Signs of confidence emerge

Canadians appear to be regaining their confidence in the financial markets, according to a survey by Manulife Financial, with improved sentiment toward eight out of ten investment options. Whether this optimism will hold is another question.

“Canadians generally suggested they favoured safer havens over the past six months, but a number of indicators seem to show they’re becoming more optimistic about investing,” said Paul Rooney, president and CEO, Manulife Canada. “Given short-term changes in the economy and markets, we always encourage investors to work closely with their own advisors.”

The latest reading of the quarterly Manulife Investor Sentiment Index saw a gain of six points, to +11.

The nationwide telephone survey found 59% of Canadians were planning to invest the same amount this year as they did last year, while 19% planned to invest more than in the past.

They also seem to be sticking to their investment style, with 65% saying they would make no changes to the way they invest. Another 22% said they had made temporary changes.

Investing in their own homes remained the most popular option, with 55% saying it was a good time to invest in their home, compared to 13% who said it was a bad time, for a reading of +42 (55% minus 13%).

Investment real estate, while difficult to access for the average investor, ranked second, with a sentiment reading of +19. Feelings toward holding cash took the biggest hit, falling eight points, but it was still the third most popular investment, at +13.

Fixed income investments gained three points from December to reach +13. Balanced funds gained eight points in March after a sharp 33-point decline in October. Thirty-two percent felt they were a good investment, while 35 disagreed.

Equities are the least popular, despite the March rally in the stock market. They gained four points in the index, but still stand at -21.

Advisors may have their work cut out for them, if they want to guide investors back into the stock markets. According to the latest Horizons BetaPro Advisor Sentiment Survey, most advisors think stocks and commodities are poised for recovery.

Of the almost 400 advisors polled by the ETF provider, 73% said they were bullish on commodities and energy stocks. A global economic recovery is expected to renew the world’s thirst for crude oil, although the outlook for natural gas is somewhat dimmer.

Seventy percent of advisors surveyed said they expected the Canadian dollar to outperform the U.S. dollar, thanks once again to surging commodity exports.

“Advisors’ positive outlook on energy stocks, crude oil, mining equities and gold bullion is consistent with recent market activity in the commodities markets and signals continued confidence in Canadian equities and the country’s general economic stability vis-à-vis the United States,” said Howard Atkinson, president of BetaPro.

With the outlook for equities improving, most advisors were bearish on fixed income instruments, particularly the U.S. 30-year bond, which could deliver a one-two punch of falling capital value along with a weaker U.S. dollar.

“Despite a drop in the U.S. 30-year bond of more than 5% in the previous quarter, advisors remain bearish,” Atkinson said. “This is consistent with current U.S. monetary and fiscal policy and is an indication that advisors believe an economic recovery will eventually occur and interest rates will rise.”

The March rally boosted sentiment south of the border, however. While most American executives believe the country is in the middle of a severe recession, a recent survey by The Korn/Ferry Institute found 13% of executives believed the economy was recovering. That might not sound impressive, but it marks an improvement of six percentage points from the previous month’s survey.

Just who will lead the U.S. into a recovery was open to debate, as 17% were counting on the consumer, 16% relied on business, and just 11% said the government was the best choice to lead. The majority (56%) believed that the three players were equally important.

“We are all hoping that we have hit bottom and are on the way back up, but our survey results show that executives are conflicted about the relationship between business and government,” said Joe Griesedieck, vice chairman and managing director, CEO Services for Korn/Ferry. “What executives do agree upon is that consumers, business and government all play vital roles in our recovery.”

(04/08/09)