For a while, the S&P 500’s returns have been dominated by a select group of technology kingpins known as the magnificent seven.
Those seven stocks, Alphabet, Apple, Amazon, Microsoft, Meta Platforms, Nvidia, and Tesla, powered the market higher due to massive spending and demand growth for artificial intelligence training and inference.
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They remain key cogs in the S&P 500’s performance, but more recently, a new basket of stocks is delivering big returns, potentially signaling the early days of a regime change.
Unlike the Mag 7, the new leaders are far less tied to AI. Sure, names like Palantir and Nvidia remain big winners, but the broader group of stocks delivering eye-popping returns spans more industries, including finance and, yes, even space.
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Stocks jump on renewed optimism
It’s been a tale of two markets this year.
First, stocks took a drubbing beginning in February when President Trump launched his trade war, instituting 25% tariffs on Canada and Mexico.
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The White House followed that up with more tariffs, often higher than Wall Street and businesses expected, including a baseline 10% tariff on all imports and a 25% tariff on autos.
Altogether, the tariff tit-for-tat took a big toll on stocks, causing the S&P 500 to fall by 19%—nearly into bear market territory—and the Nasdaq Composite to tumble about 24% through early April.
Then, everything changed.
President Trump paused most reciprocal tariffs on April 9, providing leeway for trade deals that could settle tariffs at more reasonable levels.
The glimmer of hope for avoiding a worst-case scenario of high tariffs sparking inflation and sending the economy into a tailspin marked a bottom for stocks, kicking off a record-setting rally.
The S&P 500 has marched 24% higher while the Nasdaq has rallied by over 30% as more people have lowered their forward inflation expectations.
While there’s some concerning economic data on jobs and the economy, market gains suggest we’ll sidestep an economic reckoning, providing upside to revenue and earnings growth.
New stock market leaders emerge
By now, most investors are familiar with market darlings Nvidia and Palantir, two of the most prominent AI players.
Given its dominance in high-end AI semiconductor chips and optimization software, Nvidia is the de facto Goliath in AI network infrastructure. Palantir has become a go-to for securely developing AI apps for government and corporations.
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Those stocks have been top performers over the past few months, rising 82% and 107% from their early April lows.
But other big-cap technology companies haven’t performed nearly as well. Alphabet and Apple are up 28% and 23%, respectively. Solid. But not game-changing. You could have bought the Nasdaq 100 and done much better.
Instead, a new set of stock market darlings has been outpacing the market, including space technology leader Rocket Lab (RKLB) and fintech leader SoFi Technologies (SOFI) . Crypto leader Coinbase (COIN) has also been a star.
These three stocks are up 214%, 130%, and 176%, respectively, from their April lows.
Moreover, to understand just how good the performance of this new basket of leaders has been, you need look no further than the VanEck Social Sentiment ETF (BUZZ) .
The BUZZ ETF invests in “75 large cap U.S. stocks which exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources including social media, news articles, blog posts and other alternative datasets,” according to VanEck.
In short, it attempts to keep its finger on the pulse of the most interesting stocks. So far, that strategy is working. The BUZZ ETF gained 36% in the second quarter and is up 22% year-to-date through June. Meanwhile, the S&P 500 is up 11% and 6%.
It’s up 66% since early April, and month-to-date through July 18, it’s gained 8% versus a 2% return for the Nasdaq.
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“Look at how poorly the QQQs have done relative to BUZZ since April. Think about this, we consider the QQQs to be the pinnacle of technology stocks, yet they practically look like the healthcare stocks relative to the S&P when compared to BUZZ,” wrote long-time technical analyst Helene Meisler on TheStreet Pro.
It’s not just Rocket Lab, Coinbase, and SoFi powering the ETF, either.
Yes, those are the three largest holdings in BUZZ, but AST SpaceMobile and Robinhood (HOOD) are number four and five, and they’ve been up 186% and 219% since early April.
Nvidia and Palantir are only BUZZ’s 10th and 11th biggest holdings, so while their gains are substantial, they’re not the ones behind the ETF’s significant outperformance.
Does the rise of Rocket Lab, thanks to a steady stream of revenue growth from shooting satellites into the sky, or SoFI, which is increasingly disrupting traditional banking, signal the rise of a new guard, or is it just a temporary speculative frenzy?
“I was taught that corrections are the market’s way of changing leadership,” wrote Meisler. “Was the spring plunge the market’s way of changing leadership? Or is this just speculation run amok? If you go back to that ratio chart, it’s a trend that has been in place for at least a year.”
Of course, stocks don’t go up in a straight line, and some backfilling of gains for this new group of winners is to be expected.
Still, one year is a pretty long period for this ETF and its biggest components to outpace the broader market.
Todd Campbell owns Rocket Lab, SoFi Technologies, Nvidia, and Palantir.
Related: Bank of America delivers bold S&P 500 target
Great Job Todd Campbell & the Team @ TheStreet Source link for sharing this story.
