Advisors see recovery, but remain cautious

The global economy is prepped to restart, with commodities and emerging markets expected to boom, but don’t expect the U.S. to be much of a leader. That’s the picture painted by the BetaPro Management’s third quarter Advisor Sentiment Survey.

Opinion on Canadian large cap stocks is evenly split, with 40% bullish on the S&P/TSX 60 Index, 41% bearish, and 19% remaining neutral.

Financial services stocks are dragging on optimism within the large-cap space, with only 22% of advisors saying they were bullish, compared to 38% being bearish and 40% taking a neutral view of the sector.

Perhaps a sign that respondents are looking ahead to a global economic upturn, commodity sectors are the focus of far greater optimism. Forty seven percent were bullish on the S&P/TSX Global Mining Index, while 27% were bearish; 53% were bullish on the Global Gold Index, compared to 27% who were bearish.

Gold bullion was seen in a better light than gold stocks, with 55% being bullish, 32% neutral, and only 13% expecting a decline in the price of gold. Results were nearly identical for silver.

Energy was also a favourite, with the S&P/TSX Energy Index getting the stamp of approval from 52%, compared to 28% who were bearish. The opinion on crude oil itself, however, was slightly lower, with 45% bullish on its price, and 25% saying they were bearish — 30% came in neutral.

Natural gas looks better than crude these days, having largely missed out on the energy rally of the past six years. Forty eight percent of advisors said they were bullish on gas, with 34% neutral and just 18% remaining bearish.

With commodities expected to rally, advisors are bullish on the Canadian dollar, with 62% expecting it to appreciate against the U.S. dollar. Only 16% expect the greenback to firm against the loonie, while 22% are neutral.

“Not surprisingly, [advisors’] strongest opinions favour the Canadian dollar over the U.S. dollar, and being short longer-dated U.S. bonds,” said Howard Atkinson, President of BetaPro. “The possibility that equities may take a breather over the quarter makes sense after such a strong showing in the second quarter and this is reflected in the survey results.”

U.S. equities are not seen in a particularly favourable light, especially as measured by the S&P 500. Just 28% of respondents were bullish on this index, compared to 48% who said they were bears, and 24% neutral. The outlook for the NASDAQ 100 was better, with opinion split evenly between bulls and bears at 38%, with 24% saying they were neutral.

The U.S. 30-year bond, which proved to be the refuge of last resort over the past nine months, is seen to be susceptible to decline, with only 17% saying they saw more upside potential. Fifty five percent said they were bearish, while 28% were neutral.

Emerging markets are viewed as a good bet to lead the global recovery, with 47% of advisors bullish on the MSCI Emerging Markets Index, compared to 32% who called themselves bears.

(07/08/09)