Canadian Investment Advisors Start 2013 with Optimism

TORONTO, Jan. 18, 2013 /CNW/ - Nearly 8 out of 10 Canadian investment advisors expect the Canadian stock market to rally in the first quarter of 2013 according to the Q1 Advisor Sentiment Survey (the "Q1 Survey") conducted by Horizons Exchange Traded Funds Inc. ("Horizons ETFs").

The Q1 Survey asked Canadian investment advisors to give their outlook on 16 distinct asset classes. Advisors responded whether they were bullish, bearish or neutral on the anticipated returns for these asset classes over the next quarter. In total, advisors were collectively bullish on 13 of the 16 asset classes surveyed this quarter.

The vast majority of the more than 120 advisors who responded to the Q1 Survey, are very bullish on stocks. Bullish sentiment on the S&P/TSX 60 Index™ increased from 68% to a remarkable 77%, despite the fact that the Toronto Stock index only returned about 1.54% last quarter.

The exact same percentage of advisors are also bullish on the S&P 500® after the U.S. benchmark Index had negative returns last quarter of -1.01%. Bullish sentiment on the NASDAQ 100 increased from 62% to 74% after a -4.94% return on the quarter.

"Historically a market rally spurs more optimism, but advisors are being bullish in spite of mediocre returns last quarter," said Howard Atkinson, CEO of Horizons Exchange Traded Funds Inc. "This survey was completed before the Fiscal Cliff deal announcement on January 1, 2012, so even with the uncertainty surrounding the Fiscal Cliff, Canadian advisors saw some fundamental positive developments in North America which they believe will contribute to higher stock prices."

It wasn't just North American stocks that were appealing to advisors; the biggest uptick in bullish sentiment was seen on the MSCI Emerging Markets Index, which increased more than 30 percentage points from the Q4 Advisor Sentiment Survey ("Q4 survey"), rising from 45% to 76%. The benchmark emerging market index delivered a 5.24% return last quarter.

"If advisors are less concerned about risk in the equity market it would make sense that they would opt for emerging market stocks, which historically have generated higher returns than domestic stocks during periods of lower stock market volatility," said Mr. Atkinson. 

Canadian advisors were slightly less bullish on precious metals. Both gold and silver bullion were big bets in the Q4 survey, each with 69% bullishness.  Bullishness on both gold bullion and silver bullion decreased to 60% bullishness. Gold bullion delivered around a -5.46% return last quarter, while Silver bullion declined by 12.15%.. Bullish sentiment on gold stocks decreased even more - by 17 percentage points - to 54%, after the S&P/TSX Global Gold Stock Index lost -13.25%.

"The slight pullback in bullish sentiment on precious metals is not all that surprising given that precious metals performed poorly last quarter and tend to be inversely correlated to the fortunes of stocks which advisors seem to favour this quarter," said Mr. Atkinson. "Many gold bulls would likely still be long the asset class, anticipating inflationary forces coming into play when the U.S. likely has to renegotiate the debt ceiling later in the quarter." 

Bullish sentiment on base metal stocks, however increased substantially by 8 percentage points to 57% after the S&P/TSX Global Base Metals Index delivered a nearly 10% return last quarter. Similarly, sentiment on copper futures, one of the core base metals, also increased by 13 percentage points from the Q4 survey.

"Both copper and base metals tend to do well with an expected increase in both economic and stock market growth in the emerging markets. If advisors are bullish on emerging markets, they also tend to be bullish on the base metals which are central to their industrial production," Mr. Atkinson said.

Bullish sentiment on Natural Gas also stayed in positive territory for the Q1 Survey, increasing from 55% to 57% after about a 1% return. Sentiment on Crude Oil stayed exactly the same at 55% after delivering a -0.40% return last quarter.  Bullish sentiment on energy stocks, represented by the S&P/TSX Capped Energy Index also held at 57% - up 1% from last quarter. The energy stock index lost 4.29% last quarter.

"It doesn't seem that there have been any market developments in energy asset classes to drastically shift advisor opinion," Mr. Atkinson said. "Advisors would have likely assigned a neutral sentiment to energy if they had expected to stand pat; the majority of advisors remain moderately bullish on oil and gas."

A full half of advisors now have a neutral outlook for the Canadian dollar, which lost 0.94% against the U.S. dollar last quarter.  Almost two thirds (65%) of the advisors have neutral outlooks for the loonie versus the Australian dollar. The Canadian dollar gained about 1% versus the Australian dollar last quarter - typically these two currencies trade in tandem against the U.S. dollar.

"The outlook for currencies would seem to reconcile with a lot of industry forecasts which expect the Canadian dollar to remain around parity for the foreseeable future, which means there would be little movement one way or the other," Mr. Atkinson said.

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 approximately $3.6 billion in assets under management and 76 ETFs listed on the Toronto Stock Exchange, 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 Exchange Traded Funds Inc.

Howard Atkinson, CEO, Horizons Exchange Traded Funds Inc., [phone] [email protected]