- 27% of retail investors to take profits or scale back future investments in seven big tech stocks
- Majority (53%) plan to rebalance portfolios this year in anticipation of expected rate cuts
- Most common asset changes will be to increase allocation to equities and cut down on cash
- Young investors most likely to adapt strategies – 71% will rebalance portfolio vs 37% of over-55s
More than one in four retail investors (27%) plan to scale back investments in the so-called ‘Magnificent 7’ big tech stocks in 2024, according to data from the latest Retail Investor Beat (RIB) from trading and investment platform eToro.
In the study of 10,000 retail investors across 13 countries, at global level 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) with 12% of the Romanian investors, locking in profits and reducing their allocation to these market-dominating stocks. A further 16% (20% of the Romanian investors) 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. Romanians are even more keen to do this, with 65% of the respondents either rebalanced or preparing to rebalance their portfolios.
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. Romanian investors are showing the same pattern, with 76% of the young investors intending this but the differences as the age increases are smaller than on the global averages. More than 50% of the investors over 55 years old are also rebalancing showing more flexibility in working with their portfolios.
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%), with Romanian investors showing the same behavior.
Commenting on the data, eToro Market Analyst Bogdan Maioreanu, says: “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,showing an increased level of sophistication in their investing skill set by identifying moments of opportunity and taking action early on. But in a country with a small population of investors, the degree of sophistication spans across multiple generations making the differences between them less evident than in more developed countries. ”
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.
The poll also shows that Romanian investors are more attracted to technology with 22% prioritising this sector for this year, followed by financial services and energy (14%). As for AI, the number of investors investing or planning to invest has grown from 26% at the end of 2023 to 35% in the first quarter of 2024.
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