Learn the stock market › The economy and the stock market › Lesson 4 of 6
What is GDP?
What GDP measures
GDP adds up what is produced: cars, haircuts, software, health care. The same total can be counted three ways that should agree: what is produced, what is bought (consumer spending, investment, government spending and exports minus imports), and the incomes it creates.
When people say the economy is growing, they nearly always mean real GDP is rising. BEA publishes it every quarter, first as an advance estimate and later revised as more data come in. A quarter's growth is given at an annual rate: the pace for a whole year if the quarter's growth continued.
US GDP
| Year | Real GDP growth |
|---|---|
| 2016 | +1.8% |
| 2017 | +2.5% |
| 2018 | +3.0% |
| 2019 | +2.6% |
| 2020 | −2.1% |
| 2021 | +6.3% |
| 2022 | +2.4% |
| 2023 | +2.9% |
| 2024 | +3.0% |
| 2025 | +2.3% |
The table shows real growth per year. Growth was +3.4% at an annual rate in the third quarter of 2026, after +2.2% in the second quarter of 2026.
Does the stock market follow GDP?
Not year by year. BEA has real growth for every year since 1930. Here are the years GDP shrank, with the S&P 500 that year and the year after.
| Year | Real GDP | S&P 500 that year | S&P 500 the year after |
|---|---|---|---|
| 1930 | −8.5% | −28% | −47% |
| 1931 | −6.4% | −47% | −15% |
| 1932 | −12.9% | −15% | +44% |
| 1933 | −1.2% | +44% | −5% |
| 1938 | −3.3% | +25% | −5% |
| 1945 | −1.0% | +31% | −12% |
| 1946 | −11.6% | −12% | 0% |
| 1947 | −1.1% | 0% | −1% |
| 1949 | −0.6% | +10% | +22% |
| 1954 | −0.6% | +45% | +26% |
| 1958 | −0.7% | +38% | +8% |
| 1974 | −0.5% | −30% | +32% |
| 1975 | −0.2% | +32% | +19% |
| 1980 | −0.3% | +26% | −10% |
| 1982 | −1.8% | +15% | +17% |
| 1991 | −0.1% | +26% | +4% |
| 2009 | −2.6% | +23% | +13% |
| 2020 | −2.1% | +16% | +27% |
The index rose in 12 of the 18 years GDP shrank, or 67%. In the 78 years GDP grew, it rose 53 times, or 68%. The difference is small.
There are two reasons. Stock prices move on expectations, so they often turn before the economy does, as in the recessions. And listed companies are not the whole economy: many sell around the world, and much of GDP comes from government and small businesses that are not on the stock market.
Test yourself
GDP shrinks one year. What does history say about stocks that year?
The index excludes dividends and runs from the last close of the December before.
Sources
- U.S. Bureau of Economic Analysis, Gross Domestic Product, real GDP, percent change, read Nov 5, 2026.