US homebuilding rebounds, potential early-cycle economic shift
Data on housing starts rose to their highest level in five months, suggesting improving momentum heading into the year.
CMC Markets Poland
The residential construction sector has been largely stagnant over recent years. However, recent technical signals, both in relative and absolute terms, point to the potential start of a new growth phase. Notably, price action on charts is beginning to align with improving fundamental data, which may reinforce this view.
Government figures showed that housing starts increased by 6.2 per cent in December, exceeding expectations and reaching a five-month high. Despite this improvement, developers continue to face structural challenges. These include supply imbalances following a period of overexpansion when mortgage rates began to rise. As a result, companies are attempting to balance sales incentives with the need to preserve margins.
Analysis as of 20 February 2026.
Despite a rebound at the start of the year, the iShares US Home Construction exchange-traded fund (ETF) finished January at broadly the same level as two years earlier. Since then, the ETF has risen sufficiently to break through several key resistance levels, suggesting that near-term momentum has shifted in favour of buyers.
Construction companies have historically been viewed as early-cycle leaders. The sector often moves ahead of the broader equity market, making it a useful indicator of potential turning points in the economic cycle.
A recovery in the US housing market may therefore prompt investors to reassess the residential construction sector. Valuations appear modest relative to expected earnings. Even if regional demand remains uneven, the longer-term structural backdrop remains characterised by housing undersupply.
One way to gain diversified exposure to the sector is through the iShares US Home Construction ETF. The fund holds shares in 46 companies linked to residential construction, including 18 homebuilders and related businesses such as Home Depot.
Summary of the session in Europe and the United States
European equity indices remain at elevated levels, although recent sessions have shown some consolidation. Expectations of even a modest correction have so far not materialised. In the latest session, leading European indices declined between 0.55 per cent and 1.22 per cent.
On Wall Street, optimism has been tested following recent weakness in technology stocks. Major indices remain close to recent highs, but stronger employment data and persistent inflation have tempered expectations of imminent interest rate cuts by the Federal Reserve. The Dow Jones fell 0.54 per cent, the S&P 500 declined 0.28 per cent and the Nasdaq 100 closed 0.31 per cent lower.
Asia-Pacific overview
Trading across Asia-Pacific markets began the week with mixed sentiment. Some exchanges were closed for public holidays, while others followed Wall Street lower. Japan’s Nikkei 225 declined 1.12 per cent and Australia’s S&P/ASX 200 eased 0.05 per cent. Hong Kong fell 0.64 per cent, while India’s Sensex rose 0.51 per cent and Singapore gained 0.34 per cent. The broader Asia Dow index declined 0.64 per cent.
Currency markets
Major currency pairs remain relatively stable.
GBP/USD – trading around 1.27
EUR/GBP – trading near 0.85
USD/JPY – trading around 150
EUR/USD – trading near 1.08
The Week Ahead: Nvidia; Tokyo, Germany CPI; US PPI
Welcome to Michael Kramer’s pick of the key market events to look out for in the week beginning Monday 23 February.
