The outlook for the financial industry appears stronger than expected, according to financial leaders who participated in the 2026 Morgan Stanley U.S. Financials Conference.
Record investments in AI infrastructure, healthy corporate balance sheets, resilient consumer spending, favorable tax policy and ongoing regulatory reforms are supporting a constructive view of the U.S. economy and the financial sector in particular, despite lingering uncertainty.
“Bank leaders highlighted that their clients keep investing, demand for loans is exceptionally strong and the credit environment is benign,” said Manan Gosalia, Head of U.S. Large and Midcap Banks Research at Morgan Stanley. “Yes, we are seeing some volatility in the macro environment and there are some concerns around geopolitics, but most corporate clients and consumers have moved on.”
Consumer Spending Keeps Growing
Consumption resilience is a key source of confidence for the financial industry. Despite rising energy prices, a strong labor market is helping consumers maintain or even increase spending levels and meet debt obligations. Delinquency rates have improved compared with 2025.
Credit card companies noted that even discretionary categories—such as travel, dining and entertainment—continue to perform well.
“Overall, the U.S. consumer is still in a good spot,” said Jeff Adelson, who covers Consumer Finance at Morgan Stanley Research. “At the same time, some companies cautioned that higher energy prices could begin to weigh on consumer spending over the next six months."
Consumer prices rose 4.2% in May, marking the highest inflation reading in three years.
Some retail banks are also closely monitoring wages, which has lagged inflation for certain lower-income households and could eventually affect spending patterns.
Corporate Activity Supports Loan Growth
Banks reported strong momentum in commercial and industrial lending across regions and sectors. Companies are increasingly turning to loans to fund capital expenditures, pursue mergers and acquisitions, and support broader growth initiatives.
“Loan demand is coming not just from the larger corporate clients, but also from the middle market,” Gosalia said. “Clearly, there has greater diversification in loan growth.”
Lenders also highlighted that corporate borrowers have become more adept at managing periods of market volatility. Experiences ranging from the COVID-19 pandemic to recent tariff-related uncertainty have improved companies' ability to manage liquidity pressures and adapt to changing leverage conditions.
The healthy economic backdrop is also supporting capital markets activity. Banks cited solid trading performance and robust pipelines for M&A transactions and initial public offerings. Deal activity is extending beyond the technology sector as companies across industries continue to generate healthy free cash flow.
"Capital markets activity has been fairly strong, with revenues generally up in the low to mid-teens," Gosalia said.
Signs of Recovery in Real Estate
After several challenging years, commercial real estate may be approaching a turning point.
Banks and asset managers reported that property supply in both the U.S. and the U.K. remains well below peak levels, supporting industry fundamentals. Industrial properties, particularly warehouses, were highlighted as a bright spot, benefiting from data center construction and efforts to reshore manufacturing activity in the U.S.
Agentic AI Draws Attention
Large consumer banks see agentic AI rapidly improving how customers discover and evaluate their products and services, making search more conversational and reducing friction in the customer experience. However, the technology's impact on transaction execution is still limited, as trust, security and consumer protections remain critical considerations.
While AI could intensify competition by lowering barriers to entry for fintech firms and new market participants, large banks are counting on their ability to modernize infrastructure quickly, leverage established customer relationships and provide trusted security frameworks.
One challenge discussed by executives is the deployment of larger agentic systems capable of autonomously coordinating multiple workflows, overseeing secondary processes and executing complex, multi-step tasks with limited human intervention. Many of these initiatives remain in the early stages and may require additional regulatory clarity before broader implementation.
Despite the optimism around AI deployment, there’s some concern about the costs associated with investments in technology.
"That's a key area of focus for investors as they assess the potential impact on near-term profitability while weighing the opportunity for stronger returns over the longer term," Adelson said.
Private Credit Continues to Attract Capital
Alternative asset managers characterized private credit as fundamentally sound, arguing that concerns about systemic risk may be overstated, especially in the context of a healthy macroeconomic environment.
Although the asset class has experienced higher redemptions and softer near-term flows, participants said underlying demand remains strong. Institutional investors continue to view private credit as an attractive long-term allocation, supported by favorable growth prospects and compelling return opportunities after recent market volatility.
