Canadian equities improved this quarter to become most favoured asset
class; U.S. Equities remain positive; the outlook for EAFE and Emerging
Markets has declined
Almost 90 percent of Canadian investment managers see headline macro
risk as one of the greatest challenges
Bullish sentiment towards bonds rose slightly, but overall outlook
TORONTO, June 28, 2012 /CNW/ - With Canada's financial markets being
buffeted by concerns about Europe's financial situation, Canadian
investment managers have become increasingly bullish on Canadian
equities as valuations have fallen, according to the latest Russell Investment Manager Outlook, conducted between May 24 and June 4, 2012. Not surprisingly, headline or
macro event risk is seen as the greatest challenge facing active
managers at this time, according to 86 percent of investment managers
According to the second quarter Investment Manager Outlook 70 percent of investment managers surveyed are bullish on Canadian
equities, while only 25 percent are bearish. By comparison, 56 percent
were bullish in the first quarter and only 43 percent were bullish a
year ago at this time.
"The sell-off in April and May has improved valuations and that has led
to increased bullishness in Canadian stocks," said Greg Nott, Chief
Investment Officer, Russell Investments Canada Limited. "In addition,
despite gaining in the first quarter, Canadian equities lagged their
global counterparts in that period, making their relative valuations
even more attractive."
Assessing the Canadian market as a whole, 73 percent of investment
managers say it is undervalued. That is a big shift from the previous
quarter, when only 17 percent of investment managers thought the
Canadian market was undervalued.
In terms of asset classes, investors are least bullish on real estate --
only six percent have a favorable outlook versus 56 percent bearish.
They are also relatively bearish on Canadian high yield bonds, with
only 11 percent of managers holding a favorable outlook on that asset
class compared to 29 percent in the first quarter.
Canadian bond bears remain, despite rise in bullish sentiment
On the fixed income side, bullish sentiment has risen slightly, but the
overall outlook remains bearish. Bulls rose to 20 percent from 12
percent, while bears slipped from 65 percent to 71 percent.
U.S. equities' sentiment remains positive, but investors more cautious
on emerging markets and EAFE
Sentiment is also generally positive on U.S. equities, with 65 percent
of investment managers indicating they have a positive outlook for that
asset class. However, this is down from 72 percent in the first
quarter. By contrast investors have become far more cautious on
emerging markets, with only 40 percent bullish and 35 percent bearish
on the outlook for that region. "Investors who had expected emerging
markets to continue performing better than developed markets may have
been disappointed by the Russell Emerging Markets Index's 19 percent
decline in 2011," Nott noted.
And with Europe still wrestling with debt woes and political unrest,
sentiment towards the EAFE region is unsurprisingly quite bearish.
According to the IMO, only 25 percent of investment managers have a
positive outlook on EAFE equities, down from 44 percent in the first
quarter. Meanwhile 40 percent are bearish on the region, a significant
increase from the 11 percent who were bearish in the first quarter.
Investors bullish on energy and industrials; bearish on utilities
Among sectors, investors remain generally bullish on energy and bearish
on utilities as they have been for several quarters. However,
bullishness on industrials has risen dramatically, with 74 percent of
investment managers positive on the outlook for that sector compared to
only 33 percent in the first quarter. Bearishness has fallen to 11
percent compared to 20 percent.
"Lower prices for oil and other inputs have investors looking more
favourably on the industrials sector, which is dominated by
transportation companies," Nott said. "The country's railroads, which
are major components of the transportation sector, are strongly
influenced by the state of the U.S. economy, which was viewed as
For access to the full Investment Manager Outlook, please visit www.russell.com/ca or call Catherine Winchell at 416-640-6899.
About the Russell Investment Manager Outlook
As creators of the Russell indexes and one of the few firms that
researches thousands of investment manager products worldwide, Russell
Investments has extraordinary access to senior-level Canadian
investment decision-makers. Prior to the end of each quarter, Russell
surveys a sample of those investment managers to collect their top-line
opinions about the direction of the markets, sectors/styles to watch,
and trends on the horizon that could impact investment strategy.
The result of this survey is the Russell Investment Manager Outlook.
Three of the four questions posed to investment managers are repeated
each quarter, so that results can be measured over time. The poll also
includes one topical question that changes each quarter. In addition to
providing quantitative results, Russell reviews the data collected each
quarter, and provides a qualitative analysis from a senior investment
The Russell Investment Manager Outlook is completed and distributed at
the end of each quarter. This report includes responses from investment
managers with a variety of investment focuses. The manager research
that Russell conducts for investment purposes is done entirely
independent of the Russell Investment Manager Outlook, and responses to
the survey are on a purely voluntary basis.
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