Dow Blazes While U.S. Housing Market Data Surge to Pre-Recession Levels

• The Dow sped toward a weekly gain of more than 500 points.
• A key U.S. housing market metric surged to its highest level since before the financial crisis.
• Recession hawks say the “next housing market crash” won’t involve mortgages at all.

The Dow capped a spectacular week with a final bounce on Friday, as U.S. homebuilding activity surged to its highest level since the housing market crash.

With Wall Street sentiment succumbing to “extreme greed” and more tax cuts potentially on the way, investors don’t appear worried that the growing asset bubble  is going to pop anytime soon.

Dow Burns Brighter as Stock Market Revels in ‘Extreme Greed’

The U.S. stock market raced to fresh all-time highs this week.

The Dow Jones Industrial Average rose in four of five sessions for a net gain of more than 500 points. The index now sits within striking distance of the historic 30,000 milestone.

The S&P 500 and Nasdaq also crossed important thresholds, clearing the 3,300 and 9,300 levels, respectively.

According to CNN’s Fear and Greed Index , market sentiment is overwhelmingly ruled by “extreme greed.”

That greed has tapered over the past two weeks since peaking at 97, but it still reads 89 on a scale of 0 to 100 where 50 represents neutral sentiment and 100 betrays pure, unadulterated avarice.

U.S. Housing Market Metric Spikes to 13-Year High

Stocks aren’t the only asset class burning bright. U.S. homebuilding activity surged to a 13-year high last month , climbing to its highest level since before the financial crisis.

Housing starts rallied 16.9% to a seasonally adjusted annual rate of 1.608 million units in December, easily surpassing economist estimates.

The housing market only accounts for about 3.1% of the U.S. economy, but the spike in housing starts is indicative of improving sentiment across the board.

A recent Allianz Life survey  found that Americans are increasingly skeptical that either an economic recession or stock market crash is hiding just around the corner. Despite slowing U.S. growth, only 43% of Americans expect a recession to strike within the near future, down from 50% the previous quarter. Even fewer (39%) are worried about a stock market crash, compared to 48% just a few months prior.

Finance professionals are similarly indifferent. A TD Bank survey  revealed that 50% of respondents were either entirely unconcerned about a potential recession or did not believe one was a realistic threat.

Yet there are reasons to believe they should be more worried. According to Vanguard Chief Economist Joseph Davis, present stock market valuations anticipate that the U.S. economy will secure 3% GDP growth in 2020, which is far above the 1.5% to 2% growth that most professional forecasters expect.

Recession Hawks: Watch Auto Loans – Not the Housing Market

Analysts continue to scrutinize housing data for evidence of an inflection point, but recession hawks warn that the “next housing market crash” won’t involve mortgages at all.

U.S. households have accumulated a staggering $16 trillion in debt . Doug Kass and David Rosenberg have both speculated that auto loans could be the pin that pricks this catastrophic consumer debt bubble.

Rosenberg notes that auto debt has ballooned 60% this cycle, while Kass warns that car buyers have begun behaving a lot like homebuyers  ahead of the housing market crash.

A record number of vehicle trade-ins were underwater on their loans in 2019, and Kass says that puts the U.S. auto industry at risk of falling into a “tailspin in 2020.” This could cause “collateral damage to U.S. consumer confidence and spending” – putting even more pressure on the “linchpin” of the U.S. economy.