Analyzing the Impact of Macroeconomic Indicators on Stock Market Performance in the USA

This study analyzes the impact of macroeconomic indicators, such as GDP, Consumer Choice Index (CCI), Inflation, Interest Rates, Retail Sales and Industrial production on the stock market performance in the USA. The chosen indices are DOW 30, NASDAQ, NYSE Composite, Russell 2000, S&P 500, S&P MidCap 400, and Wilshire 5000, the analyzed timeframe is from May 2009 until May 2024. This research used Autoregressive Distributed Lag (ARDL) Model, the findings reveal significant impacts of consumer confidence and interest rates across all indices, indicating their crucial role in market performance. Also, this work highlighted difference in sensitivities of major US stock market indices to the changes of different macroeconomic variables with small-cap and large-cap companies having different behaviour. This study examined effect of the COVID-19 pandemic on the performance of the stock market performance and even though the coefficients of the pandemic dummy are not significant when compared to other variables, the market sensitivity was increased that led to the higher levels of risk-aversion. These insights are important for investors, as understanding and anticipating stock market movement due to changes in macroeconomic indicators will help in forming rational and accurate expectations and also will lead to a better and more informed investment decisions. Policymakers’ decisions should be made with the understanding of the investor sentiment and possible influence on the stock market.