Advisors bullish on equities

Canadian investment advisors expect stocks keep going strong in Q1 of 2014, but are bearish on every other asset class, shows Horizons ETFs’ Q1 2014 Advisor Sentiment Survey.

Horizons asked Canadian advisors to share their Q1 outlook on 15 distinct asset classes. Collectively, advisors were bullish on only six of the 15 asset classes surveyed, all of which were equity indices.

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Nearly three quarters of Canadian advisors (74%) are bullish on the S&P/TSX 60 Index, up from 68% in the last survey. Canadian stocks generated a 6.94% return last quarter. The same bullish sentiment, 74%, was observed on the S&P 500 Index as well, after an approximately 10% return in Q4 2013. Bullish sentiment on the NASDAQ-100 Index is at 75%, after a Q4 2013 return of 11.62%.

“We are seeing almost unprecedented levels of bullishness on large-cap stocks across the board,” says Howard Atkinson, president of Horizons ETFs. “Investors may be expecting Canadian stocks to rally on a relative performance basis to close the gap on the U.S.”

Bullish sentiment on the MSCI Emerging Markets Index rose a substantial 11 percentage points from 60% to 71% after this index generated a 1.54% return last quarter.

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“With equity risk appetite increasing, it would stand to reason that investors may be growing more comfortable with emerging market equities,” Atkinson says.

Advisors aren’t as confident about previous metals. Only 32% of advisors are bullish on gold bullion—a percentage point lower than last quarter—despite that gold bullion lost 9.28%. Similarly, silver bullion lost 10.27% last quarter.

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Bearish sentiment on the Canadian dollar rose dramatically— from 41% in our previous survey to 70%—with seven out of 10 advisors surveyed believing that the Canadian dollar will decrease in value versus the U.S. dollar over the next quarter.

“For this reason, we’ve also seen a preference, as highlighted in ETF flows, for non-hedged U.S. equity – investors want to get direct exposure to the U.S. dollar as the value of the Loonie falls,” says Mr. Atkinson.

Bullish sentiment on volatility increased to 48%, from 45%, after the S&P 500 VIX Short-Term Futures Index lost nearly 27.50% last quarter.

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