The housing market is the latest economic indicator to light up the charts?
One of the key leading indicators of future economic activity—construction of new homes and apartments—blew away expectations this week, with the pace of construction at its highest level in more than a year.1
In May, the number of actual housing starts exceeded predicted starts by a whopping 21.8 percentage points—the biggest surprise to the upside in more than nine years, as seen in the chart. A surge in the construction of new houses likely means strong future demand for furniture, appliances, and many other things that fill those homes.
It’s just the latest round of unexpected good news for the economy. Consider that the US Citi Economic Surprise Index has been above zero 97% of the time since the end of January—meaning economic data has consistently come in better than anticipated.
Other significant upside surprises of late include job creation and retail sales. These and similar developments have been key drivers of the market’s continued rise in recent weeks, effectively overpowering the “higher for longer” interest rate expectations that had dragged returns.
Once again, as we’ve recently pointed out, we believe the case for investing broadly in equities remains strong regardless of which stage of your investment lifecycle.
Disclosures
This commentary is written by Horizon Investments’ asset management team.
Past performance is not indicative of future results.
1 Source: Reuters, 06/20/23, New US Home Construction Surges by Most in Three Decades in May
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