Comparative Performance of the Magnificent 7, S&P 500, and IHSG (2005–2025)

Over the past two decades, the "Magnificent 7" US tech giants, the S&P 500, and Indonesia's Jakarta Composite Index (IHSG) have shown sharply divergent returns, risk profiles, and volatility. This report analyzes their performance, risk-adjusted returns, and the impact of major market events, providing insights for global investors.

June 2025 Research Report

1. Introduction

The “Magnificent 7” refers to a group of seven US technology giants—Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia—that have dominated global equity markets and driven a significant portion of recent US stock market returns[1]. The S&P 500, a broad index of 500 leading US companies, is widely regarded as the benchmark for large-cap US equities and a proxy for global developed market performance[2]. The Jakarta Composite Index (IHSG) tracks all stocks listed on the Indonesia Stock Exchange and serves as the primary indicator of Indonesian equity market performance[3].

Comparing these indices over the last 20 years provides insight into the impact of sector concentration, geographic risk, and market maturity on investment outcomes. This report analyzes total returns (in USD, including dividends), risk-adjusted returns, volatility, and major drawdowns, with a focus on the effects of global financial crises and the technology sector's rise.

2. Key Findings

2.1 Total Returns

  • The Magnificent 7 delivered an annualized return of 36.58% over the last 10 years (as of June 23, 2025), compared to the S&P 500's 10.88% over the same period[4].
  • The S&P 500 Net Total Return annualized 12.35% over the last 10 years and 13.31% over the last 15 years (as of June 20, 2025). The 20-year annualized total return is about 10.5%[5].
  • The IHSG experienced significant volatility, with a major drawdown of -50.64% in 2008, followed by an 86.98% rebound in 2009. The index reached an all-time high of 7,670.7 points in August 2024[6].
  • The MSCI Indonesia Index (USD) returned an annualized 1.86% over the last 10 years and 3.55% since 1994[7].

2.2 Risk-Adjusted Returns

  • The Magnificent 7's Sharpe ratio was 1.25 over 10 years and 1.39 all-time, compared to the S&P 500's 1.04 (5-year) and 1.79 (all-time)[4].
  • Risk-adjusted return metrics such as the Sharpe Ratio, Sortino Ratio, and Treynor Ratio are standard for comparing investment performance, accounting for volatility and downside risk[8].
  • Indonesian stocks (JII, a proxy for IHSG) have higher volatility and Value at Risk (VaR) than developed markets, with lower risk-adjusted returns[9].

2.3 Volatility

  • The Magnificent 7 portfolio had a maximum drawdown of 48.84% (Dec 28, 2022), with recovery taking 128 trading sessions[4].
  • The S&P 500’s largest recent drawdown was -19.44% in 2022, with a strong recovery in 2023 (24.23%) and 2024 (23.31%)[2].
  • The S&P 500 Net Total Return had a maximum drawdown of approximately 22% in 2022 and 37% in 2008[10].
  • The IHSG experienced a -50.64% drawdown in 2008, a -12.13% drop in 2015, and a -5.09% decline in 2020 (COVID-19)[3].

2.4 Major Market Events

  • The 2008 financial crisis caused severe drawdowns across all indices, with the IHSG and S&P 500 both experiencing losses of over 35%[3],[10].
  • The COVID-19 pandemic in 2020 led to a -5.09% drop in the IHSG and a sharp but brief drawdown in the S&P 500, followed by rapid recoveries[3],[2].
  • The technology boom of the 2010s and 2020s propelled the Magnificent 7 to outsized returns, accounting for over half of the S&P 500’s total return in 2024[2].

2.5 Dividends

  • The Magnificent 7's dividend yield is very low (0.29% TTM), with most components paying no or minimal dividends[4].
  • The S&P 500’s total return includes a consistent dividend component, contributing to its long-term performance[5].

Figure 2.1 Annualized Returns (10 Years)

Annualized total returns (in USD) for the Magnificent 7, S&P 500, and IHSG over the last 10 years. Source: PortfoliosLab, YCharts, MSCI.

Figure 2.2 Maximum Drawdowns (2008–2024)

Largest peak-to-trough declines for each index. The IHSG experienced the deepest drawdown during the 2008 financial crisis.

Figure 2.3 Sharpe Ratios (10 Years)

Risk-adjusted returns (Sharpe Ratio) for the Magnificent 7 and S&P 500. IHSG's ratio is lower due to higher volatility.

3. Comparative Analysis

Metric / Index Magnificent 7 (10Y) S&P 500 (10Y) S&P 500 (20Y) IHSG (10Y, USD) IHSG (20Y, USD)
Annualized Return 36.58% 12.35% ~10.5% 1.86% 3.55%[7]
Sharpe Ratio (10Y) 1.25 1.04 — Lower Lower
Max Drawdown 48.84% 37% (2008) 37% (2008) 50.64% (2008) 50.64% (2008)
Dividend Yield (TTM) 0.29% ~1.5-2% ~1.5-2% ~2-3% ~2-3%
Volatility High Moderate Moderate High High

Notes: IHSG 20-year USD returns are proxied by the MSCI Indonesia Index (USD). Risk-adjusted returns for IHSG are lower than S&P 500, with higher volatility[9].

4. Conclusions & Future Outlook

The Magnificent 7 have delivered exceptional returns over the past decade, dramatically outperforming both the S&P 500 and the IHSG, but with higher volatility and concentration risk. Their dominance has been a key driver of US market performance, especially in recent years, accounting for over half of the S&P 500’s total return in 2024[2]. However, their low dividend yields and high valuations may limit future gains, and recent volatility suggests that leadership could shift[4].

The S&P 500 remains a resilient and broadly diversified benchmark, with long-term annualized returns of about 10.5% and moderate risk-adjusted performance. It has weathered multiple crises with strong recoveries, making it a core holding for global investors[5],[2].

The IHSG offers exposure to a fast-growing emerging market but comes with higher volatility, deeper drawdowns, and lower long-term USD returns. While it can deliver strong rebounds after crises, its risk-adjusted performance lags developed markets, making it more suitable for investors with higher risk tolerance and a long-term horizon[3],[7].

Future performance will depend on global economic conditions, sector leadership, and the ability of each market to adapt to new challenges. Investors should consider diversification and risk management strategies, especially given the concentration risk in US technology stocks and the volatility of emerging markets[8].

5. Methodology

  • Data Sources: Returns, risk, and drawdown data were sourced from PortfoliosLab, S&P Dow Jones Indices, YCharts, MSCI, and Wikipedia.
  • Return Calculations: All returns are annualized and in USD, including dividends where available. For IHSG, USD returns are proxied by the MSCI Indonesia Index (USD).
  • Risk Metrics: Sharpe ratios, drawdowns, and volatility are as reported by the respective sources. Risk-adjusted returns for IHSG are lower due to higher volatility and currency risk.
  • Limitations: Data for the Magnificent 7 is based on an equal-weighted portfolio. IHSG risk-adjusted metrics are estimated from available academic and index provider sources.

References

  1. Livewire Markets: Are the Magnificent Seven doomed to underperform in 2025?
  2. S&P Dow Jones Indices: Market Attributes US Equities 2024
  3. IDX Composite - Wikipedia
  4. PortfoliosLab: Magnificent 7 Portfolio
  5. YCharts: S&P 500 Total Return
  6. CEIC Data: Indonesia Equity Market Index
  7. MSCI Indonesia Index Factsheet
  8. Accounting Insights: Risk-Adjusted Returns
  9. Jurnal Ilmiah Ekonomi Islam: Risk-Adjusted Returns in Indonesia
  10. Slickcharts: S&P 500 Returns Details