A closely watched survey of homebuilders showed that the construction outlook for single family homes in the U.S. weakened to its lowest level since 2016. This weaker data point adds another brick to the wall of worry for economic and market participants concerned about the health of the U.S. economy. More importantly, the data is an added headwind to market sentiment.
As we pointed out last week, a build up of negative geopolitical developments and a lack of positive economic or corporate earnings catalysts are likely to weigh on market sentiment and limit any sustained rallies. Indeed, this was evidenced in today’s tech-related selloff which came on the heels of a negative production news from a well known i-device maker.
In terms of housing market weakness and growing concerns of a recession, we think that today’s data release is consistent with a broader story of a generally weaker housing market and is a coincidental indicator of weakening economic conditions. In other words, the weaker data confirms our expectations of weaker economic growth, we don’t believe that a recession is yet imminent.