The Consensus is Dead
The global economic engine is misfiring. Morgan Stanley’s Seth Carpenter just confirmed what the bond market has whispered for months. Global growth is no longer a rising tide. It is a series of isolated pools. Some are evaporating. Others are flooding. The latest roundtable from the bank’s top economists highlights a brutal reality. The forces of growth are diverging along regional fault lines. This is not a temporary glitch. It is a structural shift in how capital moves across borders.
Markets spent 2025 betting on a synchronized recovery. They were wrong. The data released on January 23 suggests a widening gap between the American consumer and the rest of the world. Seth Carpenter’s analysis points to a fundamental decoupling. While the US maintains its momentum through aggressive fiscal spending and a surge in artificial intelligence capital expenditure, other regions are choking on high real interest rates. The narrative of a ‘global cycle’ is being replaced by regional survivalism.
The American Exceptionalism Trap
The US economy refuses to cool. This is a problem for the Federal Reserve. Total Factor Productivity (TFP) is rising in the US at a pace not seen in decades. This is driven by the massive deployment of generative AI in the enterprise sector. According to recent reports from Bloomberg, the productivity gap between the US and the Eurozone has widened to its largest margin since the post-war era. Capital is a coward. It is fleeing low-yield environments in Europe and Japan to chase the 5 percent real returns available in US Treasuries and tech equities.
The wealth effect is the primary driver. US households are sitting on record equity gains. This buffers the impact of higher mortgage rates. The Fed is in a corner. If they cut rates to help the global economy, they risk reigniting domestic inflation. If they hold, they starve the developing world of liquidity. It is a zero-sum game. The Morgan Stanley roundtable emphasizes that ‘growth forces’ are now localized. Policy in Washington no longer exports stability. It exports volatility.
The European Stagnation and the China Reset
Europe is a museum of 20th-century industry. The energy crisis of 2024 and 2025 has left a permanent scar on German manufacturing. High electricity costs have rendered heavy industry uncompetitive. Unlike the US, the Eurozone lacks a unified fiscal backstop to drive a tech transition. The result is a stagnant 1.1 percent growth forecast for 2026. The European Central Bank is paralyzed. They cannot cut rates fast enough to save growth without crashing the Euro against a dominant Dollar.
China is attempting a different path. The property-led growth model is finished. Beijing is now pivoting toward ‘new productive forces.’ This means massive subsidies for green tech, semiconductors, and robotics. However, this transition is painful. Domestic consumption remains weak. The Chinese consumer is saving, not spending. Per latest Reuters analysis, the structural reset in China is creating a deflationary impulse that is being exported to the rest of Asia. This is the ‘Force’ Carpenter refers to. It is a push-pull dynamic where US inflation fights Chinese deflation.
Visualizing the 2026 Growth Gap
To understand the scale of this divergence, we must look at the projected GDP growth rates for the current year. The following data represents the consensus forecasts as of January 24, 2026, adjusted for the latest Morgan Stanley roundtable insights.
Regional GDP Growth Forecasts for 2026
The Technical Breakdown of Global Drivers
The divergence is best captured in the underlying drivers of these economies. We are seeing a split between consumption-led, investment-led, and export-led growth models. The table below breaks down the primary catalysts identified in the Seth Carpenter roundtable.
| Region | 2026 Forecast (%) | Primary Growth Driver | Risk Factor |
|---|---|---|---|
| United States | 2.4 | AI Capex & Consumer Wealth | Fiscal Deficit Sustainability |
| Eurozone | 1.1 | Energy Price Stabilization | Demographic Collapse |
| China | 4.2 | High-Tech Manufacturing | Internal Debt Overhang |
| India | 6.5 | Digital Infrastructure | Global Trade Protectionism |
| Brazil | 1.8 | Commodity Exports | Political Instability |
India remains the outlier. It is the only major economy benefiting from both the ‘China Plus One’ strategy and a young demographic profile. However, India is sensitive to the US Dollar. If the Fed stays higher for longer, the capital flight from Mumbai to New York will intensify. This is the hidden trap in the Morgan Stanley data. The stronger the US looks, the harder it is for the rest of the world to catch up.
The Liquidity Squeeze
Global liquidity is tightening. The ‘Thoughts on the Market’ podcast highlights that central banks are no longer acting in concert. The Bank of Japan is finally raising rates while the ECB is desperate to cut. This creates a chaotic environment for currency carry trades. Volatility is the new alpha. Investors who rely on old correlations will be liquidated. The forces influencing growth are now geopolitical as much as they are economic.
Supply chains are being rewired for resilience rather than efficiency. This is inherently inflationary. The ‘Just-in-Time’ era is over. It has been replaced by ‘Just-in-Case’ stockpiling. This requires massive capital investment, which is why the US, with its deep capital markets, is winning. Europe and China are struggling to fund this transition. The divergence we see today is the result of ten years of underinvestment in the Old World and overinvestment in the New Tech World.
The next data point to watch is the February 14 US CPI print. If inflation remains sticky above 3 percent, the Fed will have no choice but to maintain the liquidity squeeze. This will further widen the gap between the US and the rest of the world. Watch the 10-year Treasury yield. If it breaks 4.8 percent again, the regional divergence will turn into a regional crisis for emerging markets.
