Ideas
Supportive policy keeps equities attractive in 2026.
Monetary and fiscal policy are supportive at the same time, which rarely happens outside recession. The Fed is easing and tax relief is coming, so he remains relatively optimistic on equities in 2026 even though it is late cycle, not end of cycle.
Favor procyclical sectors and smaller-cap stocks.
With policy supportive and the cycle late but not over, he favors procyclical areas—finance, industrials, technology—and moving down the market-cap curve. These winning trades emerged in the second half of last year and he expects them to continue into 2026.
Jitania Kandhari
Deputy CIO, Solutions and Multi-Asset Group, Morgan Stanley Investment Management
5:41
AI value shifts to application adopters.
There are cracks in the mega-cap AI consensus as adoption rises while monetization lags. The next phase of value creation should shift from model building/enablers to the application layer/adopters.
Jitania Kandhari
Deputy CIO, Solutions and Multi-Asset Group, Morgan Stanley Investment Management
6:03
New China AI offers structural opportunity.
Two AI ecosystems are evolving globally: a high-cost cutting-edge US innovation engine and a lower-cost efficiency-driven Chinese model, each with its own supply chain beneficiaries. Separately, new China is pivoting toward manufacturing and technology, with its AI ecosystem part of the emerging-market opportunity set.
AI broadening favors lower-valuation adopters.
Using the internet as an analogy, investors cannot reliably pick the ultimate AI winners early. AI is a productivity-enhancing tool that many industries will embrace, lifting productivity and margins broadly, so broadening out into lower-valuation AI adopters is safer than concentrating on specific tech winners.
Increase non-US exposure, especially Europe and Japan.
He has picked up different signals from Europe and Japan, where procyclical and value stocks started working in the first half of 2025; historically this leadership does not fade after just one year. As a result, he has increased non-US exposure, expecting parts of the world that outperformed the US to continue doing so in 2026.
Non-US equities benefit from cyclical broadening.
The US index is dominated by tech and tech-related names, while ACWI ex-US is roughly 40% industrials and financials. As cyclical leadership broadens across different countries, non-US equities, including Europe and emerging markets, look attractive.
Europe and emerging Europe look interesting.
Different pockets of Europe, both core and periphery, as well as emerging Europe, look very interesting because different countries are at different cyclical stages.
Emerging markets offer structural positive story.
Overall emerging markets have restored fiscal and monetary credibility in this cycle, creating a structural positive story within a heterogeneous asset class that offers opportunities across countries.
North Asia supplies both AI ecosystems.
North Asian markets sit in the supply chain of both the US and Chinese AI ecosystems, so they should benefit from growth in both ecosystems.
Korean defense, biotech, shipbuilding benefit from US.
Korean defense, biotech, and shipbuilding sectors are interesting opportunities because they are vendors to the US.
India remains a structural market.
India is a structural market she has discussed repeatedly and remains a long-term opportunity.
Latin America has positive policy backdrop.
Latin America benefits from Trump's relatively positive stance on the region and good fiscal and monetary management by central banks.
This Morgan Stanley video, published February 04, 2026,
features Andrew Slimmon, Jitania Kandhari
discussing VT, XLF, XLI, XLK, Small/Mid-Cap Equities, AI-SECTOR, FXI, China AI ecosystem, Lower-valuation equities, non-US equities, VGK, EWJ, ACWX, Emerging Europe equities, EEM, North Asian equities, Korean Defense, Korean Biotech, Korean Shipbuilding, India Equities, ILF.
13 trade ideas extracted by AI with direction and confidence scoring.
Speakers:
Andrew Slimmon,
Jitania Kandhari
· Tickers:
VT,
XLF,
XLI,
XLK,
Small/Mid-Cap Equities,
AI-SECTOR,
FXI,
China AI ecosystem,
Lower-valuation equities,
non-US equities,
VGK,
EWJ,
ACWX,
Emerging Europe equities,
EEM,
North Asian equities,
Korean Defense,
Korean Biotech,
Korean Shipbuilding,
India Equities,
ILF
