Matrixport Research Report | Reassessing the Long-Term Allocation Value of U.S. Stocks: Institutional Dividends, Industry Cycles, and Global Capital Resonance

Amid heightened volatility across various asset classes, it is of practical significance to re-examine the core allocation value of U.S. stocks. Within the global equity asset universe, U.S. stocks can still be considered one of the core allocation options for certain long-term investors. This judgment is not based on a short-term bet on the 2026 macro environment, but stems from three more stable, more sustainable structural drivers: the compound interest foundation built by institutional advantages, the real demand catalyzed by technological innovation, and the long-term migration of global capital allocation logic.

Institutions and Historical Compound Interest: An Unreplicable "Underlying Architecture"

From early 2015 to the end of 2025, the cumulative gain of the Nasdaq Composite Index was approximately 2 to 3 times that of the ChiNext Index and the Hang Seng Tech Index. More crucially, its maximum drawdown during the sample period was only -36.4%, significantly lower than the -69.7% and -74.4% of the latter two. This implies that in the U.S. stock market, investors are more likely to realize returns through "time + compound interest" rather than "strong market timing."

This outcome is not accidental but a quantitative reflection of institutional advantages. The U.S. capital market has constructed a complete innovation financing chain from venture capital and private financing to IPO and follow-on offerings, enabling companies to access resources with lower friction over longer cycles, forming a positive feedback loop of "investment—growth—reinvestment." Simultaneously, listed companies generally adhere to cash flow discipline and shareholder return mechanisms, allowing the index's profit base to demonstrate stronger resilience amidst macro fluctuations. Furthermore, the global pricing attribute of U.S. dollar assets endows U.S. stocks with a natural liquidity absorption capacity—capital flows back for safety during risk aversion and absorbs incremental risk exposure during expansion. This dual moat of "institutions + currency" is the fundamental reason why the compound interest effect can be consistently realized.

AI-Driven Industry Cycle: From "Valuation Imagination" to "Real Investment"

Tech giants have contributed the bulk of the excess returns in this U.S. stock rally. However, contrary to some market concerns about a "bubble," we believe the current phase is a critical transition in the AI industry cycle from "infrastructure expansion" to "application penetration," characterized by the parallel validation of real demand and real investment.

Stanford's "AI Index 2025" shows that in 2024, 78% of organizations reported using AI, a significant increase from 55% in 2023, indicating an acceleration in demand-side diffusion. On the supply side, capital expenditures by U.S.-listed AI-related companies grew from approximately $208.26 billion in 2019 to $384.44 billion in 2025, a cumulative increase of nearly 100%. This is not a "storytelling retreat" but a genuine investment in expanding computing power and infrastructure.

We divide the AI profit realization path into three stages: the infrastructure dividend period, the platform expansion and service monetization period, and the application layer penetration and business model reinvention period. The current market is still in the window transitioning from the first to the second stage, with application layer penetration far from saturated. Even if the marginal gains of leading stocks slow, the cost reduction and efficiency improvements brought by AI will continue to diffuse into more industries, providing U.S. stocks with broader, longer-tail growth momentum.

Global Capital Allocation: Shifting from "Tactical Inflows" to "Structural Overweighting"

Over the past three years, the scale of U.S. equity holdings by overseas investors has shown a "step-up" increase—rising from $14.63 trillion in 2023 to $21.59 trillion in 2025, a cumulative two-year increase of approximately 47.6%. Sustained growth of this magnitude resembles a long-term upward adjustment in the allocation weight by global institutional capital, rather than short-term trend-chasing.

From a regional structure perspective, Europe contributed about 51% of the incremental flows, further confirming this as a strategic rebalancing primarily driven by capital from developed markets. The underlying drivers can be summarized into three points: First, the U.S. stock market is the only ultra-large-scale market globally capable of absorbing trillions in incremental capital with manageable transaction impact costs. Second, the continuity, comparability of information disclosure, and the predictability of the regulatory system significantly reduce the information asymmetry costs of cross-market investing. Third, U.S. stocks offer the most concentrated supply of high-quality assets in long-term growth sectors such as technology, software, cloud, and AI platform companies, coupled with highly mature ETF and indexation tools, facilitating low-cost, high-efficiency expression of long-term allocation views.

Macro Environment: Coexistence of Moderate Rate Cuts and Policy Games, but Long-Term Direction Unchanged

The macro baseline scenario for 2026 leans more towards "declining interest rates + cooling but still resilient economy." The Fed's SEP projects a median policy rate of about 3.4% by the end of 2026, a marginal decline from the current target range, which is favorable for corporate financing and the valuation environment. Although economic growth is slowing from its peak, CBO forecasts maintain it within a normal growth range of around 1.8%, suggesting corporate earnings are more likely to follow a path of "slowing growth rather than a cliff-like downward revision."

A notable source of potential volatility is tax policy. Several individual and family provisions from the 2017 tax reform are set to expire at the end of 2025, making 2026 highly likely to enter a period of intense policy negotiation. Fiscal pressures could exacerbate volatility in long-term rates, making the market more turbulent in phases. However, it is crucial to distinguish: volatility does not equal a trend reversal. Provided the three long-term drivers—institutional advantages, industry cycle, and capital structure—remain fundamentally intact, short-term policy disturbances precisely provide a window for phased allocation and extending holding periods.

The long-term allocation value of U.S. stocks is essentially the product of a "institutions—industry—capital" trinity positive feedback system. It does not rely on a single year's macro luck, nor is it tied to the valuation myth of a single leading stock. Instead, it is rooted in more stable, more replicable structural dividends. For allocation-oriented capital pursuing long-term compound interest, the "core foundational holding" attribute of U.S. stocks has not weakened; on the contrary, against the backdrop of rising global uncertainty, it appears increasingly scarce.

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Disclaimer: The market carries risks, and investment requires caution. This article does not constitute investment advice. Digital asset trading can carry significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.