Nicholas Colas, co-founder of DataTrek Research, is keeping an eye on three key indicators in the face of a possible recession, Barron’s reports. On indicator, the New York Fed’s Recession Probabilities model, puts the odds of a recession in the next 12 months at 34.8%, which, as Colas notes, is close to where the same model sat in September 2007, when it was at 34.6%.
“The bottom line is that this indicator is flashing a ‘Sell’ signal for US stocks,” Colas wrote. He added that when the model hit 30% in 1990, 2001, and 2007, the S&P 500 index was lower a year after. “This time around it hit 30% at the end of June 2019 and stocks saw their all time highs in July.”
In BuildFax’s September Housing Health Report, Jonathan Kanarek, COO, BuildFax notes that the housing market is beating expectations, even with the threat of recession.
“The housing market is beating expectations this month both through the lens of construction activity and home sales, which posted notable growth in September,” Kanrek said. “Single-family housing authorizations and existing home sales have risen to highs not seen in a year.”
“Amidst concerns of a recession, it’s promising to see the housing market responding to the impact of mortgage rate decreases and other positive moves in the market,” he added. “If housing continues showing the promise of growth, or even a leveling off, this activity has the potential to stimulate the larger economy.”
Housing remains a bright spot in economic growth, according to the latest commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. Risks to the ESR Group’s forecast remain biased to the downside, with trade tensions between the U.S. and China continuing to pose the greatest threat to growth, but housing is expected to be a source of strength in the near term. While the ESR Group had expected housing to contribute positively to third quarter GDP growth, stronger-than-expected recent data led the Group to revise substantially upward its projection for residential fixed investment. The Group’s updated forecast of 4.2% annualized is 3.3 percentage points higher than last month’s projection. According to Fannie Mae, this would represent the first time residential fixed investment has been positive since 2017.