An Earnings Recession Could Pop the US Housing Market Bubble

  • The U.S. housing market seems to be on a roll apparently.
  • An earnings recession has already set in, and this could dent the market’s momentum.
  • Weak wage growth and potential job losses might pop the U.S. housing bubble.

The U.S. housing market seems to be on a roll as recent data suggests, but there is a high chance of things going downhill quickly. The economy is not in great shape, the U.S.-China trade war keeps raging on, and wage growth has been tepid at best in recent months.

But this isn’t all that could eventually pop the bubble that the U.S. housing market is currently in. The U.S. is currently going through an earnings recession, and this could bring an end to the good times that the U.S. housing market is currently enjoying.

An earnings recession is bad news for the U.S. housing market

MarketWatch reports that the S&P 500 index’s earnings are set to drop 1.51 percent in the fourth quarter of 2019. The bad news – S&P 500 components witnessed a decline in their bottom lines in the first two quarters of 2019. MarketWatch anticipates a similar trend in the third quarter.

That’s because earnings reports from 95% of the components of the S&P 500 have revealed a 2.34 percent earnings decline so far. This is the largest earnings decline seen so far in 2019. And if the fourth-quarter earnings numbers also decline, it would be the first time since 2015 when earnings of S&P 500 components have receded for four quarters in a row.

An earnings recession happens when there are at least two consecutive quarters of annual earnings declines. Going by that definition, we are deep in an earnings recession. And that’s bad news for the U.S. housing market for a few simple reasons.

First, weak corporate earnings reduce the scope for wage increments and bonuses, as…

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