Kensho Stats

How to trade Friday's GDP release

Gold bars
Akos Stiller | Bloomberg | Getty Images

On Friday, markets will get a second reading of economic growth last quarter, and if history is any guide, there could be a trade to be made.

The first reading of second-quarter GDP was a tepid 1.2 percent as companies held back on investing amid a bumpy global economic environment. And the figures released tomorrow aren't projected to come in much better, according to economists.

So how can investors profit from this trend?

CNBC PRO ran a study to find the areas of the market that often perform best when U.S. GDP is subdued between 1 and 2 percent. The analysis was conducted with data from Kensho, a quantitative tool used by hedge funds to spot historical trends and trading patterns.

Here's what we found:

Since 2000, there have been nine such periods, covering about 1,200 trading days.

Conventional wisdom suggests that when economic growth is muted, consumers tend to pull back on purchases and investors typically favor less risk.

History backs up that sentiment. The best performers during these periods have been defensive stocks. The consumer staples, industrials and health-care sectors, for example, have all outperformed the S&P 500 when the economy was barely growing.


Gold has been another strong performer, while the dollar index has been a major laggard, losing more than 2 percent on average, according to data from Kensho.


Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.