Episode Details

Our strategists Michelle Weaver and Adam Jonas join analyst Christopher Snyder to discuss the most important themes that emerged from the Morgan Stanley Annual Industrials Conference in Laguna Beach.

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Michelle Weaver: Welcome to Thoughts on the Market. I'm Michelle Weaver, Morgan Stanley's U.S. Thematic Strategist.

Christopher Snyder: I'm Chris Snyder, Morgan Stanley's U.S. Multi-Industry Analyst.

Adam Jonas: And I'm Adam Jonas, Morgan Stanley's Embodied AI Strategist.

Michelle Weaver: We recently concluded Morgan Stanley's annual industrials conference in Laguna Beach, California, and wanted to share some of the biggest takeaways.

It's Tuesday, September 16th at 10am in New York.

I want to set the stage for our conversation. The overall tone at the conference was fairly similar to last year with many companies waiting for a broader pickup. And I'd flag three different themes that really emerged from the conference.

So first, AI. AI is incredibly important. It appeared in the vast majority of fireside conversations. And companies were talking about AI from both the adopter and the enabler angle.

Second theme on the macro, overall companies remain in search of a reacceleration. They pointed to consistently expansionary PMIs or a PMI above 50, a more favorable interest rate environment and greater clarity on tariffs as the key macro conditions for renewed momentum.

And then the last thing that came up repeatedly was how are companies going to react to tariffs? And I would say companies overall were fairly constructive on their ability to mitigate the margin impact of tariffs with many talking about both leveraging pricing power and supply chain shifts to offset those impacts.

 So, Chris, considering all this, the wait for an inflection came up across a number of companies. What were some of your key takeaways on multis, on the macro front?

Christopher Snyder: The commentary was stable to modestly improving, and that was really consistent across all of these companies. There are, you know, specific verticals where things are getting better. I would call out data center as one. Non-res construction, as another one, implant manufacturing as one. And there were certain categories where we are seeing deterioration – residential HVAC, energy markets, and agriculture.

But we came away more constructive on the cycle because things are stable, if not modestly improving into a rate cut cycle. The concern going in was that we would hear about deteriorating trends and a rate cut would be needed just to stabilize the market. So, we do think that this backdrop is supportive for better industrial growth into 2026.

We have been positive on the project or CapEx side of the house. It feels like strength there is improving. We've been more cautious on the short cycle production side of the house. But we are starting to see signs of rate of change. So, when we look into [20]26 and [20]27, we think U.S. industrials are poised for decade high growth.

Michelle Weaver: You've had a thesis for a while now that U.S. reshoring is going to be incredibly important and that it's a $10 trillion opportunity. Can you unpack that number? What are some recent data points supporting that and what did you learn at the conference? 

Christopher Snyder: Some of the recent data points that support this view is U.S. manufacturing construction starts are up 3x post Liberation Day. So, we're seeing companies invest. This is also coming through in commercial industrial lending data, which continues to push higher almost every week and is currently at n