Market update from April 29th, 2009

Greetings to all.

Nice to see the sun today and no snow!

I wanted to update my last market update that I sent you. My March 23, 2009 headline was-- Stock markets up over 5% today, 20% in the last couple of weeks. What does it mean?

Today is April 29, 2009. So what's happened since March 23? The Toronto stock market [TSX] is up another 5.1% and the index sits at 9416 points. New York [S&P 500] is up another 6.0% since March 23 and the index sits at 874. It's obviously good news for investors when markets have a good run: we see that markets can go up after they've gone down. And to be fair, I have to point out that markets have to recover much more to get back to where they were.

The TSX peaked at about 15,000 points in 2008, the S&P 500 peaked at about 1550 points in late 2007. How long will it take to recover and surpass those peak levels? Well, bear with me--no pun intended--as I look at some more numbers.

The last bear market ran from 2000 to 2002. We all remember that one which overlapped with the events of 9/11. When the bear ended in 2002, markets went into a recovery rising to the peak, as stated above, of about 15,000 on the TSX. But do you want to guess at the point level of the TSX at its low in 2002? Was it 9000 or 7000 points?

I think it's remarkable that the TSX was as low as 5,695 in 2002. The recovery took it from 5,695 to 15,000 in 2008. That's a climb of over 9000 points or 168% from the low. Has the TSX had that kind of recovery before? In the 1990s, the market recovered 203%, 253% in the mid-1980s, 288% the mid-1970s.

Should the market climbs 160% again--from where it is today at 9416--that would take the TSX to near 25,000 points. That's well above its 2008 peak of 15,000. No one can say how long the climb would take, but we can say that the markets have done it before.

Cheers! Tom

PS-so what is the TSX index anyway [more properly known as the S&P/TSX]? The index was invented to measure the rise and fall of the Toronto stock market over time. The index includes about 70% of the largest companies whose stocks trade on the Toronto Stock Exchange. If, on average, these stocks rise in value today, then the index will go up accordingly. The index value in points--e.g. the TSX closed at 9416 points today--has no absolute meaning, it's all relative: the index is measured each day so that we can compare to what the index was yesterday, a month ago or 20 years ago.