According to Inc, as of this week, five of the so-called Magnificent Seven tech stocks have lagged the S&P 500 year-to-date in 2025. Only Alphabet and Nvidia have managed to outpace the broader index’s 16.7% gain. The underperformers are Tesla, Microsoft, Apple, Meta, and Amazon. Despite this, the group as a whole is still up about 24%. Veteran strategist Jay Woods told Inc’s Full Signal podcast that it’s fair to call them the “lag seven” right now. He and ETF strategist Todd Sohn see this as part of a healthy market rotation into other sectors like financials and small-caps, with multiple rate cuts expected in 2026 potentially accelerating the trend.
The Narrative Shift
Here’s the thing: this is a massive shift in the market narrative we’ve had for years. We’ve been conditioned to think the entire market rally is propped up by these seven behemoths. And now, the S&P is charging ahead without most of them leading the charge. That’s wild. It completely undermines the easy “AI bubble 2.0” comparison to the dot-com era. Back then, if the tech leaders faltered, the whole house of cards came down. Now? The market seems to be saying, “Thanks for the lift, but we’ve got other ideas.”
Healthy Rotation or Warning Sign?
So, is this a bad sign? Woods argues it’s actually a reason for optimism. A bull market that narrows is fragile. A bull market that broadens is robust. Money looking for a home outside of mega-cap tech means other sectors get a chance to shine. He’s looking at financials. Sohn is eyeing a potential rebound in healthcare—a sector that’s been absolutely beaten down and might be set for a contrarian surge. They’re even talking about small-caps finally waking up. If you want to dive deeper into their full analysis, you can check out the discussions on Full Signal with Jay Woods and Full Signal with Todd Sohn.
What It Means for Investors
Basically, the playbook is changing. “Set it and forget it” on the Mag 7 might not work as well in this phase. The call to action from these strategists is pretty clear: diversify. Look at sectors that have been left for dead. Consider adding small-cap exposure. It’s not about abandoning tech, but about recognizing that the next leg of growth might come from somewhere else. And with rate cuts on the horizon for 2026, the entire calculus for value stocks, banks, and industrials could change. I think the big takeaway is that the market is finally doing what everyone said they wanted—it’s broadening out. The trick now is figuring out where it’s broadening *to*.
