The stock market reign of the Magnificent seven has reached its end point. For two years, great technological ones have dominated markets, promoted by the Revolution of Artificial Intelligence and its hegemony in Wall Street. But now, the throne wobbles. With the European bank in full boom and investors turning their gaze to the old continent, the big banks are postulated as the new monarchs on the market.
Call for the great portfolio rotation. Every time, investors agree to move billions of capital from one asset to another. And everything indicates that there is a regime change in the world variable income. For two years, the market was dominated by American technological ones. More specifically by those known as the seven magnificent (Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia). And in the last year, more specifically, by Nvidia.
The Big Tech have become the great hoarder of the markets since 2023. Before the euphoria of the world the world’s investment was increasingly concentrated on a very narrow number of values. North American technological ones became megacapitalized and their comings and were dragged to all Wall Street. Not in vain the weight of these magnificent seven has grown up to 33% of the entire S&P 500. As absolute dominators, in 2024 they were responsible for half of the index’s profits, by revaluing 63%.
Despite the latest Nvidia copes, the technological reign touches its end. Bloomberg’s magnificent seven index barely rises 1% so far this year and this week the great US portfolios managers have launched the warning that money will escape other geographical areas. According to the latest Bank of America survey, the managers see the most overvalued US stock market than has ever been, despite this the magnificent seven remain the most busy asset.
New favorites
But something has changed. Precisely, Michael Hartnett, Bank of America’s strategist, which coined the term of the Magnificent seven in 2023, is responsible for analyzing the survey and highlights that investors have fallen in love with the European Stock Exchange. Eurostoxx has been placed as the favorite index of managers to become the best performance in 2025, surpassing Nasdaq. And in this part, bank values appear as candidates to occupy the throne of the magnificent seven. “Banks have exchanged their place with insurance to become the most raised sector in Europe for the first time since July 2023,” Hartnett team stands out.
Right now the European sector Stoxx 600 Bank is very close to catching the index of the magnificent seven and overcoming them with a better performance in the last twelve months. In the year there is no color. While Big Tech are flat, European banks rise more than 20%. They have entered the streak and record the largest rally since 1997, when the index was launched. Banks have been in the interrupted climbing for nine weeks. They shine with their own light. Société Général is revalued 41% this year and Sabadell advances 31%, respectively so far this year.
The Sorpasso surprises with the context with geopolitical tensions on the east border of Europe, a commercial war and downward types, which should harm the business. “The European banking sector is leading the rebound in the stock market for good reasons,” says Roberto Scholtes, head of the strategy of the Singular Bank heritage manager, pointing out that the profits of the fourth quarter exceeded consensus expectations in approximately 10% in average. “Facing the future, all these trends are probable.”
What is happening with the banks of Europe?
The increases of the old continent entities are not something new. Interest rates from the European Central Bank have given a great fuel to firms with the highest interest margin (NII). However, the generalized belief was that these increases were a temporary phenomenon and that they would already be folding candles in revenues and benefits in decline due to the successive cuts of the Central Bank. However, The reality is that their profits are enduring firm and have allowed them to compete from you to you in the stock market with technological giants that have starred in a real stock fever since the end of 2023.
Fitch was one of the first to notify this in his sector report. According to the Ratings Agency, the results of 2025 of these companies “will remain at levels very close to those of 2024”. In fact, they assumed that they will be better than those of a 2023 “that was already very solid.” The reason is especially clear in the banks of southern Europe, particularly in the Italians and Spanish. “These entities have been the ones that had the greatest Nii (and therefore exposure to interest rates) and thanks to this they have improved the quality of their assets until the rest of Europe is equal.” In summary, Banks such as Intense, Unicredit or CaixaBank (the three main cases indicated by the report) have entered this stage in a new fasE in which “more than a decade of performance inferior than the firms of northern Europe, which marks a turning point in terms of growth,” has been put to end. “
For their part, the income that has come through the ECB has not come alone and in fact Fitch believes that the key is the ability to transform that impulse into a sustainable growth engine. “There has been a structural improvement of operating environments, there has been a restructuring of banks, a stricter risk selection and this, added to favorable interest rates, have generated a cyclical impulse to income.”
In that sense, although the phenomenon had focused previous years on the ‘Sureña’ bank from the agency, they now play a French impulse that “they are up to date on 2025 with the averages of the sector”, after passing through complicated moments in the face of doubts in the French bonus and a model more exposed to investment banking and commissions. This ‘update’ is one of the keys that has driven values as a société Générale. This growth forecast is felt in the market because the Bloomberg analysts consensus gives the financial sector a growth potential of 4.73% in its benefits for the next 12 months. At the moment, Sabadell, Santander and BBVA sneak into the Stoxx 600 Bank top at the beginning of the year.
From Goldman Sachs, meanwhile, they see more factors that explain this situation of stock market euphoria. First, central banks that despite cutting are going to leave interest rates in a higher environment than in previous years. “Interest rates are going down, but they will not return to the levels before the pandemic,” says Sharon Bell, a senior strategist of the European portfolio team. “That is extremely important for the profitability of banks.” Bloomberg’s swap market points to some types by December 2025 between 1.75% and 2%. Well above the era of the long decade after 2012, when the price of money was at 0%.
From Lombard Odier, they also defend that while the decreases of types will damage the margin of interest, the reality is that they will also expand credit in a balance that would not be negative either. “Of course, lower types can help credit growth, something that has been difficult to achieve in recent years. In fact, We see signs that the long disappointment period of Spain can be coming to an end“. A rebound of loans” could help compensate part of the pressure on the margin of net interest. Income -unrealized income also tends to benefit from the lowest types and many banks have reinforced these activities, in addition to working hard to reduce their sensitivity to interest rates. “
An example of other segments in which income can grow is a M&A market that was practically a lot of the last years and now seems to resurface. This is being seen in the banking sector itself with BBVA’s OPA on Sabadell or Unicredit’s offers on Commerzbank and BPM. Apart from mergers, “banks have improved their resilience to earn money from other sources of income such as commissions.”
For its part, Shell points out that the increases have been fed by “banks that are returning money to shareholders thanks to huge repurchase and dividend programs” and “prices of relatively cheap actions. The bank is quoted with a ratio 8.23 times against, for example, the 16 in which Eurostoxx 50 is moved. On the other hand its value with respect to books is just over 0.9 Its stock market capitalization is below the value of its assets, a trend that has been this way since practically 2008. From Lombard Odier they coincide with the latter claiming that “the sector is cheap with a benefit price ratio below its historical average.”
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