Is Trump on Track? Economists Say Not Yet

The Trump administration has pledged to increase GDP growth to 4% per annum. This he plans to do through massive infrastructure spending, deregulation of corporate industry, and sweeping tax cuts. Unfortunately, the White House tax plan does not offer any details about where the government will make up for the shortfall if corporate tax is reduced from 35% to 15%. The problem for the US economy is evident in labour shortages and weak productivity. According to economists, the expected growth rate is around 2% for 2017.

Q1 2017 marks the worst performance of the US economy in 3 years. This is due in part to weakness in consumer expenditure. Fortunately, analysts expect growth in wages and an uptick in business investment to boost GDP performance as the year progresses. It also puts a damper on Trump’s ambitious goal of 3% growth. Businesses are spending less on their inventories, and the US government has reduced defense spending, leading to weakness in GDP growth.

Analysts are quick to point out that the poor figures we see in Q1 2017 growth are not reflective of the health of the US economy. For starters, the US economy is nearing full employment, and we are also seeing the strongest level of business investment (on equipment) since Q3 2015. Wage growth continues to increase, but government expenditure on defense decreased by 4% (the largest decrease since Q4 2014). Increasing oil prices have helped the US economy, since there was a 9.1% increase in business spending in Q1 2017 the biggest expenditure came from exploration which is up 449%.

Trading opportunity #1 – Nasdaq holds above 6000 level

The Nasdaq 100 index is currently trading at 6,047.61, down 0.02% or 1.33 points. The year to date return on the tech-heavy index is 12.34%, but the 1-year return is an impressive 28.26%. The Nasdaq is currently operating near its 52-week high of 6,074.04. On Friday, 28 April 2017, there were mixed trading signals on US bourses. The Nasdaq retreated, after hitting an intraday peak on Friday. Part of the reason we saw a lacklustre performance on the Nasdaq, S&P 500 index, and the Dow Jones was Trump’s assertion that a major conflict with North Korea may be on the cards.

While Trump favours a diplomatic solution, he alluded to the difficulty in peacefully resolving issues with the belligerent North Koreans. The other reason for the risk-off approach to equities was the slowdown in US GDP growth in Q1 2017. A growth of just 0.7% was achieved, much less than the 2.1% appreciation that took place in Q4 2016. For binary options traders, the slowdown in US GDP growth is important. It indicates that put options on the Nasdaq are sensible. Weaker oil prices are also driving down the value of bourses across the US. WTI crude oil traded at $49.33 per barrel. This is the lowest level in over one month (the previous low was $48.20 on March 28, 2017).

Trading Opportunity #2 – McDonald’s Trading Strongly

The current price of McDonald’s Stock (MCD) is $139.93 per share. Viewed from a 52-week low perspective, MCD traded at $110.33 per share, and $142.79 per share on the high-end. The stock has an EPS of $5.66 and an annualized dividend of $3.76. The 2017 performance of MCD stock has been phenomenal, and binary options traders with a short-term bullish perspective have done incredibly well. The consensus recommendation for MCD stock according to Zacks Investment Research is a buy. This is evident from the quarterly earnings surprise for the fiscal quarter ending in March 2017.

The earnings per share (EPS) of $1.47 bested forecasts of $1.32 by 11.36%. Since June 2016, there have been positive earnings surprises for MCD, and this bullish sentiment continues unabated. The 12-month price target range is $146 per share and over the last 4 weeks, momentum has shifted to the bullish side by a strong margin. In terms of earnings growth this year, MCD is at 7.59%, while the industry average is around 6%. All the signs are clearly pointing to call options on MCD for binary option stock traders.

Trading Opportunity #3 – EUR/GBP Retreats 

The EUR/GBP pair has weakened heading into May 2017. The pair initially advanced slightly after the first leg of the French elections revealed an advantage for Macron over Le Pen. This calmed investor fears and traders went long on the EUR/GBP. However, the market is somewhat bearish heading into May 2017. The key technical level for traders to look for is 0.83. Any move beneath that will invariably lead to a long-term downtrend for the EUR/GBP pair. Traders are not necessarily looking to go long on the EUR/GBP, as tremendous volatility lays ahead. The EUR/GBP met with some resistance near the 200-day MA level and has tapered off since then.For binary options traders, there is little appetite for buying the EUR/GBP pair now.

Trading Opportunity #4 –Oil Prices Slipping

For the week ending Sunday, 30 April 2017 oil prices continue to slide. This was the second week of losses for West Texas intermediate crude oil, although the end of April losses were marginal compared to the previous week. There have been net put options on crude oil futures, resulting in ongoing weakness for the commodity. Crude oil prices are being affected by the EIA (Energy Information Administration) which reported a drop of 3.64 million barrels on April 26, 2017. This was preceded by a decline of 1.04 million barrels the week before that. Naturally, crude oil prices rally when inventory levels run down.

Following that report, the price of WTI crude oil temporarily breached $50 per barrel, but the pullback was dramatic. If past trends continue, we could see upside momentum within 2 weeks. Overall though, there is a net long position on WTI crude oil valued at approximately $20.41 billion, down substantially from Q1 2017, but up on figures reported throughout 2016. As a binary options trader, the trend is clearly bearish, short-term.