Introduction: 'Hot and Cold' Near Historic Highs
In early August 2026, the US stock market showed a rare 'hot and cold' dynamic. On one hand, the Nasdaq Composite and S&P 500, driven by the AI wave, remained strong near historic highs, with optimism about AI computing power and application deployment undiminished. On the other, Berkshire Hathaway's latest report showed its cash reserves had soared to a record near $300 billion.
This stark divergence has prompted deep reflection among global investors: With US stocks repeatedly hitting new highs, why is Buffett hoarding record cash? For ordinary investors, is now still a good time to buy US stocks? Answering 'why buy US stocks' requires going beyond macro narratives to rethink global asset allocation rebalancing through market structure, capital flows, and valuation systems.
Buffett's Cash Signal: Defense and Patience Amid High Valuations
Buffett's significant reduction of core holdings like Apple does not reflect a bearish view on the long-term US economic fundamentals, but rather an extreme pursuit of risk-reward ratio. By mid-2026, the S&P 500's forward P/E ratio was at a historically high percentile, with the valuation premium of the Magnificent Seven particularly pronounced. In Buffett's investment philosophy, when market expectations are highly uniform and asset prices fully reflect or even overprice future growth, preserving cash and waiting for the 'sweet spot' is the best strategy.
The implication for global asset allocation is clear: the long-term compounding value of US stocks is undeniable, but the odds of winning with a concentrated heavy position are declining. For investors, understanding 'why buy US stocks' means not only seeing its innovation-driven growth but also learning to hedge tail risks near cycle peaks using options, stock-bond balancing, and other strategies.
Passive Fund Surge: The Invisible Driver of the Long Bull Market
In stark contrast to Buffett's caution, passive funds continue to pour in. In 2026, net inflows into ETFs tracking core indices like the S&P 500 once again set historical records, forming the most solid foundation of the current US stock market.
'Buying US stocks means buying a basket of the world's best companies'—this is the core logic behind retail and institutional investors consistently dollar-cost averaging into the S&P 500. Under the automatic deduction mechanisms of 401(k) and other pension systems, billions of dollars are passively invested into broad market indices each month regardless of market sentiment. This 'blunt' buying force significantly smooths market volatility, allowing the S&P 500 to quickly find support after each pullback.
Thus, a crucial dimension in answering 'why buy US stocks' lies in its unique capital ecosystem: the dollar-cost averaging effect of passive funds provides solid base support, while active hedge funds generate volatility and excess return opportunities in tech stocks.
Fed Policy and Soft Landing Expectations: The Cornerstone of Valuation Support
In the second half of 2026, the Fed's monetary policy path remains the core variable driving US stock valuations. Although inflation retains some stickiness, the overall downward trend is unchanged, and the market broadly expects the Fed to maintain stable rates or make minor adjustments. This 'no sudden braking, no flooring the accelerator' policy environment provides relatively favorable liquidity expectations for US stocks.
More importantly, US macroeconomic data currently points to a 'soft landing' or even 'no landing' scenario. Corporate earnings have not collapsed as pessimists predicted; instead, they have shown strong resilience, benefiting from AI-driven cost reduction and efficiency gains. Against a backdrop of positive nominal GDP growth, the substantial improvement in corporate earnings is the core fundamental factor supporting the S&P 500's high valuation.
How to Conduct Global Asset Allocation in the Current Environment?
Facing Buffett's caution and the frenzy of passive funds, investors should adopt a 'core-satellite' balanced strategy when allocating to US stocks:
- Core Position (60%-70%): Maintain S&P 500 index funds as the core holding. This is the most reliable way to share in the dividends of the US economy and global technology, especially suitable for long-term investment and dollar-cost averaging, effectively diversifying single-stock blow-up risk.
- Satellite Position (20%-30%): Focus on the Magnificent Seven and AI supply chain stocks. This portion seeks excess returns but requires vigilance against high-valuation pullback risks, utilizing earnings season volatility for swing trading.
- Hedge and Defense (10%): Monitor the VIX fear index. When market sentiment is extremely greedy, consider allocating to cash, short-term Treasury bills, or defensive sectors (such as utilities, consumer staples) to cope with sudden black swan events.
Conclusion: Seeking Long-Term Compounding with Market Respect
Buffett's record cash reserves remind us that even the most resilient US stock market is not without risk. High valuations and high expectations are a double-edged sword. However, from a longer-term perspective, US stocks, with their survival-of-the-fittest market mechanism, sustained technological innovation, and deep passive fund moat, remain an indispensable core asset in global allocation.
'Why buy US stocks?' The answer lies not only in the past stellar returns but also in the market's self-evolution and clearing mechanism. At this juncture of opportunity and challenge in 2026, investors must maintain a keen sense for the AI tech revolution while learning to retain moderate patience and defense like Buffett, to navigate the turbulent seas of global assets steadily and far.
