CNBC's Jim Cramer said Wednesday that dividend stocks are getting more attention as Wall Street's desire to buy the “Magnificent Seven” tech stocks has waned.
“The market has temporarily lost its love for the Mag Seven,” Cramer said. “This is a new market – that's right – where the mega-cap tech companies are no longer leaders. It's a market where money is invested in a lot of boring stocks with higher returns, as well as smaller stocks, healthcare, banks, etc. REITs and utilities.”
Most of 2023 has been dominated by mega-cap tech stocks – Apple, Alphabet, Meta, Microsoft, Amazon, Nvidia and Tesla. But since U.S. Treasury yields peaked in October, an index tracking these technology stocks has underperformed the equally weighted S&P 500, giving each company an equal impact on its performance. The traditional S&P 500 is weighted by the market capitalization of each individual index.
Cramer attributed this change in part to a growing number of investors who believe the Federal Reserve will begin cutting interest rates, making these dividend stocks more valuable.
He pointed to several “new darlings” in the market, including banks and healthcare companies. Investors are using the Magnificent Seven's profits to buy these dividend stocks, he said, explaining that in this way the market is experiencing a “rotation” away from Big Tech.
However, Cramer stressed that the Magnificent Seven are still great companies and this rotation won't last.
“Don’t worry, the Seven will return to their rightful place eventually,” he said.
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Apple, Alphabet, Meta, Microsoft, Amazon and Nvidia.