Bloomberg named Christophe Barraud of Market Securities as the top economic forecaster. Bloomberg has consistently ranked him as the top US economy forecaster for the past nine years, from 2012 to 2020. He also holds the record for being the most accurate forecaster of the Eurozone and China’s economies over several years.
Barraud, Market Securities’ chief economist and strategist, has a knack for predicting global economic twists and turns. He was one of the few who correctly predicted the US economy’s resilience in 2023, despite challenges from the pandemic, supply-chain disruptions, inflation, and monetary policy shifts.
“I was surprised by the strength of the US economy because, at the beginning of 2023, I was expecting some kind of recession,” he told Business Insider in a recent interview. It seems that the US economy outperformed expectations, especially in the third quarter. It was partially explained by transitory factors, but overall, if you look at what happened in the fourth quarter, consumption slowed slightly, but it should remain quite strong and in line with historical norms.”
Barraud expects the US economy to expand by 2.5% in 2024, slightly higher than the consensus estimate of 2.4%. He attributes this to strong consumer spending, a recovery in the labor market, and fiscal stimulus from the infrastructure bill.
What He Sees as the Biggest Risks and Opportunities for 2024
However, Barraud is not optimistic about the outlook for 2024. He warns that many uncertainties and risks remain, which could derail the economic recovery. He identifies geopolitical tensions in the Middle East, the potential escalation of the conflict between Russia and Ukraine, and the possibility of new coronavirus variants as the primary sources of concern.
“Currently, the political situation and the Middle East situation are of particular concern due to their rapid evolution, making it difficult for people to predict; everyone is surprised by that,” he went on to say.
He also warns that inflationary pressures are not yet over, and the Federal Reserve may need to tighten monetary policy more than expected. He believes the Fed will begin to raise interest rates in May, rather than March, as some market participants anticipate.
“While the fight against inflation may not be completely resolved, under normal conditions, we can expect the CPI to range between 2% and 2.5% by the third quarter,” he added.
Barraud, on the other hand, sees some opportunities for investors willing to capitalize on the economic divergences between the United States and the Eurozone. He believes that the Eurozone will lag behind the United States in terms of economic growth and inflation, and that the European Central Bank will not be able to raise interest rates until at least June.
This opens up an arbitrage opportunity for investors who can borrow in euros and lend in dollars, or buy US assets and sell European assets. Barraud believes that this strategy will pay off in 2024, as the US dollar appreciates against the euro and the US stock market outperforms the European one.
Barraud predicted that the euro would rise against the US dollar as the ECB lags behind the Fed in raising interest rates and shrinking its balance sheet. He claimed that this would result in a favourable rate and balance sheet gap for the euro. “The euro could outshine the USD in the short run and maybe throughout the year,” he added.
He warned, though, that a geopolitical crisis could disrupt this situation. This poses a significant risk. Otherwise, individuals will gravitate towards the US dollar as a safe haven.”
