For the past two years, a handful of technology behemoths dubbed the "Magnificent Seven" have led the broader market higher. Companies like Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia saw their valuations swell to astronomical levels, propelled by pandemic-driven demand for their products and services.

However, recent weeks have seen a reversal of fortunes. Since mid-July, the Magnificent Seven have collectively fallen over 10%, significantly underperforming the rest of the S&P 500 which has gained around 4% over the same period. This marks the group's worst two-month stretch compared to the broader index since late 2022.

The drivers behind this shift are multifaceted. Firstly, concerns over economic growth and higher interest rates have dampened investor appetite for the previously highflying tech mega-caps. Secondly, many of these giants are facing competitive pressures and saturation in their core markets.

In contrast, smaller, emerging tech players across verticals like artificial intelligence, cloud computing, cybersecurity and fintech are gaining traction. Nimbler and focused on next-generation technologies, these upstarts are benefiting from their ability to innovate and capitalize on evolving trends.

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The Fed's Next Move

The faltering performance of tech's leaders coincides with the Federal Reserve's ongoing efforts to tame stubbornly high inflation. Investors await the critical August jobs report on Friday for clues on whether the central bank will enact a hawkish 50-basis point rate hike or a more modest 25-basis point increase at its September meeting.

While easing price pressures may grant the Fed flexibility to downshift the size of its rate rises, a robust jobs reading could prompt policymakers to maintain an aggressive anti-inflationary stance. Markets are currently pricing in around a 31% probability of a half-point hike.

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Former hedge fund manager: "Move your money before the Fed's next meeting"

In 2022, the Federal Reserve raised interest rates and triggered a stock market event that slashed the average investor's portfolio nearly in half.

Now, according to the man whom CNBC calls 'The Prophet', the Fed could soon trigger another dramatic stock event – one investors have seen just 13 times since 1920. He warns: "This event will likely dictate the next decade of every American's financial life, and it's critical for you to take steps now to prepare."

Economic Calendar for the Week:

Monday: U.S. markets closed for Labor Day

Tuesday: S&P Global manufacturing PMI, construction spending, ISM manufacturing index

Wednesday: JOLTS job openings, factory orders, Fed Beige Book, earnings from Dick's Sporting Goods

Thursday: ADP private payrolls, productivity and costs, jobless claims, services PMI, Broadcom earnings

Friday: August nonfarm payrolls report, unemployment rate, earnings

As the world's largest economy shows signs of slowing, the coming week's data deluge will significantly impact the Fed's rate trajectory and subsequently, prospects for both tech giants and upstart innovators.

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