Christophe Barrault predicts that US growth will accelerate after the election. His predictions take into account election results, control of Congress, and the impact on the economy. His methodology uses economic data, backtesting, and polling markets to make accurate predictions.
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No one can predict the future with certainty. But when it comes to economic forecasting, Christophe Barrault has an astonishing track record.
Bloomberg has named the chief economist and strategist at Market Securities Monaco the top U.S. forecaster every year but once since 2012. In the quarterly ranking, Mr. Barrow secured the top spot again in the third quarter of 2024.
He now has his sights set on the US election, with its high stakes and far-reaching economic potential. This is a close race between two very different candidates who will produce different policy outcomes. Perhaps an even bigger question than who the next president will be is how much power they will wield. No matter how small or grand it may seem, it is difficult to pass policies without a majority in Congress.
Barrow said in an interview that he expects U.S. growth to accelerate regardless of who is elected once the results come out. That’s because uncertainty threatens growth as companies halt major capital spending and hiring decisions. In addition, a number of adverse events such as trade union strikes and weather conditions such as hurricanes have put a damper on the situation.
Overall, U.S. GDP growth will remain stronger than consensus expectations, he said. This means that the expected rate of 2.6% in 2024 becomes 2.7%, and the consensus rate of 1.8% in 2025 approaches 2.1%.
But growth could be different depending on how Washington is carved out next year. Here’s how:
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Mr. Barrow’s election predictions – and his most likely outcome
In Scenario 1, Vice President Kamala Harris wins with a divided Congress, but no major changes are expected on the economic front. Therefore, expect the status quo to remain the same, he said.
In Scenario 2, former President Donald Trump wins, but Congress is divided. That would limit his ability to cut taxes on businesses and households. Barrow is therefore likely to focus on foreign policy, which means any measures related to trade restrictions or tariffs could be implemented sooner than expected, he said. The results will have a negative impact on global growth. In the short term, it will be neutral to US GDP. But in the long run, countries could retaliate, potentially backfiring and slowing the U.S. economy.
The third scenario is a landslide Republican victory for President Trump, which Barrow believes is the most likely outcome. He predicts Republicans will control the Senate. It is the House of Representatives that could be completely thrown out.
If Trump wins a majority, he will be able to cut taxes on businesses and households. It is also possible that he will focus more on domestic policy than foreign policy. He said it would have a positive impact on U.S. economic growth in the short term, adding 2.1 to 2.3 percent to GDP in 2025.
But there is a bigger problem. Mr. Barrow’s prominent clients, including big banks, hedge funds and pension funds, are increasingly asking him about the trajectory of the U.S. budget deficit. Those concerns center on how much the budget deficit will widen if the U.S. runs into a revenue shortfall if Trump is elected and implements tax cuts, and what impact that could have over the next 10 years. The question is, is there one?
To that end, he has several modeled predictions. If Trump wins, he expects the 10-year Treasury yield to rise sharply to at least 4.5%, based on current yields (around 4.23%). If he fails to win a majority in Congress, yields could rise another 15 basis points to 4.35% over the long term, again based on current yields. If the Republicans win a landslide victory, the rate would rise gradually to 5% after that as investors seek higher risk premiums. This is especially true if we cut immigration in a healthy labor market and create further inflation.
The last time the 10-year Treasury yield traded at 5% was a year ago and before that in 2007.
He said if Harris wins the Dividend Congress, yields could fall even lower than they currently are. That’s because the market has already priced in a Republican victory. So, firstly, it will be revised downwards, he added.
But even given his track record, why are Barrow’s predictions so confident?
His secret sauce is not his personal opinion or high-level perspective. When I asked him “why” he expected something to change, he laughed and said it was the model’s output.
Similar to quantitative traders, Barrow’s calculations are built on a three-step methodology that collects the latest and best economic, financial, and satellite data, backtests to determine key signals, and then , merge inputs from additional models to challenge predictions, reduce risk, and tighten outputs. This election forecast involves monitoring multiple voting markets with the highest number of users to assess election results.
