The rise of the Magnificent Seven, which now represent roughly a quarter of global equities and about a third of the S&P 500, has propelled high‑growth technology stocks far ahead of more defensive stocks, such as consumer staples stocks. This performance gap is similar to the one that emerged between the MSCI World Growth Index (representing high-growth internet startups) and the MSCI World Value Index (representing lower-risk “old economy” stocks) in the years leading up to the dotcom crash. The difference is that today’s gap (149%) is three times larger.
Style Rotations Are Becoming More Impactful
As of 22 April 2026
Source: MSCI. These divergences represent some of the most significant and well-known rotations of recent decades.
This poses a challenge to investors. Those who view today’s US tech outperformance as a bubble may be right—but the scale of the sector’s outperformance increases the risk of mistiming.
As the saying goes: There is no difference between being early and wrong. Asset managers who anticipated a dotcom crash may have been correct—but those who reduced their exposure to internet stocks too early (such as in 1998 rather than early 2000) would have experienced years of underperformance before the sell‑off arrived.
The same mistiming risk exists today—but heightened concentration risk, combined with heightened macroeconomic uncertainty, has added to the challenge.
Since the pandemic, style rotations have become more frequent, unpredictable, and extreme—key features of what we describe as the ‘risk exhaustion’ era.1 The cumulative performance gaps that have emerged between international value versus international quality stocks (94%) and between US versus European stocks (66%)—both driven by somewhat sudden changes in investor preferences—are just two recent examples of style rotations that are larger and more impactful than those of decades past, including those of the dotcom era and the pre-financial crisis era.2
We believe this dynamic shows no signs of stopping. Over the past year alone, a 72% performance gap has opened between software and semiconductor stocks—an unprecedented divergence for two industries that have historically moved closely together.
Against this backdrop, we believe investors should avoid trying to time the market and instead prioritize two things: balanced exposures across different investment styles, and a focus on low tracking error strategies that help neutralize macroeconomic risk.
Featured
Notes
1. Risk Exhaustion: Navigating the New Regime (Lazard, 2023) and The Risk Exhaustion Regime Continues (Lazard, 2025)
2. Tracking Error: Myth vs. Reality (Lazard, 2025) provides additional examples and analysis of recent style rotations.
Important Information
Published on 26 May 2026.
The performance quoted represents past performance. Past performance does not guarantee future results.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its affiliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Allocations and security selection are subject to change.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy.
The S&P 500 Index is a market capitalization-weighted index of 500 companies in leading industries of the US economy. The index is unmanaged and has no fees. One cannot invest directly in an index.
The MSCI World Value Index captures large and mid cap securities exhibiting overall value style characteristics across 23 Developed Markets countries.
The MSCI World Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 23 Developed Markets countries.
The MSCI World Materials Index is designed to capture the large and mid cap segments across 23 Developed Markets (DM) countries. All securities in the index are classified in the Materials sector as per the Global Industry Classification Standard (GICS®).1
The MSCI World Financials Index is designed to capture the large and mid cap segments across 23 Developed Markets (DM) countries. All securities in the index are classified in the Financials sector as per the Global Industry Classification Standard (GICS®).
The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. The index covers approximately 85% of the free float-adjusted market capitalization in the US.2
The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM) countries in Europe. The index covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe.
The MSCI EAFE Value Index captures large and mid cap securities exhibiting overall value style characteristics across Developed Markets countries around the world, excluding the US and Canada. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price, and dividend yield.3
The MSCI EAFE Quality Index is based on the MSCI EAFE Index, its parent index, which includes large and mid cap stocks across Developed Market (DM) countries, excluding the US and Canada. The index aims to capture the performance of quality growth stocks by identifying stocks with high quality scores based on three main fundamental variables: high return on equity (ROE), stable year-over-year earnings growth, and low financial leverage.4
The MSCI World Information Technology Index is designed to capture the large and mid cap segments across 23 Developed Markets (DM) countries. All securities in the index are classified in the Information Technology sector as per the Global Industry Classification Standard (GICS®).5
The MSCI World Consumer Staples Index is designed to capture the large and mid cap segments across Developed Markets (DM) around the world. All securities in the index are classified in the Consumer Staples sector as per the Global Industry Classification Standard (GICS®)
The indices are unmanaged and have no fees. One cannot invest directly in an index.
Certain information included herein is derived by Lazard in part from an MSCI index or indices (the “Index Data”). However, MSCI has not reviewed this product or report, and does not endorse or express any opinion regarding this product or report or any analysis or other information contained herein or the author or source of any such information or analysis.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
This document reflects the views of Lazard Asset Management LLC, Lazard Frères Gestion or its affiliates ("Lazard") based upon information believed to be reliable as of the publication date. There is no guarantee that any forecast or opinion will be realized. This document is provided by Lazard for informational purposes only. Nothing herein constitutes investment advice or a recommendation relating to any security, commodity, derivative, investment management service, or investment product. Investments in securities, derivatives, and commodities involve risk, will fluctuate in price, and may result in losses. Certain assets held in Lazard’s investment portfolios, in particular alternative investment portfolios, can involve high degrees of risk and volatility when compared to other assets. Similarly, certain assets held in Lazard’s investment portfolios may trade in less liquid or efficient markets, which can affect investment performance. Past performance does not guarantee future results. The views expressed herein are subject to change, and may differ from the views of other Lazard investment professionals.
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