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Lessons from the GDP and the DNP - Macroeconomic Investing Strategies
What can you learn from looking at the GDP of the United States over the past few years? Does it tell us we are heading into a Bull or maybe a Bear market? GDP track record for growth over the past eight years is nothing to brag about. And what is the difference between GDP and DNP?
Recall that the Gross Domestic Product (GDP) is the total market value of goods and services produced within the borders of a country.
The GDP over the past eight years is something worth noting as an investor in the market. The following figures are for the first quarter over the past eight years straight.
As of 4/19/09 the figures were: estimate; -4.7 vs. actual; -6.1. As of 4/30/10 the figures were; estimate; 3.3 vs. actual; 3.2. As of 4/28/11; the figures were: estimate; 2.0 vs. actual; 1.8. As of 4/27/12 the figures were: estimate; 2.5 vs. actual; 2.2. As of 4/26/13 the figures were: estimate; 3.0 vs. actual; 2.5. As of 4/30/14 the figures were: estimate; 1.2 vs. actual; 0.1. As of 4/29/15 the figures were: estimate; 1.0 vs. actual; 0.2. As of 4/28/16 the figures were: estimate; 0.6 vs. actual; 0.5. The differences in order from 2009 to 2016 are: -1.4, -0.1, -0.2, -0.3, -0.5, -1.1, -0.8, -0.1.
The Gross National Product (GNP) is the total market value of goods and services produced by the residents of a country, even if they are living abroad. Thus, if an investor in the United States make money from an investment overseas that value would be included in the GNP but not in the GDP. The difference is important since more and more American companies are doing business internationally. But also note that the real difference in actual number is very small. For example, in the 4Qt 2012 the GDP was $15,851.2B, while the GNP was $16,054.2B for 3Qt 2012. As noted from the St. Louis Fed chart below.
In general, it is good to have a feel for the macroeconomics. Some other items may be determined from looking the GDP like Disposable Income as we discuss in another article. It appears, after reading this, that the numbers are low and that we tend to over estimate them over the past years. However, after reading this do you know if we are going into a Bull or Bear market? I'd have to say the answer is no. It does not really help one answer that specific question. The problem typically is that one really don't know if you are in a Bull or Bear market until it is to late to position your holdings to have an advantage. Thus, the key is to buys stocks that are out of favor in relation to the individual company or its sector. This approach is much better than trying to react to the overall market like everyone else. You can not follow the crowd if you want to obtain above-average gains. That is where we can help you.
At Port Wren Capital, LLC, we specialize in picking specific undervalued U.S. stocks using fundamental analysis developed by Benjamin Graham using a five step process. We have beaten the S&P500, DJIA and NASDAQ benchmarks since we started 5 years ago on our own investments. Discover the difference for yourself. To learn more contact us today.
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