The gains posted by US stocks have broadly outpaced the average gains of ASX shares over the past year.
The strong rally in US markets has seen the S&P 500 Index (SP: .INX) charge 31.37% higher in the past 12 months.
While ASX shares have also enjoyed a strong year, the S&P/ASX 200 Index (ASX: XJO) has gained a significantly lower 17.31% over this same period.
Of course, that's proverbial water under the bridge now.
Looking forward, should you double down on the rally in US stocks or buy ASX shares?
Aussie investors changing mix of US stocks versus ASX shares
While I'd recommend maintaining a diverse mix of holdings that would include both ASX shares and US stocks, new data from eToro indicates that Aussie retail investors are increasingly favouring cash and ASX shares over US stocks. A trend that's particularly pronounced among Gen Z investors.
The study encompassed 10,000 retail investors across 12 countries and three continents. Respondents included 1,000 retail investors from Australia. And it revealed that the proportion of Australian investors with exposure to ASX shares in their portfolios increased from 82% in Q2 to 87% in Q3.
And that trend appears set to continue.
19% of surveyed Aussie investors said they intend to increase their allocation to ASX shares from the third quarter onwards.
Commenting on the increasing preference for ASX shares over US stocks, eToro analyst Josh Gilbert said, "Aussies' preference for local stocks comes at a time when we're seeing the beginning of a worldwide rotation away from US tech mega-caps."
Gilbert continued:
Where Australia is departing from broader global trends is in the declining proportion of Australians holding commodities, domestic bonds and foreign bonds, which reflects persistently high inflation and interest rates in the country continuing to cast a shadow at a time when other markets are beginning to experience rate cuts.
Investors' age had a significant impact on their preferences for buying ASX shares versus US stocks.
Gen Z investors led the charge for Aussie stocks, with respondents aged 18 to 27 who hold local equities increasing from 34% to 39% over the quarter. The proportion of Gen Z investors holding international equities went the other way, sliding from 39% to 34%.
"It may be surprising to some to see Gen Z's focus on local stocks given the performance of US equities over the last two years," Gilbert said.
He added:
However, as we begin to see a rotation out of high-flying tech stocks into cheaper, more cyclical assets that the Australian market has in abundance, it just goes to show how savvy retail investors as a whole are.
The ASX 200 also outperformed the S&P 500 in the third quarter, showing we can compete with the biggest and the best on Wall Street.
Atop the shift out of US stocks and into ASX shares, Australian investors were also 9% more likely than their global peers to hold cash in Q3.
Foolish takeaway
Following the herd doesn't tend to offer investors the best results.
But if the shift from US stocks into ASX shares that eToro revealed continues apace, it could help the Aussie share market continue its third-quarter outperformance relative to US equities.
The ASX 200 gained 6.5% in Q3, compared to the S&P 500's 5.5% quarterly gain.
As always, before investing in any stocks, be sure to do your own thorough research first. Or simply reach out for some expert advice.
