After a very strong year on the stock market in 2024 and the relatively high valuations of US technology stocks (Magnificent 7), a strong start to the year was not necessarily expected. Nevertheless, we can report a positive January. Except for India, all major stock markets recorded stable or rising prices.

However, a closer look at the mechanics of individual indices and market segments reveals that the market rotation away from the Magnificent 7 and popular technology stocks, which we have been observing since July 2024, is continuing—and in some cases, accelerating. In particular, stock markets in continental Europe, which had significantly lagged behind and were very attractively valued, posted high single-digit gains in January. At first glance, this appears unusual, as the economic and political situation in Europe has by no means improved. Apparently, market participants assume that Europe’s economy has better times ahead despite political stagnation, the war in Ukraine, and the threat of tariffs from Donald Trump.

Anyone monitoring technical market indicators will also notice that all major European stock markets have broken through previous resistance levels and now look strategically attractive. Further gains seem likely. In contrast, indices heavily weighted with the Magnificent 7—such as the S&P 500, Nasdaq 100, MSCI World Momentum, MSCI World Quality, and technology indices—are finding it increasingly difficult to reach new highs. Presumably, high valuations are limiting further potential gains.

The equal-weighted S&P 500 outperformed the regular S&P 500 in January, and indices tracking small and mid-sized US stocks also had a strong start to the year. For a change, the MSCI World ex USA outperformed both the MSCI World and the MSCI USA. It is becoming increasingly evident that a global equity market reorientation away from the Magnificent 7 and technology stocks is underway. Therefore, community members looking to invest fresh capital should take note of these trends.