The impact of macroeconomic surprises through time is significant

There has been significant focus on macroeconomic surprises, but much of this work has been over very short intervals. Investors are often not able to reach to these short-term moves and are more interested in the reaction of surprises over longer time periods. 

The paper "Caught by Surprise: how markets respond to macroeconomic news" by Baltussen and Seobhag looks at the time series of surprises and finds that economic surprises related to growth with a strong positive relationship with risky assets and a negative relationship with safer assets. If we have positive growth surprises, risky assets will increase in value. Surprises persist and these surprises tell us something about the global business cycle. This economic growth impact also applies to bond over a longer horizon. If you believe in the idea that macro trends lead to price trends, then this is a good road map on how to exploit.  Clearly, knowing something about economic growth will tell us something about future expected cash flows. 

This impact will differ between good and bad news. Positive surprises will be more important when an economy and asset prices are coming out of period of bad performance. During contractions stock markets respond negatively to rising unemployment but will show a positive response during an expansion period.

This relationship is not found with inflation surprise data.