It is always astonishing that the stock markets remain at a high level despite the negative influences of Donald Trump and his trade tariffs. There are reasons for that. The mood within the US economy is excellent. Workers in particular are benefiting from the strong economic growth. Even first-time unemployment claims fell to their lowest level since 1969. The unemployment rate is at a low 3.9%. The fact that the unemployment rate is low also benefits wages. Companies are willing to pay their workers higher wages. As a result, there will be higher consumer demand in the country in the future. You could say: It is going!
The key rate hikes are not yet having an effect
The facts clearly speak for a strong US economy. The Fed, of course, also sees this. The Fed therefore has all the arguments on its side to raise key interest rates a little further. The next meeting will be on September 25th and it is expected that the base rate will be raised by 25 basis points. After all, the US Federal Reserve is still able to act, which cannot be said of the ECB. After the rate hike, Fed chief Jerome Powell will probably have to listen to Donald Trump's criticism. It is no secret that Trump would like to suspend the rate hike cycle. The effect of the combination of interest rate hikes and trade war is unpredictable. Even Trump should know that.
Braking the US economy?
The US remains the strongest economic nation in the world for the time being. But it is difficult to make future forecasts. Too many influencing factors affect the economy. Rate hikes are basically a measure so as not to overheat the economy. Interest rates should only slow economic growth and not stop it. This raises the question of how violent the effects of trade tariffs will be in the future. Any kind of duty complicates free trade. Foreign products automatically become more expensive and US citizens have to pay for them. It acts as an artificial brake on the domestic economy.
The worst case
Customs duties and high key interest rates are capable of generating a dramatic economic downturn. It depends a little bit on how many states Donald Trump wants to confront. An escalation in tariffs could have a dramatic impact. And faster than US President thinks, stock markets usually run ahead of the economy. The first thing the marketers will recognize is the economic downturn when the long-term uptrend breaks.
A look at the structure of the US stock market With the Advance Decline Line (ADL) the difference between the rising and falling shares is calculated. Basically, every movement of the index should be confirmed by the indicator. If there is no confirmation, this means that the majority of the shares are behaving differently.
Image: Daily chart of the Nasdaq100 index with the Advance Decline Line (100 shares)
Technology values remain the driving force
There are many industrial companies in the Nasdaq100 index. They are currently the driving force of the global stock markets. The stocks of industrial companies show relative price strength to all other industries. An upward trend continues when the majority of stocks are in increasing movement. The upper comparison between the course and the ADL contains only positive characteristics. A moving average of 100 periods is inserted in both courses. Comparing the price trend with the GDL reveals the strength of the market. Most stocks within the Nasdaq 100 are in an upward trend. Usually the trend feeds the trend. That means, even if there will be negative influences on the stock market in the future, the trend will keep the stock market in a bullish direction in the coming months.
Buy Coca-Cola stock?
In den In recent years, the Coca-Cola share was almost a boring security. It went up and down a few percent. In total, there was little value growth. One reason for the "perceived" standstill was the lack of ideas in the management. As a result, there was a restart in December 2016. The new CEO is now James Quincey. With him at the top, Coca-Cola gains new appeal. The first heralds are already showing. He consistently restructures the company.
New takeovers have been implemented
His latest coup is the takeover of the British coffee shop provider Costa. Coca-Cola purchased a total of 4,000 Costa stores worldwide for $ 5.1 billion. Compared to Starbucks with 28,000 shops, Costa is still a small number. But Costa is making big strides as Starbucks moves to its growth limit. In Germany, for example, Starbucks was never able to assert itself convincingly. Branches had to be closed again and again because they were unprofitable. Starbucks pulled a line two years ago and sold the German branches to a Polish company. In comparison, Costa has grown explosively. In 2011, Costa had sales of $ 520 million. But in 2017, it was $ 1.6 billion. Costa is a highly profitable coffee chain that is likely to generate $ 350 million in profit in 2018.
Sugar drinks are no longer drawing
A trend is becoming increasingly apparent at Coca-Cola. The core business of the Coca-Cola sugar drink is becoming less important within the Group. Coca-Cola has a sugar image that is increasingly hindering. The new strategic direction is also evident in the participation in the sports drink manufacturer "Bodyarmor". Former basketball superstar Kobe Bryant is the main advertising character of the drink. The basketball star owns about a third of the company. With Bodyarmor, Coca-Cola is in full confrontation with the market leader "Gatorate" from Pepsi. Coca-Cola has a portfolio of 500 products and wants to be more innovative and technological in the future in order to recognize global trends faster.
Overview of Coca-Cola Financial DataYears201420152016201720182019Revenues460034370041379350163184133001Previous to St from Coca-Cola look solid. You could say they are a reflection of the stock price. However, if the new acquisitions and the changed corporate strategy are effective, then even the forecast estimates in the table above would have to be exceeded. Especially the year 2019 should be an expression of the improved strategic orientation.
Technical Initial situation of the Coca-Cola share
Image: Weekly chart of the Coca-Cola share
A new era starting in 2017
From a long-term perspective, the share continues to move an upward trend. Visually, however, it looks more like a volatile sideways market. However, a new era could begin with the new CEO. This means that the chart will only be decisive from 2017 onwards. The low volatility increase in 2017 is an expression of the prudence of the shareholders. Such a price trend is often a sign that the stock marketers believe in the skills of the new company management. The low volatility in particular indicates calm, as there was only a stronger sales movement in 2018. It mainly affects February. However, the price losses were not specifically attributable to Coca-Cola. Rather, Donald Trump's election created a setback within the entire US stock market. There is also my medium-term price channel for the long-term upward trend. The drawn trend fork shows the way. The fork could bind the course permanently until 2019. If, contrary to expectations, the price breaks the bottom line of the trend fork, market participants will be in an alarmed mood and will probably trigger sell orders. A stop loss should therefore be urgently used for the scheduled trade.
Coca-Cola: WKN: 850663 or US symbol KO Long signal: Price target: $ 53 Interim Target: $ 48.50 Stop Loss: $ 42.50
Trading Implementation: If you want to benefit from the short-term stock recommendation, you can buy the stock directly buy or work with derivatives. Note that derivatives include leverage and therefore increase the profit and loss potential. In extreme cases, a total loss is even possible.
Stop loss: The stop loss is initially set as an initial stop and has the function of a maximum loss limitation.
Price target: The price target is the exit point for the forecast market movement.
Interim target: When the intermediate target is reached, the position is in profit. At this point we take a partial profit and we sell 50% of our position. At the same time, the stop loss is adjusted to the personal entry price. This enables us to close our position without loss, even if the market later turns against us.