Institutions and Retail Investors Increase Positions in Tandem, US Stock Allocation Willingness Hits Yearly High
On August 2, 2026, as the Q2 earnings season nears its end, global capital markets received a heavyweight survey report. Bank of America's latest Global Fund Manager Survey for July 2026 shows that "long US equities" has topped the "most crowded trade" list for the 18th consecutive month, with over 45% of surveyed fund managers naming US stocks as the most favored asset class for the next 12 months. Meanwhile, the American Association of Individual Investors (AAII) weekly sentiment survey shows that the bullish percentage of retail investors on US stocks for the next six months rose to 52.3%, the highest level since the start of 2026.
This data reveals the core consensus in current global asset allocation: despite US stock valuations being at historical highs, with the S&P 500 forward P/E ratio climbing to 22.5x, institutional and individual investors continue to add positions. What are the driving factors behind this?
II. Earnings Fundamentals: Q2 Earnings Season Validates the "Soft Landing" Narrative
The just-concluded Q2 2026 earnings season provided solid earnings support for the US stock bull market. According to FactSet data as of July 31, over 80% of S&P 500 constituent companies have reported results, with overall earnings growing 8.2% year-on-year, exceeding the 6.5% forecast at the start of the quarter. Among them, the "Big Seven" tech giants (Apple, Microsoft, Google, Amazon, Nvidia, Meta, Tesla) achieved a combined earnings growth of up to 18%, once again serving as the core engine driving the broader market.
More notably, the "breadth" of earnings growth is improving. Previously, the market worried that the US stock rally was overly concentrated in a few tech giants, but Q2 data shows that 9 out of 11 S&P 500 sectors achieved positive earnings growth. The healthcare, financial, and industrial sectors all posted earnings growth exceeding 5%, indicating that corporate earnings recovery is spreading from the tech sector to broader economic sectors.
This trend is crucial for answering "why buy US stocks": the US stock market not only hosts the world's most powerful tech company cluster, but its overall economic earnings resilience also provides long-term investors with cross-cycle return stability.
III. Global Capital Flows: Net Inflows for 9 Consecutive Months, Asian Investors Accelerate Allocation
According to EPFR Global's global capital flow monitoring data, from January to July 2026, global equity funds accumulated approximately $420 billion in net inflows, with US stock funds absorbing over $280 billion, accounting for about 67%. Notably, capital inflows from the Asian region accelerated significantly in Q2, reflecting the enhanced appeal of US assets as a "safe haven" amid rising global economic uncertainty.
From an asset allocation perspective, the US stock market possesses three major advantages that other markets struggle to match:
- Market Size and Liquidity: The total market capitalization of the US stock market exceeds $50 trillion, accounting for over 40% of the global total. Both institutional and individual investors can enter and exit the market with relatively low transaction costs.
- Sector Diversity and Innovation-Driven: From artificial intelligence and semiconductors to biotech and new energy, US stocks gather the world's most cutting-edge listed companies across various industries, offering investors a rich array of choices.
- US Dollar Asset Attribute: Against the backdrop of rising global geopolitical risks, the safe-haven function of US dollar assets adds extra appeal to US stock investment.
IV. Institutional Views: High Valuations but Not a Bubble
Addressing the widely discussed valuation concerns, Goldman Sachs stated in a strategy report released in late July that the current valuation expansion of US stocks is justified. The report analysis indicates that the average return on equity (ROE) of S&P 500 constituent companies reaches 21%, far exceeding the 12% of Europe's Stoxx 600 and the 10% of the MSCI Emerging Markets Index. In other words, the high valuations of US stocks correspond to higher earnings quality and growth potential.
Morgan Stanley Chief Investment Officer Mike Wilson stated that US stocks may face phased adjustment pressure in the second half of 2026, but any significant pullback should be viewed as a buying opportunity. "We are in the early stages of an AI-driven productivity revolution, a trend that will last at least 5 to 10 years. For long-term investors, the answer to 'why buy US stocks' is clearer now than it has been in the past decade."
V. A Beginner's Guide for Retail Investors
For Chinese investors, participating in US stock investment has become increasingly convenient. Currently, US stocks can be allocated through Qualified Domestic Institutional Investor (QDII) funds, Mutual Recognition of Funds (MRF), or by directly opening overseas securities accounts. In terms of specific operations, the following strategies are recommended:
- Core-Satellite Strategy: Use S&P 500 index ETFs (such as SPY, VOO) as the core holding, supplemented by the Tech Seven or thematic ETFs as satellite allocations.
- Dollar-Cost Averaging to Mitigate Risk: Regardless of market highs or lows, consistently invest a fixed amount monthly or quarterly to smooth out entry costs.
- Focus on Valuation-Earnings Alignment: When investing in individual stocks, prioritize examining the company's profitability, moat, and long-term growth potential.
In summary, the latest Q2 2026 data reaffirms the fundamental logic of US stocks as a core choice for global asset allocation. Whether it's the "most crowded trade" indicated by institutional surveys or the sustained recovery in retail sentiment, both point to a clear signal: in an environment of rising global uncertainty, the earnings resilience, innovation capacity, and US dollar asset attributes of US stocks make them an indispensable allocation direction for long-term investors.
