Stock Market Value Vs. GDP

GDP measures economic growth.

The stock market and gross domestic product (GDP) measure two separate values. The stock market is a measure of how investors value individual companies based on supply and demand while GDP gauges economic growth and contraction. Nonetheless, investors should care about both.

Identification

GDP is the broadest measure of economic activity and represents all sectors of the U.S. economy, according to Barron's. GDP affects stock market performance in that investors rely on the indicator as a barometer for upcoming corporate profits.

Features

Stock market trading represents multiple sectors across corporate America and globally, including technology, finance, media and health care. The major components of GDP are personal consumption and spending, investments, exports and the government, according to "Barron's."

Signficance

GDP is considered the most comprehensive economic scorecard, according to "Barron's." The stock market affects national economies. If economic perception is negative, investors may cut back on personal spending and buying stocks, which can interfere with a company's growth plans.

Timing

The stock market trades Monday through Friday between 9:30 a.m. ET and 4 p.m. ET. GDP is reported on a quarterly basis and is released by the Bureau of Economic Analysis and the U.S. Department of Commerce.

Recession

After four straight quarters of declines in GDP, economic contraction was reversed when GDP began rising again in the third quarter of 2009, according to "The Wall Street Journal." The reversal indicated the end of a recession in the U.S. economy.

References

• How Washington Can Create Jobs
• Barron's