Over the last several years, a handful of mega-cap technology companies, widely known as the “Magnificent 7” or “Mag 7,” have carried the weight of equity market returns. In the US, the Mag 7 accounted for roughly 63% of S&P 500 Index returns in 2023 and 55% in 2024, underscoring how concentrated market leadership had become. However, more recently, that concentration has started to ease, with share of returns falling to roughly 43% in 2025 as performance broadened beyond the small handful of names.¹

This shift in market leadership has also been seen in global equity markets. Within the MSCI World Index, the percentage of companies outperforming the overall index return rose to 61% year to date in 2026, a notable improvement from 29% in 2024 and 41% in 2025.² This increase suggests market participation is becoming healthier and more balanced, with gains being supported by a much wider range of companies rather than concentrated in a narrow leadership group.

A supportive macro backdrop may also be driving broader market participation. Possible key factors include earnings growth expectations widening beyond the handful of megacap names, a weaker US dollar and relatively more attractive valuations seen outside the US supporting international equities.³ This shift may be creating a more balanced environment, one in which stock selection could matter more than having exposure to a handful of dominant names.

As more companies and sectors contribute to earnings growth and market leadership, we believe the opportunity set for active, selective investors has become much more favorable, particularly for investors focused on identifying durable, quality businesses beyond the famous Mag 7. Selective investors may also be better positioned to uncover differentiated businesses that may have been overlooked during the periods of narrow market leadership.

The Federal Reserve held its policy rate steady at 3.5-3.75% following its March 18 meeting. The new dot plot of fed funds rate forecasts was unchanged from December’s, with a median expectation of one rate cut in 2026 and one in 2027. However, seven of the 19 participants did not see the need for a cut this year as tariff and energy shocks pressure the central bank’s dual mandate from both sides.¹

The median forecast for both headline and core PCE inflation rose, while labor market projections were basically unchanged through the forecast horizon. Fed Chair Powell indicated it’s still too early to judge the potential impact of the war on inflation and the labor market, as it will depend largely on the severity and duration of the oil price shock. He instead spent most of his press conference discussing the impact of tariffs, which the Fed staff estimates is adding 0.5-0.75% to 3% core personal consumption expenditure (PCE) inflation, though he expects this to fade once lapped this summer.²

The committee increased its forecasts for real GDP growth through 2028. It also bumped up its estimate of potential economic growth to 2%, which Powell attributed to improved productivity growth but noted it was too early to attribute it to artificial intelligence (AI). The median estimate of the longer run neutral policy rate increased to 3.1% from 3.0%.³

In response to Powell’s remarks, the market shifted its expectation of the next interest rate cut to mid-2027 from December 2026. This reaction seems excessive to me. A short-lived oil shock could potentially open up space for a cut in the fourth quarter under the next chair, while a more severe shock—especially one that tightened financial conditions—could actually lead to more rate cuts if accompanied by a weaker labor market.⁴