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Retail Sales Growth and Stock Market Returns

| | Posted in: Economic Indicators

Financial media each month report retail sales, the largest component of U.S. Gross Domestic Product, as a harbinger of stock market behavior. Do retail sales reliably predict U.S. stock market behavior? To investigate, we relate monthly change in retail sales to monthly S&P 500 Index return. We consider both seasonally adjusted (SA) and non-seasonally adjusted (NSA) retail sales series, as compiled by the the U.S. Census Bureau. Using monthly levels of retail sales during January 1992 through April 2020 and of the S&P 500 Index during January 1992 through May 2020, we find that:

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