OBBB taxes and deregulation are the big drivers of market breadth, says Morgan Stanley's Jim Caron

Watch on YouTube ↗  |  January 14, 2026 at 20:32  |  4:40  |  CNBC
Speakers
Jim Caron — CIO, Portfolio Management, Morgan Stanley Investment Management

Summary

Jim Caron of Morgan Stanley Investment Management says OBBB tax benefits and deregulation are structural drivers of durable market broadening and cyclical leadership. He outlines four investable structural themes: deglobalization, reindustrialization/onshoring, technological innovation, and state-capitalist funding. He expects AI to benefit value sectors, especially inefficient Health Care and companies such as Caterpillar, and sees inflation/labor in a sweet spot for now.

  • Jim Caron attributes durable market broadening and cyclical leadership to OBBB taxes and deregulation.
  • He outlines four structural themes: deglobalization, reindustrialization/onshoring, technological innovation, and fiscal-policy funding.
  • He says AI adoption should benefit value sectors because it improves efficiency and operating leverage.
  • Health Care and Caterpillar are cited as AI-adoption beneficiaries with better valuation and operating leverage.
  • He sees tariffs having softened labor, but expects that drag to fade by mid-year.
  • He says inflation is currently in a sweet spot, with no evident bond-market or dollar imbalance.
Ideas
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 0:40
Tax cuts, deregulation drive durable market broadening.
The One Big Beautiful Bill tax benefits and deregulation are structural forces that are driving a durable broadening of market leadership toward cyclical stocks. These changes create winners and losers and creative destruction, supporting a more thematic approach to markets.
XLY HIGH
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 1:12
Deglobalization is a major structural investment theme.
Deglobalization is one of four major structural investment themes because foreign policy, tariffs and trade are being renegotiated. This puts money in motion and creates winners and losers across supply chains.
Deglobalization MED
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 1:16
Reindustrialization and onshoring are investable themes.
Reindustrialization and onshoring are key structural investment themes because if companies are not going to buy goods from China, they must make them at home. The shift is occurring not only in the U.S. but also in Europe.
AIRR MED
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 1:24
Technological innovation supports efficient reindustrialization theme.
Technological innovation is a structural investment theme because the reindustrialization process will be done smartly with technology, improving efficiency and productivity.
Technological innovation LOW
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 3:45
AI adoption lifts undervalued value sectors.
The AI trade is beneficial in value sectors because companies that adopt AI become more efficient and productive, unlocking economic value. These stocks are better priced and better valued, with more upside, so investors can screen for AI adopters and build equity baskets.
Value sectors HIGH
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 4:10
Healthcare AI adoption drives operating leverage.
Health Care is a very inefficient sector where adopting AI technology into business practices can create substantial operating leverage. Because it is better valued, it offers more upside as an AI-adopting sector.
XLV MED
Jim Caron CIO, Portfolio Management, Morgan Stanley Investment Management 4:23
Caterpillar AI use boosts operating leverage.
Caterpillar is the number one stock in the Dow and is a construction company building data centers and using AI to run its machinery better and more efficiently, which should deliver more operating leverage.
CAT MED
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This CNBC video, published January 14, 2026, features Jim Caron discussing XLY, Deglobalization, AIRR, Technological innovation, Value sectors, XLV, CAT. 7 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Jim Caron  · Tickers: XLY, Deglobalization, AIRR, Technological innovation, Value sectors, XLV, CAT