One of the (precious) few bear cases leveled against America’s mightiest mega-caps says some of them are cyclicals masquerading as growth stocks.

That criticism was borne out in Tesla last year, when growth flatlined, but thanks to Elon Musk’s wildly successful “investment” in Donald Trump’s reelection bid, the shares nevertheless soared 62% (“Allahu Akbar!”).

Purveyors of the growth stock “imposter” narrative as it applies (or doesn’t) to the Magnificent 7 generally argue that in a meaningful economic downturn, the group’s revenue streams will prove more susceptible to the vagaries of the cycle than company analysts anticipate. In the event that susceptibility leads to a wholesale rethink of lofty long-term growth projections for the group, the shares may collapse.

Of course, the shares did collapse in 2022, and although that was a rough year for Wall Street, it was a “crash-less” bear market, not a dot-com-style implosion, which suggests that in fact, a severe pullback for the biggest names needn’t be “the end of the world as we know it,” even if nobody would “feel fine.” (If you didn’t catch the pop reference there, congratulations: You’re under 40. Enjoy it while it lasts.)

The problem for Mag7 bears is the group’s knack for “heads we win, tails you lose” dynamics. I could cite countless examples, but in the context of the “cyclicals in disguise” narrative, it’s worth noting that Amazon, Tesla, Meta and Alphabet drove dramatic outperformance for Comms Services and Consumer Discretionary versus the sectors’ historical relationship to a Cyclicals versus Defensives basket and also to rates since the yield lows in September. By contrast, Energy and Materials have (woefully) underperformed their typical relationships with rates and growth expectations over the same period.

In other words: If you’re a Cyclical sector, the only sure-fire way to get your fair share in a favorable macro environment (i.e., rising yields and improving growth expectations) is to have a mega-cap tech company arbitrarily assigned to your corner by the people who decide on such things. Have a look at the figure, below, from Goldman.

“The mega-cap tech stocks have been the notable recent outperformers relative to their typical relationships with interest rates,” David Kostin remarked, thanking “the secular growth profiles of their largest stocks” for the outperformance from Consumer Discretionary and Comms Services.

Stop and think about that for a moment. In the normal course of things, you want to own secular growth during periods of subdued economic activity and well-behaved rates, whereas you want to own things with a lot of beta to the cycle when growth expectations are improving and rates are rising commensurate with that improvement. These days, it’s a lot simpler than that. As the chart makes clear, you can just own the Nasdaq 100, or anything with a mega-cap “tech” name in it, and you’ll probably outperform relative to how history says you should fare for a given macro environment, because the mega-caps find a reason to rally regardless.

In the same vein, the Nasdaq 100’s outperformed the Russell 2000 by five full percentage points since Election Day, a period over which 10-year yields in the US rose 60bps, and small business sentiment jumped by the most on record (measuring with a two-month rolling window for the NFIB’s sentiment gauge).

Big-tech turns the old “can’t win for losin'” adage on its head. The group “can’t lose for winnin’.” Kostin said that “whether these sectors and stocks can sustain their recent share price outperformance will depend on what upcoming earnings reports signal regarding the sustainability of their earnings outperformance,” which is just a wordy way of saying the Mag7 has no room for error and that some of those names are priced to perfection. But something tells me the group will find a way to rally in 2025. There’s scant evidence to suggest the Mag7’s “tired of winning.”