TORONTO (Reuters) - Canadian investors will likely continue to push the country's main equity index lower in the coming months as credit-crunch fears persist and talk of a US recession begins to gain momentum.

What began in August as a liquidity choke-up in parts of the debt market has now firmly taken hold as a volatile selloff in equities. As well, a steady stream of bad corporate news and weak government data are putting further strain on investors' psyches.

"I think this is just a foretaste of more damage to come," said Elvis Picardo, investment strategist at Northern Securities Inc in Vancouver. "I think there's a good chance that we go quite a ways lower from here before things start turning around again in the fourth quarter."

The Toronto Stock Exchange's S&P/TSX composite index is almost 1,000 points down from the lifetime high of 14,646.82 that it set in July. For the month of August, it was down 1.5 percent.

Investors have been forced to acclimatize to regular announcements of exposure to troubled sectors of the debt markets by financial services firms and their corporate clients alike.

Last Friday, the US reported the first monthly drop in payrolls in four years, which stoked recession fears and depressed equities. Because of the obvious importance of the United States to the global economy, a contraction would have a much wider impact than North America.

A US recession could trigger a domino effect with a profound impact for Canada: the US puts the brakes on global economic growth, which slows demand for commodities and causes a drop in prices of both the commodities themselves and the share prices of their producers.

Toronto's benchmark index, with its heavy exposure to energy and metals and mining, could plunge.

"Investors are seriously beginning to factor in the likelihood of a slowdown in the US and how that might impact the Canadian economy," Picardo said.