Economic Indicators & SPY

This project investigated the statistical and predictive relationship between key US economic indicators (Unemployment Rate, 10Y-2Y Yield Spread, Fed Funds Rate, CPI Inflation) and monthly SPY returns from 2000 to 2025. Using lagged data, the team performed univariate and multivariate linear regressions, rolling window analysis, and Granger Causality tests. While the regression models generally showed weak explanatory power and statistical significance, partly due to multicollinearity, the Granger tests suggested potential predictive value from lagged Fed Funds Rate and CPI Inflation data. The analysis highlighted the complexity of directly linking these macroeconomic indicators to market performance.