Market reaction to GDP release events

Key takeaways:

• The market's performance is statistically significantly better than the long-term average daily returns, regardless of whether GDP changes are negative or positive. Dividing the events into positive and negative surprise groups shows the same picture. The Russell 1000® Index performed better than on average trading days
• Size performs better than average on these dates, while value underperforms. This size outperformance and value underperformance are more pronounced on positive GDP release dates compared to negative ones
• The market seems to be more in tune with GDPNow, the nowcasting index from the Atlanta Fed, than with forecasters’ polls
• Dividing the market effect into pre-QE and post-QE samples indicates that this phenomenon can be attributed to the Fed’s aggressive QE policy. Positive news led to an increase in share prices, and negative news leads to expectations for QE, which is positive for markets

Points of differentiation:

• Analysing the performance of the Russell 1000 Index and pure factor indices on GDP release dates
• Dividing the performance into pre- and post-GFC (Global Financial Crisis) periods
• Comparing nowcasting, polls and the actual release figures

What does our research mean for investors?

Our research provides valuable insights into the markets’ behaviour on and around GDP release dates, in context of the overall market and factor returns.