US equities continue to demonstrate superior profitability metrics globally, with Wall Street maintaining a 23.4% forward return on equity (ROE) among major regions, according to Goldman Sachs' latest Global Strategy Views report published on 3 August 2026. This performance significantly outpaces the UK, Europe, Japan, and China, with the US market's ROE remaining well ahead of most other regions even after excluding the largest technology companies. The report notes that Wall Street leads in profitability with a 23.4% forward return on equity, comfortably ahead of all other major regions, even as its dominance over global equity markets fades. Recent developments show S&P 500 EPS growth tracking +31% YoY excluding other income, with AI infrastructure earnings specifically up +54%, while the rest of the market excluding Energy is up +14%.
Despite China's boom in exports and position as a key competitor to the US in technology, the country's ROE has fallen below its historical average, as noted by Goldman Sachs. This underperformance stands out particularly given China's strong export growth and significant role in global technology competition, highlighting the complexity of current market dynamics and the challenges facing Chinese equities in maintaining their historical profitability levels. The report flags China as the only major market with an ROE below its historical average, despite what Goldman Sachs described as a boom in the country's exports and its position as a key competitor to the US in technology.
August continues to show strong re-risking momentum with hedge funds net buying global equities for a third straight week, with US equities bought every day this past week at the second-fastest pace of the past year. The key development is the collapse in single-stock implied volatility, with average S&P 500 single-stock 1-month implied volatility falling another 2.7 vol points this week and now down 12 vol points from the July peak - the lowest level since January. Single-stock buying is now driven by new longs rather than short covering, indicating genuine re-risking into long exposure. Global equity returns have broadened considerably since 2025, marking a significant shift from the post-financial-crisis pattern where US markets consistently outperformed. Japan, Asia Pacific and emerging markets delivered the strongest local-currency returns over the past year, while Asia, emerging markets and the US all experienced valuation de-ratings during this period.
The report reveals a significant shift in technology valuations, with the five biggest US stocks now trading at a price-to-earnings multiple only marginally above the remaining 495 constituents of the index, representing a sharp reversal from the consistent premium those stocks held since 2017. Goldman Sachs attributes this shift to a surge in capital expenditure among hyperscalers, driven by the build-out of artificial intelligence infrastructure, which has eroded free cash flow yields for US technology firms relative to more value-oriented markets such as Europe. Software valuations have de-rated sharply, with the sector's global price-to-earnings premium falling to around 20%, down from levels near 200% at the start of the century. Leadership within the technology sector has shifted from software towards hardware, chip and memory stocks, which have seen a surge in demand tied to computing needs. The AI capex cycle remains intact with AI infrastructure earnings up +54%, though positioning and valuations across parts of the AI ecosystem are cleaner than two months ago.
The report highlights significant changes in market structure, with industrials now commanding the highest sector valuation globally, surpassing technology, which has de-rated to roughly in line with its 20-year average valuation. The equally weighted S&P 500 has outperformed its capitalisation-weighted counterpart by more than 7.3%, the widest gap since 2009, which Goldman Sachs attributed to broader economic resilience, a pick-up in M&A activity, and the unwinding of crowded momentum trades. The bank noted falling stock correlation across major markets and a narrowing gap between the performance of the largest stocks and the broader index, reflecting the current environment of healthy market normalisation after years of concentrated performance. Korea may be transitioning from liquidation to re-risking, with equities up 12.7% on the week while KOSPI vol fell more than 20 points - the largest weekly decline in over two years, suggesting genuine buying rather than unstable leverage-driven upside.
