As at the end of June 2008, the only major North American stock market to be in a gain position versus the same time last year was the Toronto Stock Exchange (see first graph below). However, in the short week and a bit since June's closing, there has been some further adjustment in thinking and the TSE now (as at July 9th) stands -1.5% versus June 30, 2007.

Three of Four Major Stock Market Indices are -20% versus Prior Highs
In addition, the TSE is just on the cusp of being -10% versus its most recent high. In technical terms, -10% versus a previous high is called a "correction". The other three major North American indices − Dow Jones Industrials, the S&P 500 and NASDAQ have all sunk well below "corrections" and are generally dealing with -20% positions.

The world price of oil at $140-plus US per barrel is making investors more than edgy. Consumers are baffled about how to balance their budgets, with gasoline priced so high. Plus the jobs outlook has turned into a downhill-slide in the United States since the start of this year. The U.S. housing market remains mired in a sea of woes and the auto sector is showing signs of slamming on the brakes.

Monetary Policy — A Tough Choice Ahead

Furthermore, the central banks of both the United States and Canada sat on their hands when it came to adjusting interest rates downward (i.e., to provide more stimulus) at their most recent policy-setting meetings. In fact, the emphasis of monetary policy going forward is more likely to be tightening, as opposed to loosening, in order to deal with an inflation threat that is growing more serious worldwide.

Reed Construction Data (RCD) monitors 20 major publicly-listed companies with large construction-related sales components. All 20 companies had share price declines from May's month-end-closing to June's. The percentages ranged from -0.1% (Fluor Corp.) to -30.1% (Louisiana-Pacific).

Design Firms Working in Other Countries are Doing Best
The construction-related firms that are doing the best at this time are those that are providing design services for companies in other countries, where the local economy is still advancing at a good pace.

All of these factors are being taken into consideration by investors who are adopting a more sober view of the outlook. The party ended some time ago and the caterers have long since left the building when it comes to equity markets in these uncertain times.