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.