This is part of our monthly pension update series. Catch up on last month’s summary here: What happened to pensions in June 2023?
Investors are often curious to see how companies are performing. Especially within the current landscape of historically high inflation and interest rates. That’s where earnings season comes in. This where every three months publicly listed companies report their financial results. This offers investors a glimpse into a company’s financial health.
July’s earning season also marks the halfway point of the calendar year. This gives investors a temperature check on how their investments are doing in 2023. These results may have a big impact on the value of the company’s shares (which are units of ownership). As such, earnings season can make investments volatile.
Read on to discover how markets have performed this month. And which companies have seen strong performance in the first half of 2023.
What happened to stock markets?
In UK stock markets, the FTSE 250 Index rose by almost 4% in July. This brings the year-to-date performance close to +2%.
Source: BBC Market Data
In European stock markets, the EuroStoxx 50 Index rose by almost 2% in July. This brings the year-to-date performance close to +18%.
Source: BBC Market Data
In US stock markets, the S&P 500 Index rose by over 3% in July. This brings the year-to-date performance close to +20%.
Source: BBC Market Data
In Asian stock markets, the Hang Seng Index rose by over 6% in July. This brings the year-to-date performance close to +2%.
Source: BBC Market Data
What are the ‘Magnificent Seven’?
The ‘Magnificent Seven’ are a group of seven tech giants that are driving up the value of many investments. They are: Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia. These companies are all leaders in their respective industries. And they’ve all seen significant growth in recent years. But, why does this matter?
Many UK pensions invest heavily in US companies - including the Magnificent Seven. This is because these companies are some of the biggest - and in recent years most profitable - in the world. You can measure how much a company’s worth by ‘market capitalisation’. This is based on the current share price and the number of outstanding shares.
| Company | Industry | Market Capitalisation (USD) |
|---|---|---|
| Apple | Consumer Electronics | $3.1 trillion |
| Alphabet | Technology | $1.7 trillion |
| Microsoft | Software | $2.5 trillion |
| Amazon | Ecommerce | $1.4 trillion |
| Meta Platforms | Social Media | $817 billion |
| Tesla | Automotive | $838 billion |
| Nvidia | Semiconductors | $1.2 trillion |
Valuations as at 1 August 2023.
As you can see, these companies are all worth trillions of dollars. Yet there’s a discussion whether the US stock market’s too dependent on these seven companies. Investors know that big companies can’t maintain high growth forever. And past results don’t guarantee future results.
How are these companies performing in the US stock market?
The S&P 500’s an index that tracks the performance of 500 of the largest public US companies. It’s considered to be a good measure of the health of the US stock market. As mentioned earlier, the S&P 500’s year-to-date performance is close to +20%. But, recently the index’s performance has been mostly driven by the Magnificent Seven.
The Magnificent Seven make up roughly a quarter of the value of the S&P 500 index. During Q2 the spotlight was on Nvidia, a company that makes chips for computers. When the ‘AI gold rush’ gained momentum, Nvidia benefitted from this and joined the club of companies worth more than $1 trillion. This is because Nvidia will reportedly generate hundreds of billions in new revenue, thanks to AI.
| Company | 2023 performance | 5-year performance |
|---|---|---|
| Apple | 57% | 278% |
| Alphabet | 49% | 144% |
| Microsoft | 40% | 211% |
| Amazon | 56% | 47% |
| Meta Platforms | 155% | 79% |
| Tesla | 147% | 1,052% |
| Nvidia | 226% | 641% |
Five year performance as at 1 August 2023.
Pension funds typically use diversification to reduce risk. Diversification means spreading your investments around. So if one company or industry does badly, your total investment won’t be heavily impacted. This is why you may see that these profitable companies only make up a small percentage of your pension.
This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in August 2023?
Have a question? Get in touch!
You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
