Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
Components of GDP:
- Consumer Spending – When everyday people by goods and services such as bread and haircuts. Consumer spending accounts for mor than two thirds of the US GDP.
- Government Spending – When government entities spend money on equipment, infrastructure, and payroll.
- Private domestic Investment or Capital Expenditures (CAPEX) – When businesses purchase equipment and expand infrastructure. This spending has the long-term goal of increasing employment and production capacity of the US.
- Net Exports – Goods and services that we export, less the imports from other countries.
We believe that economic growth (GDP) combined with inflation are the two most consequential factors for understanding the economy and markets.