On July 30, 2026, the Federal Reserve's July FOMC meeting concluded with a decision to hold the benchmark interest rate at 5.25%-5.50%, in line with expectations. However, the statement removed the phrase "inflation remains elevated" and explicitly stated for the first time that it would "consider a rate cut at the next meeting." This dovish signal instantly ignited market enthusiasm, with all three major US stock indices hitting all-time highs: the Dow Jones Industrial Average crossed 48,000 points for the first time, the S&P 500 broke through 6,500 points, and the Nasdaq Composite surged past 21,000 points.
1. Macro Background: Rising Rate Cut Expectations Support Valuations
The Fed's shift in language was not without precedent. Over the past three months, US core CPI growth has eased to 2.3% year-on-year, approaching the 2% target. While the labor market remains strong, wage growth has slowed to 3.8%. Fed Chair Powell stated at the press conference: "We have seen substantial progress in fighting inflation, and overly tight monetary policy is no longer necessary." The market immediately priced in a probability of a 25-basis-point rate cut in September, surging from 45% to 82%, with expectations of a cumulative 75 basis points in cuts this year.
For US stock investors, rate cuts bring two benefits: first, lower risk-free rates enhance the relative attractiveness of equities; second, reduced corporate financing costs can boost profits. Historical data shows that within 12 months of the start of a rate-cutting cycle, the S&P 500 has averaged gains of over 12%. While current valuations are at historical highs (S&P 500 forward P/E around 22x), rate cut expectations provide rational support — in a low-rate environment, capital chases high-growth assets, and US stocks are precisely the home of the world's best companies.
2. Corporate Earnings: Tech Giants Lead with Strong Quality
If the macro environment is the "tailwind," then corporate fundamentals are the "core." In this earnings season (Q2 2026), about 75% of S&P 500 companies have reported, with 78% beating earnings estimates. Notably, the Magnificent Seven (Apple, Microsoft, Nvidia, Google, Amazon) posted average revenue growth of 22% and a median net profit margin above 25%. Apple saw 18% revenue growth year-on-year, driven by strong sales of the Vision Pro II; Nvidia's data center revenue soared 160% amid surging demand for AI chips.
The global dominance of these tech giants is a core answer to "why buy US stocks." They command pricing power and cash flow generation in key areas such as cloud computing, operating systems, mobile devices, and AI. Even during the rate hike cycle, they sustained earnings growth through technological upgrades and economies of scale. As rate cuts approach, lower discount rates on future cash flows of growth stocks leave room for further valuation expansion.
3. Allocation Attributes: Diversification and Dollar Asset Value
For Asian and Southeast Asian investors, US stocks are not only a channel for returns but also a key tool for asset diversification. The Hong Kong dollar is pegged to the US dollar, while Southeast Asian currencies fluctuate significantly against the USD. Holding US stocks effectively allocates to dollar assets, hedging against local currency depreciation risk. Meanwhile, US stocks have low correlation with A-shares and Hong Kong stocks (correlation coefficient around 0.4-0.5 over the past three years), so allocating part of the portfolio to US stocks can reduce overall volatility.
Moreover, US markets offer a wide variety of trading instruments. Besides individual stocks, investors can easily cover the S&P 500 (e.g., SPY), Nasdaq 100 (e.g., QQQ), tech sector (e.g., XLK), or specific themes like AI (BOTZ), biotech (IBB), or dividend growth (VIG) via ETFs. This provides a one-stop allocation solution for different risk preferences. For example, SPY, the world's largest ETF, charges a management fee of only 0.09% and has delivered an annualized return of about 10.3% over the past 20 years, far outpacing inflation.
4. Current Risks and Counterstrategies
Of course, buying US stocks is not risk-free. Major current risks include: 1) Overvaluation — the S&P 500 P/E ratio is at the 90th percentile historically; if earnings growth disappoints, the pullback could be deep. 2) Rate cut expectations are partially priced in; if the Fed acts slowly, a "buy the rumor, sell the news" profit-taking could occur. 3) Geopolitical uncertainties, such as US-China tech tensions and Middle East conflicts, may trigger short-term volatility.
To address this, investors should adopt the following strategies: First, stick to long-term holding and dollar-cost averaging, avoiding chasing highs and panic selling. History shows that US stocks tend to reach new highs after major pullbacks. Second, allocate to defensive sectors such as healthcare and consumer staples to balance tech's aggressiveness. Third, use options strategies to lock in gains or manage risk, e.g., selling out-of-the-money calls for premium income.
5. How to Invest in US Stocks?
For Southeast Asian investors, the barrier to investing in US stocks has been greatly lowered. Leading online brokers such as Futu, Tiger, and Interactive Brokers support online account opening and direct deposits in HKD, SGD, and other currencies. Investors can transfer funds via bank wire or cryptocurrency. After opening, regular trading hours are 9:30 AM - 4:00 PM ET, with some brokers offering pre-market and after-hours trading.
For beginners, it is recommended to start with ETF dollar-cost averaging, investing a fixed amount each month to spread time risk. After gaining experience, gradually select individual stocks, focusing on US blue chips with competitive advantages, high ROE, and low debt.
Conclusion
In summary, the macro and micro data in July 2026 once again reaffirm US stocks as one of the world's premier equity assets. The Fed's dovish pivot, robust tech earnings, and a well-developed trading system together form solid reasons for "why buy US stocks." However, investing always requires rationality. Every investor should formulate a US stock investment plan tailored to their risk tolerance, investment horizon, and capital arrangements. In an uncertain world, looking globally and focusing on quality assets may be the best way to navigate cycles.
