March 10, 2010

Carrick: Huge gains for North American stock markets in past year

It was a little less than a year ago (March 9, 2009) that the four major North American stock market indices sank to their low points in the recession.

Since then, they have recovered in quite dramatic fashion, despite all of the ongoing angst about how the overall economy is doing.

Versus their lows of March 9th last year, yesterday’s closing levels were as follows: Dow Jones Industrials +63.9%; S & P 500 +70.9%; NASDAQ +84.9%; and the S&P TSX (Toronto Stock Exchange) +59.3%.

For investors in Canadian stocks, a factor should be added for the appreciation in value of the loonie versus the greenback. On March 9th of last year, one Canadian dollar would purchase only 76.6 cents U.S. Today, that exchange rate is 97.1 cents or +26.8%.

Therefore, the TSE index can be said to have realized a gain of 75.2% in U.S. dollars, placing it second behind NASDAQ for overall increase from trough level.

Higher stock prices make a contribution to the economy in many ways. Primarily, they provide confidence to both firms and individuals through making it easier to raise money in initial public offerings and raising the values of mutual and pension funds.

The latter is important for both current workers and retired individuals counting on investment returns.

-Alex Carrick, CanaData chief economist

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