North America’s Stock Markets are waiting for The Economy to Catch Up

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north america’s stock markets are waiting for the economy to catch up

August 19, 2009 - Alex Carrick

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The four major North American stock market indices are currently marking time. Mid-way through August, they stand near the same levels as July month-end. The gains over the past five months, however, have been impressive. The low point in this cycle for share prices came in February of this year. NASDAQ (+56%) has led the way since then. The other three indices are up by +42% to +48%. Investors who did not jettison their equity holdings last fall through this spring must be feeling a whole lot better with the arrival of their second-quarter mutual and pension fund statements.

The Foreseeable Future

The Toronto Stock Exchange will probably stay bogged down until world oil prices start moving again, above $70 USD per barrel. That will take more evidence of recovery in China and better numbers from the U.S. economy. Almost non-existent central bank interest rates in the United States and Canada continue to provide stimulus for overall economic activity. But the depth of the latest recession and the damage that has been done to credit availability, product demand and corporate profits, consumer and business confidence and, of course, jobs will take some time to overcome.

Nevertheless, financial sector stocks are in much better shape. Energy sector stocks no longer have to contend with $35 USD per barrel oil. Manufacturing is getting a boost from an end to the homebuilding decline in the U.S., a hiatus in auto sector crises and generally low inventory levels that need replenishing. Non-energy resources are starting to experience some rundowns in stockpiles as global demand edges upward and little new capacity has been added. All in all, the outlook for share prices is on the mend, bar no new terrible unforeseen blow to the system.

Stock Exchanges-
Performances of Key Indices - July 31, 2009

INDEX	52-Week Low	52-Week High	Year Ago (July 31, 2008)	Month Ago (June 30, 2009)	Latest Month-end Closing Prices (July 31, 2009)
INDEX	52-Week Low	52-Week High	Year Ago (July 31, 2008)	Month Ago (June 30, 2009)	Latest Month-end Closing Prices (July 31, 2009)	52-Week Low	52-Week High	Year Ago	Month Ago
Dow Jones Industrials NYSE (^dji)	6,440	11,934	11,378	8,447	9,172	42.4%	-23.1%	-19.4%	8.6%
S & P 500 NYSE (^gspc)	667	1,313	1,267	919	987	48.0%	-24.8%	-22.1%	7.4%
NASDAQ (^ixic)	1,266	2,473	2,326	1,835	1,979	56.3%	-20.0%	-14.9%	7.8%
S & P/TSX Composite TSE (^gsptse)	7,480	13,771	13,593	10,375	10,787	44.2%	-21.7%	-20.6%	4.0%

Sources: New York Stock Exchange (NYSE), Standard and Poor’s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Table: Reed Construction Data – CanaData.

Performances of Key Stock Market Indices Over the Last 12 Months-
July 31, 2009

*Each month’s closing figure versus the July 31, 2008 closing figure for the index.
The Key Stock Market Indices are:
1) New York Stock Exchange – Dow-Jones Industrials (30);
2) New York Stock Exchange – Standard and Poor’s (S & P) (500);
3) National Association of Securities Dealers Automated Quotations – NASDAQ Composite Index;
4) Toronto Stock Exchange – S & P/TSX Composite.

Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: Reed Construction Data – CanaData.

S & P/TSX Composite
Toronto Stock Exchange

New York Stock Exchange Dow -
Jones Industrials (30)

New York Stock Exchange
Standard and Poors (500)

NASDAQ Composite Index
(National Association of Securities Dealers Automated Quotations)

The charts show month-end closing figures.

Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.

Chart: Reed Construction Data – CanaData.