Magnificent 7's Fall: A 2022 Echo or 2018 Replay?

The Nasdaq's recent correction has left investors scratching their heads, wondering if history is repeating itself. The current downturn mirrors the 2022 correction, but with a twist. This time, the 'Magnificent 7' stocks—Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla—are the common factor driving the index lower. But is this a 2022 echo or a 2018 replay? Let's dive in.



The 2022 correction was driven by rising interest rates, which impacted long-duration valuations of stocks. In contrast, the current correction is driven by a repricing of the 'animal spirits' playbook, where the market is reassessing the valuations of these same stocks due to a pause in rate cuts and other economic factors.

Jurrien Timmer, the director of global macro at Fidelity Investments, noted that the fall of the 'Magnificent 7' stocks led to a similarity between the patterns of the two years. He explained, "At first glance, that seems odd, since 2022 was driven by rising rates and this one is driven by a repricing of the 'animal spirits' playbook." This repricing is analogous to the time when rising discount rates impacted their long-duration valuations in 2022.

Despite these differences, the market responses to both corrections have been similar in terms of speed and depth. Timmer also said that 1998 and 1968 were similar to 2025 in terms of "speed and depth." This suggests that market corrections, regardless of their underlying causes, tend to follow a similar pattern of rapid decline and subsequent recovery.



The 'Magnificent 7' stocks have experienced significant declines during the current correction. As of March 2025, all of these stocks have seen negative year-to-date performance. Specifically, Nvidia Corporation (NVDA) has declined by 15.03%, Apple Inc. (AAPL) by 11.73%, and Microsoft Corp. (MSFT) by 7.35%. These declines are part of a broader market correction that has seen the Nasdaq 100 fall into correction territory, with a drop of over 10% from its 52-week high scaled on February 19, 2025, to a fall of over 10% by March 6, 2025. Similarly, the S&P 500 fell into the correction zone as of March 13, 2025, closing after scaling the February 19 high.

The performance of these stocks has implications for both the broader market and individual investors. For the broader market, the decline of these high-weightage stocks within key market indices has contributed to the overall market downturn. For individual investors, the performance of these stocks highlights the importance of diversification and maintaining a long-term investment strategy. As Jurrien Timmer, the director of global macro at Fidelity Investments, noted, "At first glance, that seems odd, since 2022 was driven by rising rates and this one is driven by a repricing of the 'animal spirits' playbook." This suggests that the current correction is driven by different factors than previous ones, and investors should be prepared for potential volatility.

Additionally, the performance of these stocks underscores the need for investors to review their risk profiles and consider the potential for market corrections in their investment strategies. As Timmer noted, "Apart from this common factor the correction was much more comparable with 2018, 'when robust earnings growth was offset by contracting P/E multiples.'"

In conclusion, the current correction in 2025 and the 2022 correction share some similarities but also have distinct underlying causes and market responses. The 2022 correction was driven by rising interest rates, while the current correction is driven by a repricing of the 'animal spirits' playbook. The performance of the 'Magnificent 7' stocks during the current correction highlights the importance of diversification and maintaining a long-term investment strategy. Investors should be prepared for potential volatility and review their risk profiles in light of the current market conditions.