Ideas
US consumer spending to broaden in 2026.
The US consumer is K-shaped: upper-income households drive about 40% or more of total spending, and their spending has been supported by asset-market appreciation and home-price gains even as inflation and tariffs pressure lower-income households. Michael expects the expansion to broaden in 2026 if inflation comes down and tariff effects peak, allowing lower- and middle-income households to regain residual spending power and making the consumer less dependent on the upper-income cohort.
AI CapEx is multi-year investment story.
AI was the primary and almost exclusive driver of US business spending in 2025. Even though some AI CapEx is intermediate or imported and may not show up fully in GDP, it remains a multi-year investment story, supporting the quality and sustainability of the overall business spending picture.
German fiscal stimulus improves medium-term outlook.
Germany has the most potential among major Eurozone economies to catch up and accelerate because the government has exceptional fiscal space and is deploying fiscal stimulus. The direction of travel is clear and the medium-term outlook is better, but implementation lags, defense procurement constraints, and trade exposure mean the improvement will not be immediate and short-term GDP news could even be negative.
Eurozone growth accelerates mildly by 2027.
The Eurozone aggregate is not simply weak; growth is complicated by divergence, but the outlook is for mild acceleration toward the end of the forecast horizon. Quarterly growth should rise from around 0.1-0.2% now to about 0.35% in roughly two years, reaching above-potential rates by 2027.
China remains in deflation in 2026.
China's macro backdrop remains challenging in 2026, with deflation the number-one issue. Chetan expects some easing of deflationary pressures, but the economy will still be in deflation, and policy is not expected to generate a huge demand surge that would end the deflationary cycle.
China gains advanced manufacturing export share.
Even as China's macro picture is challenged by deflation, the micro story is positive: China is making inroads into advanced manufacturing, which enables it to gain share in global goods exports. Recent export data have outperformed expectations, and this market-share gain supports a positive corporate micro story.
PBOC limits significant yuan appreciation.
The PBOC is unlikely to allow significant renminbi appreciation while China remains in deflation. Chetan notes the trade-weighted RMB basket has been stable since 2016 and expects that to continue; appreciation would worsen deflation, hurt corporate revenue and wage growth, and make consumption rebalancing harder rather than easier.
Asia ex-China exports drive 2026 recovery.
Asia ex-China should benefit in 2026 as the non-tech export story turns around after a weak 2025. That should broaden the regional recovery from tech exports alone into non-tech exports, capex, job growth, and consumption, with particularly meaningful improvement in export growth, real GDP, and nominal GDP for the non-China part of Asia.
US tariffs risk Europe growth.
If the US imposes additional tariffs on Europe, such as 10% or later 25%, Jens estimates a drag on European GDP growth of 30-60 basis points, roughly half of expected 2026 growth. Additional tariffs are bad for growth, and this time European retaliation is more likely, which would increase downside risk for Europe.
This Morgan Stanley video, published January 23, 2026,
features Michael Gapen, Jens Eisenschmidt, Chetan Ahya
discussing US Consumer, AI capex, EWG, EZU, FXI, China advanced manufacturing, Chinese yuan (CNY), Asia ex-China, VGK.
9 trade ideas extracted by AI with direction and confidence scoring.
Speakers:
Michael Gapen,
Jens Eisenschmidt,
Chetan Ahya
· Tickers:
US Consumer,
AI capex,
EWG,
EZU,
FXI,
China advanced manufacturing,
Chinese yuan (CNY),
Asia ex-China,
VGK
