Welcome, Sandbox friends.
Today’s Daily discusses:
Mag 7 reset
Let’s dig in.
Blake
Markets in review
EQUITIES: Dow -2.50% | S&P 500 -3.46% | Nasdaq 100 -4.19% | Russell 2000 -4.27%
FIXED INCOME: Barclays Agg Bond -0.79% | High Yield -1.63% | 2yr UST 3.856% | 10yr UST 4.409%
COMMODITIES: Brent Crude -3.05% to $63.49/barrel. Gold +3.62% to $3,190.8/oz.
BITCOIN: -3.62% to $79,191
US DOLLAR INDEX: -1.76% to 101.092
CBOE TOTAL PUT/CALL RATIO: 1.04
VIX: +21.12% to 40.72
Quote of the day
“Today’s boring work ain’t for today, it’s for one day.”
- Nicky Cass
Mag 7: from vulnerability to opportunity
Amid a tremendously uncertain near-term backdrop, we’re on the precipice of 1st quarter earnings season which should provide investors with insight into the evolving outlook for corporate profits, activity, and important discussions among management teams.
Friday kicks off with the banks, with the rest of the S&P 500 following in the coming weeks.
Under normal circumstances, 20% of companies provide quarter-ahead guidance on earnings calls, while 43% of companies provide full-year guidance.
Expect much fewer companies to do so in Q1, as the shifting environment for trade policy and economic growth remain highly fluid.
Confidence remains that artificial intelligence has transformative potential, but markets to date have traded the theme alongside the rest of the market, ie poorly.
DeepSeek highlighted some fragility in Magnificent 7 trade in early 2025, and with the recent derisking in U.S. equities, big tech valuations have reset to historically cheap levels relative to the broader market (as measured by the S&P 493).
In fact, the Mag 7 collectively trades at its lowest valuation premium (27x) to the rest of the market since 2018.
Directionally, this de-rating helps to reduce valuation risk for the most important segment of U.S. markets.
For years, the Mag 7 complex have grown substantially faster than rest of the market but this growth should moderate on a relative basis going forward.
Consensus expects growth for the Mag 7 will again outpace growth for the remainder of the index but by the narrowest gap since the first quarter of 2023.
Estimates show the Mag 7 are expected to stocks grow earnings by 16% versus just 7% for the remaining S&P 493.
A key development in the coming weeks is whether investors will continue to focus on the global trade wars or shift their attention away to the reports, performance, and guidance of corporate America.
Sources: Goldman Sachs, Eaton Vance
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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