Will the Fed End the Party?

Andrew Sheets, head of corporate credit research at Morgan Stanley, discusses factors that could stimulate corporate activity in 2026, provided the labor market remains stable. He highlights significant U.S. government spending, projected record-breaking AI-related corporate investments, and a deregulatory push that could boost bank lending capacity. Despite these supportive factors, the Federal Reserve is considering rate cuts due to concerns about a slowing labor market. Sheets suggests that if economic growth persists, these combined elements could lead to a surge in corporate risk-taking not seen since the 1990s, which, while preferable to an economic slowdown, carries its own risks.