A US-China world, and Europe is just living in it - VP 2026 Themes (Part 2, Dec. G3 Leading Indicator Watch)

This is part 2 of our 2026 themes, focused on G3 economies and markets. Part 1 was released on December 2nd (link). Upcoming reports will focus on outliers within DM and EM.

Summary by Region:

• US: Most leading indicators point to continued resilience despite muted jobs growth, and manufacturing could exceed expectations if capex broadens out amid Fed easing.
• China: The Chinese focus on net exports will mean that disinflation continues to spill over globally. We are skeptical the Chinese government is ready to revalue the RMB stronger, until they are confident in China’s leverage vs the US.
• Eurozone: Leading indicators point to a cyclical rebound but weak structural competitiveness from high energy costs and a strong euro make a reflation unlikely without a much weaker euro.