In the last year there has been extensive talk of the economy in shape «M». This is a schematic term that shows that there are some who win and, at the same time, others lose. Earned are those directly involved in the markets and benefit from rapid technological developments and the high profitability of businesses. Losers are those who have no savings, do not invest and are called upon to face an increasing cost of living.
The same is happening now at national level. The US seems to be the winners at all levels. Technology, stock exchange, energy, defence and development are ahead of all economies and especially Europe. This is confirmed by recent GDP figures. In the first quarter of 2026 the US grew at a rate of 2%.
The principles of growth are investment. Construction of infrastructure for AI has a direct impact on the economy. Capital investments, in both natural capital and intellectual property capital, support GDP. The profitability of the companies for the first quarter moves at the same wavelengths. Beyond the giant technology, banks and industries of capital equipment – microchip, had extremely high profits. The stock market, relieved by the results of the first quarter, was found in new highs. The fear of war has already been overcome. S&P 500 compared to a year ago is 25% higher.
The U.S. seems to be playing alone on their own financial grounds. European stock exchanges have no comparable returns. European indicators STOXX 50 and STOXX 600 have a yield just under 15%, while national indicators such as German or French are static. The European economy in the first quarter developed only 0.1%. Europe's competitiveness problems are known. Christine Lagarde has stated that trade restrictions between European countries amount to 60% tariffs on goods and 110% on services. However, this finding is not surprising. The Dragi proposals have detailed the Union's structural problems. Nevertheless, 2 years later, according to Torsten Schlock of Apollo, only 10% of these proposals have been made. The rest are either in consultation or not even discussed.
With the artificial intelligence train lost to Europe, its energy dependence on third parties and the slow pace of reforms, the gap with the US will grow. The two economies are shaped «M». For investors, investment in the US is a one-way street, with few opportunities for diversification. The war in Iran will further exacerbate the imbalance of forces. The USA, as an exporter, temporarily benefit from the highest energy prices. Europe, on the other hand, remains pinned with higher inflation, lower growth and energy suffocation.
* Elias Arvanitakis is an Economist – Analyst, Morgan Stanley
