S&P500 More Impacted by Fed Hikes Than GDP

Apollo Chief Economist

The goods sector of the US economy (housing, autos, capex spending, etc.) is more sensitive to interest rates, and Fed hikes are having a more negative effect on the S&P500 than on GDP because the goods sector makes up a much smaller share of GDP, see chart below. In addition, the service sector which is most vulnerable to higher interest rates is tech, and the tech sector has also responded very negatively to Fed hikes. The bottom line is that it is not surprising that Fed hikes have had a more negative effect on the stock market than on GDP.

First chart shows that goods/manufacturing industries make up nearly two-thirds of the S&P500. The second chart shows that the services sector makes up the lion's share of US employment.
Source: BLS, S&P, Bloomberg, Haver Analytics, Apollo Chief Economist. Note: S&P 500 services industries include Software, Interactive Media & Services, IT Services, Health Care Providers & Services Indus, Internet & Catalog Retail, Specialty Retail, Hotels Restaurants & Leisure, Life Sciences Tools& Services, Diversified Financial Services, Diversified Telecom Services, Multiline Retail, Commercial Services & Supplies, Professional Services, Wireless Telecommunication Services, Diversified Consumer Services.

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