Trend Major economies enter 2026 on divergent balance sheet pathways

Summary

MGI finds that the largest economies went into 2026 heading in different directions rather than along a shared path. The United States has been tracking a productivity-acceleration scenario, yet its heavy public debt and lofty equity prices leave room for either persistent inflation or a reset of the balance sheet. Europe has drifted toward secular stagnation, with weak demand holding down both growth and interest rates. China has gone through a partial reset as property values fell, although state spending and corporate investment kept enlarging its balance sheet. The report argues that identifying what could tip each economy toward faster productivity is now urgent: stronger corporate earnings and more government saving for the US, more investment for Europe, and stronger domestic consumption for China.