Ed Yardeni has pulled back from one of his signature long-held positions, lowering his stance on the Magnificent 7 to Underweight as he urges investors to rebalance both U.S. and international equity exposure heading into 2026.

In his latest market commentary, Yardeni warns that mega-cap tech dominance has reached levels that create excessive concentration risk, especially after years of sustained leadership in the major indices. That imbalance, he argues, now favors widening exposure to the rest of the equity market.

“It no longer makes much sense for us to continue recommending overweighting the Information Technology and Communication Services sectors in an S&P 500 portfolio, as we have since 2010,” Yardeni said in a Sunday note.

He underscores that Information Technology and Communication Services have collectively climbed to an unprecedented 45.2% of the S&P 500’s total market value, supported by a record 38.6% of forward earnings. With so much weight concentrated in these two areas, he cautions that “the riskiness of an S&P 500 portfolio has increased,” adding, “We now recommend market-weighting the two sectors combined.”

This reinterpretation effectively signals a downgrade of the Magnificent 7 and a pivot toward what Yardeni calls the “Impressive-493,” the remainder of the S&P 500, which has significantly underperformed the giant tech names since the pandemic due to weaker earnings trends.

Yardeni also notes that competitive pressure on the mega-caps is intensifying as rivals target their “juicy profit margins,” while the broader S&P 493 could benefit indirectly from the technologies developed by the very companies overshadowing them. “In effect, our spin is that every company is evolving into a technology company,” he said.

Within the index, he advocates increasing overweight positions in Financials and Industrials—two sectors that account for far smaller shares of the benchmark’s market cap and earnings—while also shifting Healthcare to an overweight. He argues that many active and passive managers have remained too light in Healthcare despite its healthy 11.9% share of forward earnings.

Yardeni extends this diversification message to global markets as well. The U.S. MSCI index now makes up 65.1% of the ACWI benchmark, close to its highest level on record. Although the U.S. market is up 16.8% this year, it trails the ACWI ex-U.S., which has risen 19.7% in local currency terms, with several countries posting far stronger gains helped by a softer dollar.

He adds that international stocks continue to trade at lower forward P/E multiples, while earnings momentum outside the U.S. has been improving. Yardeni argues that global companies have demonstrated surprising durability in the face of geopolitical challenges and trade tensions, saying globalization is not receding but transforming—no longer centered on labor cost arbitrage but driven by consumer demand and worldwide competition in technological progress.

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