In a recent analysis, Christophe Barraud, the chief economist and strategist at Market Securities, provided a detailed forecast for the U.S. economy in 2024. Barraud’s latest economic insights, discussed with Business Insider, came after a period marked by numerous challenges such as the pandemic, supply chain disruptions, and varying monetary policies.
Reflecting on the past year, Barraud noted, “I was surprised by the resilience of the U.S. economy because, at the beginning of 2023, I was expecting some kind of recession.” He attributed this strength to temporary factors and predicted that consumer spending will continue to be robust, albeit with a slight slowdown.
Barraud also projected a 2.5% increase in GDP by year-end, slightly surpassing the general consensus of 2.4%. However, he warned of several challenges ahead. He pointed out issues like reduced savings, the resumption of student loan payments, wage normalization, and stringent credit conditions.
Additionally, Barraud identified geopolitical tensions, particularly in the Middle East, as the primary global economic threat. “To be honest, right now it’s the political situation and the Middle East situation because it evolves quite quickly, and the reality is that people are not able to forecast this kind of thing usually; everyone is surprised by that,” he stated.
Regarding the Federal Reserve’s monetary policy, Barraud anticipated a shift later in the year, though not as early as some investors might expect. He forecasted a CPI between 2% and 2.5% around the third quarter and speculated that rate cuts are more probable in May. “My guess is that they are more likely to do it in May,” he said. “I think March is a bit early, especially if you look at recent comments from several policymakers. March is not excluded, but it will imply some significant deterioration of the labor market, which I don’t expect right now.”
Contrasting with the U.S., Barraud said he sees the Eurozone’s economic situation differently. He believes the European Central Bank (ECB) will continue to fight inflation for a longer period than the U.S. This scenario, he suggested, could create an arbitrage opportunity for investors, with the ECB likely to cut rates after the Fed, potentially bolstering the euro against the USD.
In summary, Barraud’s forecast for the U.S. economy in 2024 is generally positive, with expectations of robust consumer spending and a slight increase in GDP. However, he warns of potential challenges such as reduced savings and geopolitical tensions. He also anticipates a shift in the Federal Reserve’s monetary policy later in the year, with rate cuts more likely in May. Overall, Barraud’s insights provide valuable information for investors and businesses planning for the year ahead.
