Market Rotation: From Mag 7 Earnings Weakness to Equal-Weight S&P 500 Strength (2025-12-12)

This analysis is based on the YouTube video [1] published on 2025-12-12, where Kevin Hincks discusses market rotation from the “Magnificent Seven” (Mag 7) tech stocks to other sectors, citing recent earnings underperformance from Broadcom (AVGO) and Oracle (ORCL) as indicators of tech sector weakness.

• Tech Earnings Impact
  : Oracle (ORCL) fell ~10.8% on 2025-12-11 following Q2 earnings that missed forecasts, driven by high AI infrastructure spending [0][2]. Broadcom (AVGO) dropped 3.35% on 2025-12-12 due to margin pressure from lower-margin AI processors [0][3]. The Technology sector declined 0.58% on 2025-12-12 [0].
• Rotation Evidence
  : Despite tech weakness, the S&P 500 closed at an all-time high on 2025-12-11 [4]. The equal-weight S&P 500 ETF (RSP) gained ~2.05% 12/08-12/12, while the cap-weighted S&P 500 ETF (SPY) rose only ~0.37% [0]. Outperforming sectors included Basic Materials (+0.96%) and Communication Services (+0.78%) [0].

1. Broader Market Breadth
   : The rotation from Mag 7 to non-tech sectors suggests increased market participation, challenging the narrative that Mag 7 dominance alone drives market gains.
2. Equal-Weight Index Validation
   : RSP’s outperformance supports the “Revenge of the 493” thesis, indicating investors are reallocating capital to undervalued non-tech names.
3. Earnings Catalyst
   : AVGO and ORCL’s earnings misses likely accelerated rotation, as investors reassess tech sector valuation and growth prospects.

• Risks
  :
  • Sustained tech earnings misses from other Mag 7 stocks could weigh on the cap-weighted S&P 500 due to its high concentration [5].
  • Rapid rotation may increase volatility, as seen in ORCL’s 100.6M share trading volume on 2025-12-11 [0].
• Opportunities
  :
  • Sectors like Basic Materials and Communication Services that outperformed during the rotation period present potential growth areas.
  • Equal-weight ETFs such as RSP offer exposure to broader market strength beyond Mag 7.

AVGO and ORCL underperformed on earnings, but the broader market remained resilient due to rotation. RSP outperformed SPY 12/08-12/12, indicating capital movement beyond Mag 7. Decision-makers should monitor Mag 7 earnings breadth, rotation sustainability (via long-term RSP/SPY performance), and economic drivers (interest rates, inflation).