TORONTO, July 19, 2012 /CNW/ - Fewer Canadian advisors are bullish on
stocks than they were three months ago, according to the Q3 Advisor
Sentiment Survey (the "Q3 Survey") conducted by Horizons Exchange Traded Funds Inc. ("Horizons ETFs").
The Q3 Survey asked more than 200 Canadian investment advisors to give
their outlook on 18 distinct asset classes. Advisors responded whether
they were bullish, bearish or neutral on the anticipated returns for
these asset classes over the next quarter.
The majority of advisors are still bullish on stocks, but confidence is
declining after a relatively difficult quarter in stock returns.
Bullish sentiment on the S&P/TSX 60 (Total Return) declined from 59% in
the previous advisor survey ("Q2 Survey") to 54% after a 6.14% loss last quarter. After a 3.29% loss last
quarter, bullish sentiment dropped on the S&P 500 from 63% in the Q2
Survey to 58% in the Q3 survey. Bullish sentiment on the NASDAQ 100
declined from 65% to 59% after a 5.06% loss on the quarter.
The biggest drop in confidence occurred in emerging market equity as
represented by the MSCI Emerging Market Index, which dropped from 59%
in the Q2 survey to 48% this quarter after a 10% decline in returns
"Up until recently, Canadian advisors had a lot of confidence in stocks.
After a quarter of difficult returns, that enthusiasm seems to be
waning," said Howard Atkinson, CEO of Horizons ETFs. "Emerging market equities have historically been a little more volatile
than developed nation stocks, so it would stand to reason that bearish
sentiment on those stocks has increased more dramatically."
Bullish sentiment on many commodities actually increased. The most
remarkable turnaround was in sentiment on natural gas, which increased
18 percentage points from the Q2 survey to 48%, an increase in bullish
sentiment that comes in the wake of a 32.83% increase in gas prices.
Similarly, sentiment on Crude Oil swung to strongly to the bullish side,
as bullish sentiment increased from 44% to 55%, despite the fact that
oil declined 17.53%.
"Natural gas has been such a poor performer for so long, I can't
remember the last time when advisors were bullish on natural gas. With
a nearly 33% return last quarter, some advisors may feel that natural
gas is finally turning a corner towards the upside," said Mr. Atkinson. "Advisors may think that the pullback in oil prices has been overdone
which could explain the strong uptick in bullish sentiment we've seen
in crude oil."
Advisors are increasingly bullish on precious metals as well. Bullish
sentiment on gold bullion increased 5 percentage points to 59% and
bullish sentiment on silver bullion increased 4 percentage points to
56% from the Q2 Survey. Both gold and silver bullion delivered negative
returns last quarter. Bullish sentiment on gold stocks increased even
higher - by 11 percentage points - to 55%, after the S&P/TSX Global
Gold Stock Index lost 9.53% last quarter.
"The increase in bullish outlook on precious metals may be similar to
what we have seen in oil, in so much as advisors may feel these two
metals are now undervalued after being beaten up last quarter," said Mr. Atkinson. "It seems clear that advisors expect gold stocks to outperform bullion
over the next quarter."
Sentiment on base metal stocks seems mixed after the S&P/TSX Global Base
Metals Stock Index lost 12.65% last quarter, with only 39% of advisors
bullish on the index. One of the primary base metals is copper. Bullish
sentiment on copper did in fact increase slightly to 44% from 41% after
copper futures lost more than 8% last quarter. Horizons ETFs is the
only ETF provider in Canada that allows investors to invest in copper.
After modest gains against the U.S. dollar (1.76%), bearish sentiment on
the Canadian dollar increased dramatically from 18% of Canadian
advisors to 31%. It appears that sentiment on the loonie is moving from
neutral to bearish, suggesting that more Canadian advisors expect a
pullback in the value of the loonie versus the U.S. dollar.
Government bonds, as represented by the U.S. 30-year treasuries, only
increased slightly last quarter by 0.39%. The majority of advisors
(54%) remain neutral on the direction of 30-year treasuries.
"This survey saw one of the biggest shifts in sentiment on the loonie
that we've seen in quite some time. As the loonie traded at or near
par, advisors have tended to be neutral on its direction, it appears a
lot more advisors are expecting the U.S. dollar to outperform the
loonie over the next quarter," said Mr. Atkinson. "Neutral sentiment held steady on the direction of U.S. government
bonds. In the past few surveys advisors have been hesitant to make a
directional call on government bonds because a rate increase will have
a big impact on bond prices, but there have been no signs that the Fed
will raise rates anytime soon."
About the Sentiment Survey
Horizons Exchange Traded Funds Inc. conducts the only quarterly
sentiment survey of Canadian investment advisors. The survey
quantitatively measures advisors' quarterly outlook as it relates to
key benchmarks covering equities, bonds, currencies and commodities.
Full survey results are available at http://www.horizonsetfs.com/sentimentSurvey.asp.
About Horizons Exchange Traded Funds Inc. (www.horizonsetfs.com)
Horizons ETFs is an innovative financial services company offering the
Horizons ETFs family of ETFs. The Horizons ETFs family includes a
broadly diversified range of investment tools with solutions for
investors of all experience levels to meet their investment objectives
in a variety of market conditions. With more than $3.3 billion in
assets under management and 81 ETFs listed on the TSX, the Horizons
ETFs family makes up one of the largest families of ETFs in Canada.
Horizons ETFs is a subsidiary of Horizons ETFs Management (Canada) Inc.
and a member of the Mirae Asset Financial Group.
SOURCE Horizons ETFs Management (Canada) Inc.
For further information:
Howard Atkinson, CEO, Horizons Exchange Traded Funds Inc., (416) 777-5167 firstname.lastname@example.org