Investment in the private sector, in which construction activity is a major component along with the purchase of machinery and equipment, depends on a range of factors including the level of interest rates; usage and vacancy rates; revenue streams and corporate profits; Availability of risk capital and/or government funding assistance. All of these factors come together in a two-word phrase, “investor confidence.” At the moment, investor confidence is rising. One primary indicator of investor confidence can be found in the stock market. In North America at least, stock market indices are swinging more than good. The Nasdaq took a breath in May, but in June resumed its upward run, setting a record again. The S&P 500 and the Toronto Stock Exchange joined the Nasdaq in climbing to new highs in the last month. Only the Dow Jones Industrial Average, which hit a record high in May, failed to reach a new high in June. The DJI was the only one of the four major indicators shown in Table 1 that recorded a monthly decline in June and was barely negative, at -0.1%. The Nasdaq was +5.5% monthly in June and +44.2% year over year. As impressive as this year-over-year gain was, the Russell 2000 Index, which captures the stock performance of small businesses in the US, was +60.4% year-over-year. With the exceptions of some of the iShares emerging and pre-emerging market indices, the five North American indices once again took the lead globally (see Table 2 and Figure 4). The Nikkei 225, STOXX Europe, German DAX 30, Shanghai Composite, Hong Kong Hang Seng and London FTSE indices posted marked increases year-over-year ranging from +14% to +29%. However, they track the smallest rise achieved by the five US-Canadian indices, which is +30.0% YoY from the TSX. Construction-related stocks If the Nasdaq is +44.2% yoy and Apple (AAPL) is +50.2% yoy, halving the stock yoy seems like a good target to achieve. How have publicly traded companies performed in construction related areas? The following gives stock price results for the year/year (ie, June 2021 “close” vs. June 2020 “close”) for a representative sample: United Rentals Inc. (URI), +114.0%; Caterpillar Corporation (CAT), +72.0%; Bolt Group (PHM) + 60.4%; Stantec (STN), +44.6%; Armstrong World Industries (AWI) + 37.6%; and The Home Depot Inc. (HD) + 27.3%. Table 1: Stock Exchanges – Performance of Major Indices – June 30, 2021 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: ConstructConnect. Chart 1: US Stock Markets – June 30, 2021 The latest data points are on June 30, 2021. The red vertical lines indicate major February 2009 declines for the indices. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Automated Quotations of Securities Dealers (NASDAQ), Reuters and Yahoo. Diagram: ConstructConnect. Chart 2: Performance of major stock indexes over the last 12 months 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. Diagram: ConstructConnect. Chart 3: Performance of major stock exchange indices since the economic downturn in 2008-2009 Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (Tokyo Stock Exchange) Finance), and Reuters. Diagram: ConstructConnect. Table 2: Major Domestic and International Stock Market Indices – June 30, 2021 “Index symbols” are in parentheses MSCI (formerly Morgan Stanley Capital International) is the leading provider of investment decision support tools, with indices being one discipline. iShares is a website dedicated to Exchange Traded Funds or ETFs operated by BlackRock Investments LLC. Data source: “finance.yahoo.com” Table: ConstructConnect. Chart 4: Stock Market Performance: The United States and Canada vs. the Rest of the World over the Year As of the month-end close, June 30, 2021 iShares is a website dedicated to “exchange-traded funds,” or ETFs, operated by BlackRock Investments. LLC. Data source: “finance.yahoo.com” Graph: ConstructConnect. Graph 5: New York Stock Exchange: Dow-Jones Industrials (30) Areas of gray shading indicate the previous two recessions in the century (the “dot.com” crash in 2001 and the Great Recession in the first quarter of 2008 to the second quarter of 2009). The graph shows the month-end closing numbers. Latest data point on June 30, 2021. 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), Reuters Chart: ConstructConnect . Graph 6: NYSE: Standard & Poor’s (500) areas of gray shading indicate the pre-century recession (the “dot.com” crash in 2001 and the Great Recession Q1 08 to Q2 09). The graph shows the month-end closing numbers. Latest data point on June 30, 2021. 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), Reuters Chart: ConstructConnect . Chart 7: Nasdaq Composite Areas of gray shading indicate the previous two recessions (the “dot.com” crash in 2001 and the Great Recession from the first quarter of 2008 to the second quarter of 2009) The graph shows the month-end closing numbers. Latest data point on June 30, 2021. 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), Reuters Chart: ConstructConnect . Chart 8: S&P/TSX Composite Index: Gray shading area on the Toronto Stock Exchange indicates Canada’s early recession in the current century (Q4 2008 to Q2 2009; no “dot.com” crash). The graph shows the month-end closing numbers. Latest data point on June 30, 2021. 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), Reuters Chart: ConstructConnect .
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