Morgan Stanley Predicts Potential Rebound for Magnificent Seven Stocks
The recent sell-off in the so-called Magnificent Seven stocks may be coming to an end, according to a new analysis from Morgan Stanley. This potential rebound in mega-cap tech stocks could provide a significant boost to US markets, with analysts citing a weaker dollar and improved earnings outlook as positive indicators.
The Magnificent Seven, which includes Meta, Microsoft, Nvidia, Apple, Alphabet, Amazon, and Tesla, has experienced a challenging year thus far. Meta remains the only stock in the group with a gain year-to-date, while the others have contributed to a capital rotation towards international markets due to their underperformance.
Morgan Stanley analysts, led by Mike Wilson, suggest that a potential rally in the S&P 500 could be on the horizon. Factors supporting this outlook include stronger seasonals, lower rates, and oversold momentum indicators. Additionally, earnings revisions for the Magnificent Seven appear to be stabilizing.
The recent decline in the US dollar is expected to have a positive impact on US corporate earnings. Historically, a weaker dollar has led to stronger US corporate earnings relative to Europe, as it makes US goods and services more competitive internationally.
Earnings revisions for the Magnificent Seven are showing signs of improvement, coinciding with the largest weekly inflow into US stocks in 2025, totaling $34.1 billion. Several members of the group have already shown signs of recovery, with notable gains for Tesla, Nvidia, and Alphabet.
A rebound in the Magnificent Seven could have broader market implications, potentially leading to a rotation back to US equities. The improved earnings outlook and weaker dollar may enhance overall US market performance, with analysts suggesting that US equities could outperform international developed markets in the near term.
As investors closely monitor these developments, the potential turnaround in the Magnificent Seven stocks could signal a shift in market dynamics and provide new opportunities in the US equity landscape.
