As Wall Street's interest in buying “Magnificent Seven” technology stocks wanes, dividend-paying stocks are attracting more interest, CNBC's Jim Cramer said Wednesday.
“The market has temporarily lost its love for Mag Seven,” Kramer said. “This is a new market — it's true — where large-cap technology companies are no longer the leaders. It's a market where money is being used in a lot of boring, high-yielding stocks as well as small cap stocks, health care, banks, REITs and utilities.”
Most of 2023 has been dominated by big tech stocks, such as Apple, Alphabet, Meta, Microsoft, Amazon, Nvidia, and Tesla. But since US government bond yields peaked in October, the index tracking these tech stocks has underperformed the equally weighted S&P 500, giving each company the same influence over its performance. The traditional S&P 500 is weighted by the market capitalization of each component.
Cramer attributed this change in part to the growing number of investors who believe the Fed will start lowering interest rates, making these dividend stocks more valuable.
He pointed to several “new darlings” in the market, including banking and health care companies. Investors are using Magnificent Seven's dividends to buy these dividend stocks, he said, explaining that this is how the market is seeing a “rotation” away from big tech companies.
However, Cramer stressed that the Magnificent Seven companies remain great companies, and that this rotation will not be permanent.
“Don't worry, the seven will eventually return to their rightful place,” he said.
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Disclaimer The CNBC Investing Club Charitable Trust owns shares in Apple, Alphabet, Meta, Microsoft, Amazon, and Nvidia.
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