Online brokerage eToro has published the key findings of its latest Retail Investor Beat survey.
More than one in four retail investors (27%) plan to scale back investments in the so-called ‘Magnificent 7’ big tech stocks in 2024.
In the study of 10,000 retail investors across 13 countries, 11% said that they plan to sell some of their holdings in the Magnificent 7 this year (which includes Amazon, Apple, Microsoft, Meta, Tesla, Nvidia and Alphabet), locking in profits and reducing their allocation to these market-dominating stocks. A further 16% said they would reduce the amount of new capital they invest in these companies in the months ahead.
The RIB findings follow a blockbuster 14 months for these seven companies, with their collective share price up 90% since January 2023. The findings also come ahead of several anticipated rate cuts in 2024, which are expected to support a resurgence in other more cyclical sectors in the equity market.
Commenting on the data, eToro Global Markets Strategist Ben Laidler, says:
“The much hoped-for cuts in global interest rates are set to move from hope to reality over the summer as the Fed, ECB, and Bank of England all take action. This will help to support economies, earnings growth, and stock market valuations, while driving a major rotation away from the US and big tech stocks towards more economically sensitive and cheaper areas, like real estate, small caps, Europe and emerging markets.
“As our latest Retail Investor Beat data illustrates, a significant number of retail investors want to get ahead of this trend by adapting their portfolios accordingly while also locking in some profits from the Magnificent 7 juggernauts.”
According to the RIB data, the majority of global retail investors will adapt their strategy in light of the shifting economic backdrop, with 53% planning to rebalance their portfolios ahead of predicted rate cuts and a potential market rotation. Younger investors are taking the lead on this, with 71% of investors aged 18-34 stating they already have or will rebalance their portfolio ahead of rate cuts, compared to just 37% of over 55s.
Amongst those planning to rebalance their portfolios, the most common change to asset allocation will be an increase in equity investments (48%), followed by holding less money in cash (36%).
Laidler adds:
“Millenials and Gen Z have had to navigate some turbulent experiences in their early adult years, such as the repercussions of the global financial crisis and a global pandemic. This could explain why younger investors are the most flexible when it comes to adjusting their portfolios in light of major economic shifts. Besides, younger investors are showing an increased level of sophistication in their investing skill set by identifying moments of opportunity and taking action early on.”
Whilst one in four investors are planning to scale back on big tech in 2024, the data also shows that many are still holding firm on the sector, with 23% stating they will invest more in the Magnificent 7 than they did last year, and 34% planning to maintain their current allocation to these stocks.
Additionally, when asked what sector they will prioritise in 2024, global retail investors were most likely to say tech (18%), followed by financial services (12%), whilst the number of investors holding AI-related stocks continues to grow, climbing from 27% to 31% in the first quarter of 2024
