In the preceding chapters, we wrangled change in GDP data from FRED and created a dataframe object to hold that data. Here is the object for a quick refresher.
change_gdp.head() title date percent_change
193 Change in GDP 2024-04-01 0.030
192 Change in GDP 2024-01-01 0.014
191 Change in GDP 2023-10-01 0.034
190 Change in GDP 2023-07-01 0.049
189 Change in GDP 2023-04-01 0.021We also created data objects to hold our monthly and quarterly market returns.
sp_500_monthly.head() Date prior_close last_close ret
0 1980-01-01 4.508338 4.876174 0.081590
1 1980-02-01 4.876174 4.895036 0.003868
2 1980-03-01 4.895036 4.415787 -0.097905
3 1980-04-01 4.415787 4.606669 0.043227
4 1980-05-01 4.606669 4.861180 0.055248Now let’s put them together and explore how they might relate to one another.
Imagine we were asked to hypothesize on the relationship between GDP growth in a quarter and market returns in that quarter? It makes sense that a growing economy leads to or is correlated with a growing stock market and we might expect a positive relationship between these two variables.
Here’s a quick look at whether market returns have been positive or negative during various buckets of GDP growth. No code yet, but we will learn how to build this chart.
