Although the U.S. housing market may be dropping, that doesn’t mean the economy is sure to suffer, too, says UBS Securities Canada Inc. in a new report.

“The sudden plunge in U.S.housing has raised fears that a hard landing is in store for the economy,” the report notes.

“There is no doubt that housing has been a bellwether in the past, but so has the stock market. And the picture of the economy that equities paint right now is far less troublesome,” it suggests.

UBS argues that the correlation between housing and GDP has diminished, while the correlation between GDP and the stock market has not, in both Canada and the U.S. “If both equities and housing were plunging, we would be a lot more worried about a hard landing for the economy,” it adds.

“We argue that more stable monetary policies have removed a common source of cyclical variation, and so individual sectors are increasingly following their own path,” the report says. “Thus, our outlook includes a sharp drop in housing, but still a soft landing for the economy.”

The outlook for Canada is particularly sanguine, as, “The Canadian cycle appears even further behind, having had one of the smaller [housing] booms among major markets, and not yet showing signs of cyclical fatigue.”