LTKM Berhad / Najwan Hafiz Azhan ... [et al.]

The Growth Domestic Product or better known as GDP is a barometer used to measure the total value of goods produced and services provided. Based on the line graph above that shows GDP growth rate, the American GDP growth rate decreased from 1.6% to 0.7% in early 2016 to May and increased up to 2.1% end of the year. From January 2017, the GDP growth rate starts to increase from 2.1% up to 2.7% in the year. In early 2018, the growth rate increased from 2.8% to 3.2% and decreased to 2.6% at the end of the year. In the beginning this shows a good indication towards the country’s GDP growth. But it started to experience a slight downfall in 2018. GDP growth has a positive relationship with the stock market. For investors, they might find it as an attraction to invest in the country and for other businesses as it provides good economic health. With a healthy economy due to stable GDP growth rate, this indicates higher amount of earnings for companies operating in the mentioned country. As we know, higher earnings will equal to higher earnings per share which will contribute to higher stock prices. In other words, these companies benefit in the stock market by financing through shares. In an alternate scenario, a GDP growth rate that is too high may lead to inflation and this is not favourable for any countries. Though America experienced optimal GDP growth rate, by the end of 2018 they experienced a slight economic downfall that might continue in the future based on the graph.