Consumer Confidence and the U.S. Midterms

Summary

Morgan Stanley strategists discuss the consumer outlook and policy catalysts. While consumers remain resilient, lower-income households are weakening. Tariff rates are expected to stay around 8-9% with potential for slight decline. Oil prices could see marginal upside from the US-Iran MOU despite execution risks. Regulatory pushback against AI data center build-out is emerging as a key election-related risk to monitor.

• Lower-income consumer spending is showing meaningful lag, raising concern among consumer companies.
• Tariff rates are likely to remain around 8-9% with a chance of slight alleviation.
• Oil prices may get a marginal boost from the US-Iran MOU, but execution risks remain.
• AI industrial build-out is driving investment, employment, and consumption.
• Bipartisan regulatory interest could threaten data center construction.
• Midterm elections are a key catalyst for potential AI policy changes.