Glossary · Macro · Beginner-friendly
GDP
In plain English
GDP measures how much an economy produces. Rising GDP usually means growth; falling GDP can signal trouble - but stock markets often move before the official numbers.
Everyday analogy: A country’s report card for economic output.
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Why it matters
GDP is the broad growth scoreboard. Markets usually care more about the trend and policy response than one print.
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What it captures
GDP aggregates consumption, investment, government spending, and net exports. Real GDP adjusts for inflation.
Markets look ahead
Equities often move on expected future GDP and policy responses more than on the lagging official print alone.
Simple examples
Soft landing narrative
Growth cools just enough to ease inflation without a deep recession - a goldilocks story that can support risk assets.
Goldilocks narrative
Growth cools enough to ease inflation fears without a collapse - risk assets can rally on “soft landing” hopes.
Easy mistakes to avoid
- Trading GDP as if equities were not already forward-looking
- Ignoring composition (consumption vs investment vs net exports)
- Equating a soft GDP print with an automatic equity crash
Remember: GDP is a rearview mirror - markets price the next chapter.