On July 29, 2026, S&P Dow Jones Indices released the "Global Equity Long-Term Return Report (2026)." Data shows that over the past 20 years, US stocks led major global markets with an average annual total return of 9.2% (including dividend reinvestment), significantly outperforming Europe, Japan, and emerging markets. This figure not only validates the long-term investment value of US stocks but also prompts deep reflection on the underlying institutional advantages. This article combines the latest report to break down the sources of US stock returns, compare global landscapes, and discuss how investors can leverage this advantage to build a robust portfolio.
Breakdown of US Stock Long-Term Returns
Corporate Earnings Growth: Driven by Technology and Innovation
The core driver of US stock long-term returns is sustained earnings growth of listed companies. Over the past 20 years, information technology, healthcare, and consumer discretionary sectors contributed about 60% of the S&P 500's earnings growth. For example, global digital transformation has pushed revenue and profits of tech giants like Apple, Microsoft, and Google to new highs. The report shows that the average annual compound growth rate of S&P 500 earnings per share (EPS) was approximately 6.8%, providing solid fundamental support for stock price increases.
Stock Buybacks: EPS Amplifier
Massive stock buybacks by US-listed companies are another key factor enhancing shareholder returns. According to S&P Dow Jones, from 2016 to 2026, S&P 500 constituent companies executed an average annual buyback of over $800 billion. Buybacks reduce the number of shares outstanding, directly boosting EPS and supporting stock prices. For instance, total US buybacks exceeded $1.2 trillion in 2025, a record high. Buybacks not only convey management confidence in the company but also provide investors with tax-efficient capital returns.
Dividend Reinvestment: The Rose of Time
Dividend reinvestment is an important source of long-term compounding. Over the past 20 years, the average dividend yield of the S&P 500 was about 1.9%, but considering dividend reinvestment, total returns improved by nearly 40%. If an investor bought an S&P 500 index fund in early 2006 and held it, an initial $10,000 would have grown to about $58,000 by 2026, with dividend reinvestment contributing about $18,000. Especially in a low-interest-rate environment, steadily growing dividends act as a ballast for long-term investors.
Comparison with Global Markets: Where Is the Advantage?
The report also provides a horizontal comparison of major global markets. Over the past 20 years, mature European markets (e.g., UK, Germany) had average annual returns of about 6.5%, Japan about 5.8%, and A-shares (CSI 300) about 7.2%, but with significantly higher volatility than US stocks. US stocks not only lead in returns but also have lower annualized volatility (about 15%) than emerging markets (about 22%), with a Sharpe ratio (risk-adjusted return) as high as 0.55, far exceeding other markets. This means US stocks offer higher returns per unit of risk.
Why can US stocks achieve high returns with low volatility? Market depth and liquidity are key. The total market capitalization of US stocks exceeds $60 trillion, with average daily trading volume of about $400 billion, attracting global institutional and individual investors. Ample liquidity reduces transaction costs and mitigates extreme volatility risk. Additionally, the dollar's status as a global reserve currency attracts sustained capital inflows, providing a stable source of incremental funding for US stocks.
Institutional Core: Why Can US Stocks Continuously Create Value?
Registration-Based IPO and Survival of the Fittest
US stocks adopt a registration-based IPO system with relatively low listing thresholds but strict delisting rules. Over the past 20 years, the average annual delisting rate of US stocks was about 8%, eliminating many troubled companies and concentrating resources on high-quality firms. This "easy entry, strict exit" mechanism ensures overall market quality, so index constituents always represent the best companies. In contrast, some emerging markets have poor delisting mechanisms that lead to "shell value" speculation, dragging down index performance.
Investor Protection and Transparency
The US Securities and Exchange Commission (SEC) imposes extremely strict disclosure requirements on listed companies. Quarterly financial reports and major events must be disclosed promptly and accurately. The SEC's "Real-Time Disclosure Pilot" launched in 2025 further shortened key data disclosure to within 24 hours. Strict insider trading penalties and class action lawsuits effectively protect minority investors and enhance market trust—trust is the foundation for long-term capital commitment.
Corporate Governance and Shareholder-Friendly Culture
US-listed companies generally prioritize shareholder returns. Management compensation is tied to stock performance, driving companies to continuously optimize profit margins and capital efficiency. Institutional investors (e.g., BlackRock, Vanguard) actively exercise voting rights to push for better governance and ESG performance. This shareholder-oriented culture encourages management to reward investors through buybacks and dividends, creating a virtuous cycle.
How Can Investors Leverage This Advantage?
For individual investors, the long-term return advantage of US stocks does not mean chasing short-term hot spots. The following strategies can help investors fully enjoy the dividends of US stocks:
- Dollar-cost average into S&P 500 index funds: Use low-cost index funds (e.g., VOO, IVV) as core holdings, invest a fixed amount monthly to average costs. Historical backtesting shows that any lump-sum investment held for over 8 years in the past 20 years yielded positive returns.
- Hold long-term, ignore short-term volatility: US stocks experience a correction of over 10% on average every two years, but always recover to new highs. Investors should avoid panic selling and maintain positions through cycles.
- Asset allocation and rebalancing: Based on risk tolerance, pair with low-correlation assets like Treasury bonds and REITs. Rebalance annually to lock in some gains and maintain risk exposure.
The report predicts US stocks could still achieve 6%-8% annualized returns over the next decade, though slower than before, remaining attractive relative to other global markets. The key is to pick the right sectors—technology, healthcare, and consumer innovation will continue to lead growth.
The long-term return leadership of US stocks is no accident; it results from the interplay of institutions, markets, and innovation. For investors, understanding these advantages and translating them into action is key to seizing the first-mover advantage in US stock investment. Against the backdrop of slowing economic growth and declining global asset returns, US stocks remain one of the core assets worth holding long-term.
