US Multis and Machinery: Midwest Malaise? Thoughts from our time marketing in America's industrial heartland

This report presents Bernstein's takeaways from a week of marketing in the US Midwest, meeting investors weighted toward growth PMs and industrial specialists, covering US multi-industrials and machinery. Key themes: incremental investment is not going to AI-exposed industrials, with semis far more preferred for AI exposure given valuations and upstream positioning, while high rates and elevated oil prices dampen sentiment on non-AI industrials; however, valuation gaps between AI and non-AI exposed industrials have come down materially, creating a unique opportunity to buy higher quality names. Moratoriums were seen as a real near-term volatility risk that dies down after mid-terms, and the pace of the frontier was not expected to slow. On non-resi recovery, investors were skeptical, but three signals point to positive momentum: factory construction starts, upward capex revisions after tax policy changes such as bonus depreciation, and non-residential construction activity lagging mone