Assessing the Impact of Macroeconomic Variables on the Performance of the U.S. Stock Market

Abstract

Using S&P 500 and Dow Jones Industrial Average indices as the benchmark to measure the U.S. stock market, the study focused on assessing the effects macroeconomic variables on the performance of stock market. Using multiple regression model, the study found a negative correlation of unemployment rate and GDP growth rate on the stock market performance but established a direct relation with inflation and the stock market performance. The study concluded that, the negative relationship with GDP growth rate was because the U.S. stock market tracks its performance from the global technology industry rather than economic growth whiles unemployment rate was due to the fact that, depending on the economic scenario, this variable affects the stock market differently. However, the direct relationship between the inflation because a high inflation rate reduces the purchasing power which affects the number of stocks bought and the income generated from the stock market.

Keywords: Stock Market, Economic Growth, Macroeconomic Indicator, United States, Developed Country

DOI: 10.7176/RJFA/11-14-08

Publication date:July 31^st 2020