Online brokerage eToro has released the key findings of its latest Retail Investor Beat survey.
More than one in four retail investors (27%) plan to limit their investments in the so-called “Magnificent 7” large tech stocks in 2024.
In the study of 10,000 retail investors in 13 countries, 11% said 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 of their allocation to those stocks that dominate the market. A further 16% said they would reduce the amount of new funds investing in these companies in the coming months.
RIB’s findings follow a very successful 14 months for these seven companies, with their collective share price up 90% since January 2023. The findings also come on the heels of several expected rate cuts in 2024, which are expected to support the recovery in other more cyclical sectors of the equity market.
Commenting on the data, eToro Global Markets Strategist Ben Laidler says:
“The long-awaited cuts in global interest rates are set to move from hope to reality in the summer as the Fed, ECB and Bank of England go all out. This will help support economies, boost earnings and stock valuations, while driving a significant shift away from the US and big tech stocks to more economically sensitive and cheaper areas such as real estate, small caps, Europe and emerging markets.
“As our latest Retail Investor Beat data shows, a significant number of retail investors are looking to buck this trend by adjusting their portfolios accordingly, while also locking in some gains from the Magnificent 7 juggernauts.”
According to RIB data, the majority of global retail investors will adjust their strategy in light of the changing economic environment, with 53% planning to rebalance their portfolios ahead of forecast rate cuts and a possible switch in purchase. Younger investors are taking the lead on this, with 71% of 18-34 year olds saying they already have or will rebalance their portfolio ahead of rate cuts, compared to just 37% of over 55s.
Among those planning to rebalance their portfolios, the most common change in asset allocation will be to increase investments in stocks (48%), followed by keeping less money in cash (36%).
Laidler adds:
“Millennials and Gen Z have had to navigate some tumultuous experiences in their early adulthood, such as the effects 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 changes. In addition, younger investors demonstrate an increased level of sophistication in their investment skills, spotting moments of opportunity and taking action early.”
While one in four investors plan to cut back on big tech in 2024, the data also shows many are still holding firm in the sector, with 23% saying they will invest more in the Magnificent 7 than last year, and 34% planning to to maintain their current allocation to these stocks.
Additionally, when asked which sector to prioritize in 2024, global retail investors were most likely to say technology (18%), followed by financial services (12%), while the number of investors holding AI-related stocks continues to rise, rising from 27% to 31% in the first quarter of 2024