Some economic reports are more important to an investor’s portfolio than others. Gross Domestic Product (GDP) is one of the most valuable reports because it provides an overall scorecard of how the country is doing economically.
GDP measures the market value of all the goods and services produced in the economy over a given period of time. It is reported quarterly and is presented on an annualized percent basis. As an investor, it is important to understand the context behind the GDP number. GDP growth is typically a byproduct of an expanding economy. A declining GDP is showing that the rate of economic growth is slowing. Two consecutive quarters of negative GDP indicates that the economy is in a recession.
That brings up an additional point when considering the value of these reports. Some of these are very industry focused (such as retail and housing). Every investor has to consider the data provided by an economic report based on the risk to their portfolio.
For example, if you are invested in financial services stocks, you’ll want to pay attention to the direction of interest rates as those will be among the stock most affected by interest rate changes. But you’ll also want to pay attention to housing data because that will affect the mortgage market.
If you are investing in a commodity such as crude oil, you will want to pay particular attention to crude oil prices and oil and gas production numbers.
If you’re invested in countries that do business internationally, you’ll want to track exports to see how well their products will be selling overseas.