A number of analysts are speculating that July may have seen the low point for stocks in this cycle. Both the Dow Jones Industrials and the S & P 500 recorded 52-week lows during the month. In both cases, the index level was down by 25% versus the 52-week high. This is quite a drop and qualifies as more than a bear market. NASDAQ had its 52-week low in March 2008 and the TSE in January 2008.

The U.S. economy is continuing down a path of weakness. Housing starts are trolling the depths. The inflation rate is over 5% in the U.S. and 3% in Canada. The prospects for further stimulative interest rate cuts have been removed from the table. And financial markets continue to “thrill” with worries about liquidity.

However, there is also good news to report. Most important, the commodity price surge is abating. Oil has backed off to $114 US per barrel and there has been an easing of prices in many other mineral and agricultural product areas. This will take some of the steam out of the overall price level in the fall and heading into the winter. It also reduces the appeal of commodities as an investment option versus equities. There are bargains to be had in equity markets and any good news will be quickly met by an improvement in values.

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