Where To Look For Q2 Leadership Amid Market Indecision

Conclusion, Investment Implications & Strategy

The Roundhill Magnificent Seven ETF (MAGS) is currently outperforming the S&P 500 Trust ETF (SPY) on a Tactical (monthly) basis as of April 25th, but its Feb 7th trend of Strategic (quarterly) relative underperformance versus SPY is still intact.  Considering that the “MAG 7” has been a coincident if not leading indicator of US broad market for at least the past year, how MAGS performs relative to SPY in the weeks ahead will be seen as a coincident if not leading indication of Q2 2025  US broad market direction.

Introduction

The term Magnificent Seven has dominated financial headlines since its emergence in mid-2023. Broadly defined, the “Mag Seven” refers to the seven largest and most influential U.S. tech and growth companies by market capitalization: Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META, still known as Facebook to many), and Tesla (TSLA).

This modern grouping is an evolution of the FAANG acronym, originally coined by financial television personality Jim Cramer. While the history of the name is interesting, it’s the numbers that truly matter. As of this writing, the Mag Seven represents roughly 31% of the S&P 500 according to market cap weighting and thus exerts enormous influence over the broader market. Simply stated, as goes the Mag Seven, so is likely to go the S&P 500.

To track the performance of this group, we use the Roundhill Magnificent Seven ETF (MAGS) as a proxy. Over the past year, MAGS has shown a 0.95 positive linear correlation to the broad market S&P 500 (SPY), meaning these two series are essentially moving in lockstep.

Watch For MAGS To Lead The Market’s Next Move

Looking at the chart below, the bottom panel highlights the relative performance of MAGS versus SPY since January 2024.   On a Tactical 21-day basis, MAGS has begun to outperform SPY, suggesting a bullish near-term signal for the overall market. This kind of short-term leadership can be a leading indicator of where the broad market is headed next.

Strategically, however, the 63-day moving average on the relative performance chart presents a key relative resistance level. A clean breakout above this average would confirm that MAGS is once again leading the broad market higher.  Especially following the recent US broad market collapse, we’ll be watching to see if that tight correlation continues and the Mag Seven can reassert its recent leadership.

Finally, with many of these companies reporting earnings this week, positive results could trigger and fuel the next leg higher in the broad market.  Conversely, disappointing or neutral earnings may weaken the group’s momentum, potentially keeping the S&P 500 pinned below its 50-day moving average, which is currently being tested as overhead resistance (upper panel).