‘You can’t forecast Trump,’ says award-winning forecaster

Investors, economists and policy makers have been far too optimistic that Donald Trump’s trade wars would be resolved without disrupting the global economy, says Christophe Barraud, chief economist and strategist at Market Securities, and the winner of MarketWatch’s Forecaster of the Month contest for May.

“A lot of people bet on a quick deal,” Barraud said in a phone interview from his office in Paris. But now it looks like the U.S. and China have hardened their stances, and Trump is threatening more tariffs against Mexico, Japan and Europe.

“It’s a big risk for the global economy” and national economies as well, he said. How big of a risk? It’s hard to say because “it’s very difficult to forecast Trump.”

Trump has threatened to upend decades of global trade harmonization at a time when global trade flows seem to be slowing anyway. Autos and semiconductors have led the growth in global trade, but both sectors are under heavy pressure because demand has weakened, he says.

Christophe Barraud, Market Securities

The tariffs and threats have inflicted significant damage. “There’s more pain ahead,” Barraud says.

Global trade declined from the fourth quarter to first quarter, and it remains vulnerable to further negative shocks. He expects global gross domestic product to grow 3.2% this year and 3.1% next, below consensus expectations that have already been lowered several times.

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For the U.S. economy, Barraud expects “growth will converge to its long-term potential rate of 1.8%, or even weaker,” he says. His current forecasts see GDP slowing from 3% in 2018 to 2.5% this year and 1.7% in 2020.

“Underlying growth is weaker than the headline” GDP, he says. Real final private demand grew just 1.3%, he notes.

A rate cut or two by the Fed before the end of the year “seems to a done deal,” he says.

The fading of fiscal stimulus will weigh on growth. Businesses are already pulling back on investments because of the uncertainty about tariffs and domestic demand. Consumers are holding up OK, but their confidence could be shaken as well, he warns.

The politics of impeachment, trade and the debt ceiling will intrude this year. Politics will cloud the outlook next year, when voters will be faced with a “binary choice” between Trump and a Democrat who will put forth very different ideas on economic policy, implying very different outcomes.

It was Barraud’s second victory in MarketWatch’s monthly contest, in which we compare the estimates of 46 forecasters against the reported results on 10 major indicators. Over the past 12 months, Barraud has earned more points in our contest than any of the other teams we track.

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He’s one of the top forecasters in the world. Bloomberg has ranked Barraud the No. 1 U.S. forecaster for seven years in a row, the top eurozone forecaster four years in a row, and the top China forecaster two years in a row. Now he’s scrambling to learn more about internal Mexican economics and politics.

Barraud’s forecast

Number as reported*

ISM manufacturing index



Nonfarm payrolls



Trade deficit

-$52.1 billion

-$50.0 billion

Retail sales



Industrial production



Consumer price index



Housing starts

1.224 million

1.235 million

Durable goods orders



Consumer confidence index



New home sales



*Subject to revision

In May, six of Barraud’s forecasts were among the 10 most accurate: Nonfarm payrolls, the ISM manufacturing index, the consumer confidence index, retail sales, housing starts, and industrial production.

The top five finishers in the May contest were also the top five forecasters over the past 12 months. In May, the runners-up were Joerg Angele of Raiffeisen International Bank, Ryan Sweet of Moody’s Analytics, Richard Moody of Regions Financial, and Jim O’Sullivan of High Frequency Economics, who has won our Forecaster of the Year award eight years in a row.

The MarketWatch median consensus published in our Economic Calendar includes the predictions of the 15 forecasters who’ve earned the most points in our contest over the past 12 months, plus the forecast of the most recent winner of the monthly contest. When they differed, the MarketWatch consensus was more accurate than the closely followed Bloomberg consensus 56% of the time in 2018.

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The economists in our consensus forecast are: Christophe Barraud of Market Securities, Jim O’Sullivan of High Frequency Economics, Joerg Angele of Raiffeisen Bank International, Ryan Sweet of Moody’s Analytics, Richard Moody of Regions Financial, Andrew Hollenhorst at Citigroup, Ian Shepherdson of Pantheon Macro, Ellen Zentner’s team at Morgan Stanley, David Kelly at J.P. Morgan Asset Management, Michael Feroli at J.P. Morgan Chase, Stephen Gallagher’s team at Societe Generale, Stephen Stanley at Amherst Pierpoint Securities, Seth Carpenter’s team at UBS, Avery Shenfeld’s team at CIBC, and Peter Morici of the University of Maryland.

View more information: https://www.marketwatch.com/story/you-cant-forecast-trump-says-award-winning-forecaster-2019-05-31

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