US housing starts change rose in November. It moved from -4.6% previously to 6.2%.
The latest reading shows an increase in housing starts compared with the prior period. The previous data point was a 4.6% fall.
Housing Strength Shifts Fed Expectations
That strong jump in housing starts back in November 2025 signaled an underlying resilience in the economy that many had underestimated. The market saw a shift away from fears of a sharp downturn towards a more robust economic outlook. This has forced us to reconsider the Federal Reserve’s path for the coming months.
This economic strength, which we’ve also seen confirmed in the latest January 2026 jobs report showing 215,000 new payrolls, raises questions about the timing of expected rate cuts. The consumer price index for January 2026 also showed inflation remaining sticky at 3.1%, slightly above forecasts. Therefore, the probability of a March rate cut, which was once widely expected, has diminished significantly.
Derivative traders should consider adjusting positions in interest rate futures, such as those tied to SOFR. We believe there is value in trades that bet on the Federal Reserve holding rates steady for longer than previously anticipated. This could involve selling futures contracts or buying put options on Treasury bond ETFs to hedge against rising yields.
In the equity space, the homebuilder sector, tracked by ETFs like XHB, has had a strong run since that November 2025 data was released. We should now look at using options to manage risk, perhaps by buying protective puts or selling covered calls against existing positions. While the most recent January 2026 housing starts data showed a slight moderation to a 1.47 million annual rate, it remains historically strong and continues to support the sector.
The strength in housing also has direct implications for commodities like lumber and copper. Lumber futures, which saw a significant rally in late 2025, have started to consolidate near their recent highs. We see opportunities in using options spreads on these futures to trade a potential range-bound environment in the near term.
Dollar Trade As Macro Hedge
Finally, a more hawkish Federal Reserve outlook tends to strengthen the U.S. dollar. With other central banks globally signaling a more dovish stance, we think long positions on the U.S. Dollar Index (DXY) futures could perform well. This trade acts as a good macro hedge against ongoing geopolitical and economic uncertainty.
