two inflation prints for the year – which showed that progress in lowering the inflation rate had stalled – raised modest question marks over that conviction. Then on April 10, the March CPI data was released, showing the rate edging up; on April 11, the sharp sell-off of shares began. Over the same period, Microsoft has lost $US214 billion of value, Apple $US170 billion, Amazon $US150 billion, Meta Platforms $US92.5 billion, Tesla $US88 billion and Alphabet $US31.3 billion.some time ago. Its share price peaked at more than $US400 in late 2021. It’s now about $US147, having started this year at just under $US250 a share. From its 2021 peak, Tesla has lost more than $US800 billion of market capitalisation.

It’s not the US economy that is directly at fault. It has been growing solidly, although the longer US interest rates remain at their current levels , the more vulnerable the economy and stocks will be. The earnings of US companies so far this year have outperformed expectations. After a modest tremor, however, the commodity most sensitive to increased risk within the region is oil, which has fallen back. Having traded above $US90 a barrel early in the month, it is now priced at about $US87 a barrel, suggesting traders don’t anticipate any escalation of hostilities.

 

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