The narrative surrounding the “resilient U.S. consumer,” which has been a major upside surprise in 2025, is now facing significant headwinds, according to the Global Investment Committee (GIC) at Morgan Stanley Wealth Management. While consumer spending has maintained a steady nominal growth rate of 5% to 6%, underpinning a bullish outlook for US equities in 2026, the GIC is expressing caution.
Lisa Shalett, chief investment officer and head of the GIC, warned that although the broader macroeconomic picture remains cautiously optimistic, the “K-shaped” economy demands greater scrutiny. Specifically, she wrote on Monday that she sees “genuine cracks for mid- to lower-end consumers,” a cohort critical to aggregate growth. They may only account for 40% of consumption in the economy, she noted, but they make up the bulk of marginal growth in the consumption that drives the national economy. Consumer spending, after all, is roughly two-thirds of national GDP, a relationship that has been challenged in 2025 by the massive surge in data-center spending.
Shalett cited Oxford Economics data in arguing that the marginal propensity to spend an incremental dollar of earnings is more than 6x higher for the lowest-income quintile compared to the wealthiest cohort, making the 2026 outlook “increasingly fragile” without their continued strength. In other words, the economy only really grows at a healthy rate the more money lower- and middle-income people have to spend, and that’s more and more endangered.
