US Stock Market Trend Comparison and Cross-Market Configuration Strategies

From 1966 to 1981, the US stock market actually experienced a 15-year sideways fluctuation. The S&P 500 index rose only about 66% during this period, and it was far from breaking through the previous high. The driving factors of this phase included high inflation and stagflation (two oil shocks in the 1970s), tight monetary policy, readjustment of the US dollar system, and political uncertainty, which significantly suppressed corporate profits and investor confidence. At the same time, industries such as healthcare and information technology had not yet become market leaders, and the strength of the US dollar itself did not form sector linkage as it did later. [0]

Contrasting the current environment, US stocks have continued to hit new highs since their low point in 2020: the S&P 500 rose more than 112% between 2020 and 2025, and the Nasdaq rose nearly 160%, with the 200-day moving average always below the support level. Although volatility has increased, there are no signs of long-term sideways movement. [0] This indicates that although geopolitical events such as the “Red Sea Incident” exposed the limitations of the US military in certain theaters, and the internal stratification and reduced fault tolerance reflected by the “kill line” also pose challenges to society and policies, from the perspective of the capital market, US stocks are still driven by technological innovation (AI, semiconductors, cloud services), consumption upgrading, and fiscal and monetary policy support, and have not yet entered the “kinetic energy depletion” phase similar to 1966–1981. [0]

Geopolitically, the strategic competition between the US and China, frequent local conflicts, and the rebalancing of global supply chains have undoubtedly increased the volatility of US stocks, and also extended the period of uncertainty for the “US model”. However, currently, the US dollar and capital markets still hold the global capital pricing power, and US companies still lead in fields such as technological innovation, AI computing power, and medical innovation. Only when the US loses its sustained advantages in core areas such as capital, technology, and semiconductors can global allocation truly replicate the long-term sideways trend of 1966-1981. Observing current data, US stocks are still in a structural uptrend, so there is no need to simply copy historical trends to the present. Instead, we should focus on the paths: the pullback risk of high-valued industries, and the relative attractiveness of emerging markets and Asian tech growth assets. [0]

1. Core Holdings of US Stock Innovation Growth with Quality Defense
   • Maintain allocation to high ROIC industries such as AI, semiconductors, and cloud computing; but be alert to high valuation corrections, and select leaders based on ROE/profitability.
   • Moderately increase holdings in low-beta sectors such as healthcare and consumer staples to hedge against macro fluctuations, while using stock options or volatility products to protect against tail risks.

2. Regional Balance and Emerging Market Selection
   • Under the “Eastern Rise” trend, include new economic targets such as high-end manufacturing, AI, and green energy in Hong Kong stocks and A-shares, but must control policy and exchange rate risks, which can be diversified through QDII and active global emerging market funds.
   • Europe and Japan also have potential in energy transition and semiconductor equipment fields; select and participate optimally to strengthen income sources “beyond the US dollar”.

3. Diversified Assets and Risk Buffers
   • In fixed income, short-term US bonds and IG credit have safe-haven value at potential high interest rates; if inflation falls, duration can be gradually extended.
   • Physical assets such as private equity, real estate, and gold can serve as supplements to hedge against geopolitical/currency risks, especially when the US dollar’s competitiveness is challenged, they have a “hard asset” buffer.

4. Dynamic Hedging and Liquidity Management
   • Use option strategies to hedge market pullbacks (such as sold straddles/protective puts), and set phased entry to avoid full-position entry into possible structural changes at once.
   • Continue to monitor the global monetary policy path, US fiscal conditions, and geopolitical events; enhance liquidity through cash or precious metals when necessary.

Although the arguments of “loosening US hegemony” and “Eastern Rise and Western Decline” have raised warnings, currently US stocks are still dominated by structural growth, and there is a significant gap from the sideways trend of 1966-1981. It is recommended that investors maintain core US stock allocations while moderately increasing the weight of Asian emerging markets and diversified assets, and prevent potential systemic risks through strategic defense and liquidity management. If there are still doubts about the complex situation, consider using an in-depth research model to obtain more complete macro policy and industry in-depth research.

[0] Jinling AI Securities API Data (December 30, 2025).