On August 12, 2026, global financial markets refocused on the latest July Consumer Price Index (CPI) report released by the US Bureau of Labor Statistics. The data showed that the year-over-year increase in the overall CPI for July officially fell to 2.8%, not only below the market expectation of 2.9% but also hitting the lowest level since 2023. Meanwhile, the core CPI, which excludes food and energy price volatility, rose 3.1% year-over-year and only edged up 0.1% month-over-month, also recording the smallest increase in nearly three years. The cooling of this key economic indicator acted like a shot of adrenaline for the global capital market, completely igniting investors' optimistic expectations that the Federal Reserve will start a rate-cutting cycle at its September monetary policy meeting. For global investors who have been searching for the answer to "why buy US stocks", this macro turning point not only confirms the soft landing path of the US economy but also highlights the core strategic value of the US stock market in global asset allocation.

The Deep Logic of Cooling Inflation: A "Reassurance Pill" for Economic Soft Landing

To understand why the July CPI data triggered such a strong market resonance, we need to deeply analyze the underlying logic of the macroeconomy. Over the past few years, global investors have experienced a historic cycle transition from high inflation to aggressive rate hikes, and now to a moderate cooling of inflation. The return of the July CPI to the "2% era" is by no means an accidental fluctuation of a single data point, but the inevitable result of the resonance between the resilience of the US economic structure and the lagged effects of monetary policy.

Looking at specific components, the persistent deflationary trend in core goods inflation is the main force pulling down the overall price level. With the comprehensive repair and restructuring of global supply chains, the prices of used cars, home appliances, and core durable goods have declined month-over-month for several consecutive months. On the services front, housing rents, which had previously been sticky, finally showed substantial loosening. As the decline in new lease prices gradually transmits to the housing component of the CPI, the cooling of housing costs contributed a key force to the decline in core inflation. In addition, non-housing core services inflation has also gradually cooled as the supply-demand balance in the labor market improves.

This series of data improvements sends an extremely important signal to the market: the US economy is successfully avoiding a deep recession and achieving the long-desired "soft landing". For investors, a soft landing means that corporate profitability will not be systematically destroyed by an economic crisis, and the fundamental support for US stocks remains solid. This is the fundamental reason why, in the current context of global macroeconomic uncertainty, global capital still firmly chooses US stocks as a safe haven and growth engine.

Rate Cut Expectations Fully Ignited: Liquidity Turning Point Reshapes Asset Valuation

With the release of the July CPI data, the CME FedWatch Tool shows that Wall Street institutions' probability expectation for a Fed rate cut in September has soared from 65% before the data release to over 90%. Some aggressive institutions even predict that if subsequent employment data cooperates, the Fed may cut rates by a cumulative 75 basis points before the end of the year. The expectation of this liquidity turning point is profoundly reshaping the valuation model of global assets.

Risk-Free Interest Rates Decline, Attractiveness of Equity Assets Highlights

From the fundamental perspective of asset pricing, a Fed rate cut means that the "risk-free interest rate" (typically represented by the US 10-year Treasury yield), which serves as the anchor for global asset pricing, will enter a downward channel. In the Discounted Cash Flow (DCF) model, a decrease in the discount rate at the denominator will directly push up the present value of future cash flows, thereby systematically raising the valuation center of equity assets. For US stocks with long-term growth expectations, especially tech growth stocks, this is undoubtedly the greatest boon.

At the same time, as the Fed starts the rate-cutting cycle, the US Dollar Index will likely come under downward pressure. Historical experience shows that a weaker dollar is often accompanied by global funds spreading outward from the US. However, in the early stages of rate cuts, because US stocks themselves have extremely strong certainty in earnings growth, they often first attract global capital to pour in and "buy the dip". This "siphon effect" has been verified multiple times in the markets from 2024 to 2026. For investors in emerging markets, positioning in US stocks before the rate-cutting cycle begins not only allows them to enjoy the dividend of valuation expansion but also locks in potential exchange gains through currency hedging.

Sector Rotation Opportunities: What US Stocks Are Most Profitable to Buy Under the Rate Cut Cycle?

Against the macro backdrop of rising rate cut expectations, sector rotation in the US stock market is quietly accelerating. For investors pondering "why buy US stocks" and "what US stocks to buy", grasping the thread of sector rotation is key to obtaining excess returns. Wall Street institutions generally believe that as funds diffuse from defensive sectors to growth sectors, the following three areas will be the biggest winners in the rate-cutting cycle:

  • Technology and AI Sectors: As the "ballast stone" of US stocks, tech giants remain the core allocation for global funds. The warming rate cut expectations form a direct boon for long-duration growth stocks. In addition, despite the earlier valuation repair, earnings expectations in areas such as AI computing power infrastructure and large model application implementation are still being revised upward. The decline in risk-free interest rates will further amplify the valuation elasticity of tech stocks, and tech heavyweights in the S&P 500 index are expected to hit new highs in a loose liquidity environment.
  • Small and Mid-Cap Growth Stocks: Over the past two years while the Fed maintained high interest rates, the performance of small and mid-cap stocks represented by the Russell 2000 index has been constrained by high financing costs. However, small and medium-sized enterprises are extremely sensitive to interest rate changes. Once the rate-cutting cycle substantively begins, their financing costs will drop significantly, and profitability is expected to usher in a Davis double play. Currently, many Wall Street hedge funds have begun to position in advance in high-quality small and mid-cap targets with healthy balance sheets and monopolistic advantages in niche tracks.
  • High Dividend Yields and REITs: For value investors seeking stable cash flow returns, rate cuts are also good news. Utilities, consumer staples, and Real Estate Investment Trusts (REITs) were dumped during the rate-hike cycle due to competition from Treasury yields. As interest rates decline, the dividend yields of these sectors will regain their attractiveness, becoming the top choice for the base allocation of global long-term funds.

Global Capital Allocation Perspective: Why Are US Stocks the "Double Solution" Against Inflation and for Growth?

Standing at the time node of mid-August 2026 and looking back at the fluctuations of the global capital market over the past three years, we cannot help but ask: against the backdrop of complex and volatile global geopolitics and uneven recovery paces among other major economies, why do global investors still view US stocks as the core of asset allocation?

First, the US stock market gathers the most competitive leading enterprises globally. Whether it is the AI giants leading the Fourth Industrial Revolution or the multinational consumer goods companies controlling the lifeblood of global consumption, the US stock market provides a depth and breadth unmatched by any other single market. This cross-industry, cross-national source of earnings endows US stocks themselves with extremely strong anti-inflation and anti-risk capabilities. When local US inflation cools and the economy stabilizes, these companies can fully unleash their profit potential; when other regions of the world experience economic recovery, they can equally share the dividends of global growth.

Second, the institutional maturity and information transparency of the US stock market are the highest globally. Strict information disclosure systems, well-established investor protection mechanisms, and highly active liquidity leave large funds with no worries when conducting global asset allocation. Especially now, when macroeconomic turning points appear frequently, market pricing efficiency is crucial. The US stock market can reflect macro fundamental changes the fastest and most accurately, allowing investors to adjust their positions in the first instance.

Finally, the power of corporate stock buybacks cannot be ignored. Even facing macro uncertainty, US companies are still conducting large-scale stock buybacks through strong cash flows. This self-sustaining capability not only supports the growth of Earnings Per Share (EPS) but also conveys management's strong confidence in the company's future prospects to the market. As the rate-cutting cycle begins, the reduction in financing costs will further stimulate companies to increase leverage for buybacks, thereby forming a positive cycle of stock price increases.

Investment Strategy Advice: How to Position in US Stocks at the Current Turning Point?

Facing the rate cut revelry brought by the July CPI, investors need to maintain a sense of rationality while staying optimistic. The path of inflation cooling is not always smooth, and fluctuations in employment data, services PMI, and energy prices in the coming months may still interfere with the Fed's pace of rate cuts. Therefore, while answering "why buy US stocks", it is even more important to think about "how to buy US stocks".

First, it is recommended to adopt a "core-satellite" strategy for allocation. The core position should be allocated to broad-based ETFs such as S&P 500 index funds to gain average market returns and diversify single-stock risk; the satellite position can be used to buy the dip on tech leaders or small and mid-cap growth stocks that benefit from rate cut expectations, according to one's own risk preference.

Second, pay attention to the verification of corporate fundamentals during the earnings season. Improvements in the macro environment ultimately need to be reflected in the earnings of micro enterprises. In the upcoming earnings season, focus on companies that can achieve revenue growth and margin expansion in a rate-cut environment, and avoid blindly hyping concepts.

Third, use market volatility for dollar-cost averaging. Although rate cut expectations are clear, the market is often accompanied by technical pullbacks after hitting all-time highs. For investors who are long-term bullish on US stocks, using the timing of periodic spikes in the VIX panic index to gradually build positions through regular fixed-amount investments is a prudent move to average costs and reduce risks.

In summary, the return of the July 2026 CPI data to the "2% era" marks the US economy steadily entering a new stage of controlled inflation and declining interest rates. This macro turning point not only clears the last cloud hanging over the capital market but also provides solid fundamental and liquidity support for the further upside of the US stock market. In the landscape of global asset allocation, with their unparalleled corporate competitiveness, efficient market mechanisms, and diverse investment opportunities, US stocks remain the top destination for global capital under the dual demands of fighting inflation and seeking growth.