Morgan Stanley: US Industrial Sector Will Benefit from Manufacturing Reshoring

Investing.com—Morgan Stanley analysts expect a divergence and recovery in 2026, with companies related to fixed asset investment leading the growth momentum, while production exposure faces a slower recovery. Consumer-related stocks are in the most unfavorable position.

The firm states that the escalation of the Iran conflict has intensified this divergence, with rising energy prices and interest rates weakening consumers’ spending ability. Meanwhile, declining supply chain reliability and the widening gap between U.S. and global natural gas prices increase the likelihood of more production shifting to the U.S. market.

Morgan Stanley data shows that early 2026, U.S. capital goods imports will maintain approximately a 30% year-over-year increase, while U.S. consumer goods imports continue to decline, down 30% year-over-year. The firm notes that this divergence significantly differs from historical patterns.

U.S. capital goods imports are up 35% compared to 2022-24 levels, indicating ongoing U.S. reindustrialization, consistent with Morgan Stanley’s thesis of a $10 trillion U.S. manufacturing reshoring.

The firm states that under the scenario of U.S. manufacturing reshoring, consumer goods consumption will not change and may even decline due to rising costs. The beneficiaries of Western migration are not the companies selling products but those building and servicing these facilities, i.e., U.S. industrial companies.

Morgan Stanley notes that after excess pre-purchasing in the first half of 2025 and destocking in the second half, U.S. inventory levels have essentially normalized. U.S. imports have stabilized at a normal operating rate comparable to levels observed before the November 2024 election.

In Q1 2026, Chinese exports remain under pressure. During the 25 days after the Lunar New Year in 2026, despite a rebound in U.S. imports, Chinese exports are still 2% lower than the levels observed after the Lunar New Year in 2025.

Morgan Stanley believes stocks such as Rockwell Automation (NYSE: ROK), Parker Hannifin (NYSE: PH), W.W. Grainger (NYSE: GWW), Johnson Controls (NYSE: JCI), Hubbell (NYSE: HUBB), Vitesco Technologies (NYSE: VRT), Ametek (NYSE: AME), Trane Technologies (NYSE: TT), Eaton (NYSE: ETN), Reuben Electric (NYSE: RRX), and Gates Industrial (NYSE: GTES) are in the most favorable position. The firm expresses concerns about Carrier Global (NYSE: CARR), LII (NYSE: LII), Emerson Electric (NYSE: EMR), Ingersoll Rand (NYSE: IR), Allegion (NYSE: ALLE), Otis (NYSE: OTIS), Stanley Black & Decker (NYSE: SWK), and 3M (NYSE: MMM).

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