Horizons ETFs survey finds advisors expect greater volatility in U.S. equities in the upcoming quarter, and are focusing on domestic asset classes for returns
TORONTO, July 30, 2014 /CNW/ - Canadian investment advisors are bullish on domestic equities and commodities heading into the third quarter of 2014, which is a pickup in sentiment from the negative expectations they had towards 11 out of 15 asset classes in the second quarter. The change in sentiment was reported in the Q3 edition of the 2014 Advisor Sentiment Survey ("Q3 Survey"), conducted by Horizons ETFs Management (Canada) Inc. ("Horizons ETFs").
The Q3 Survey asked Canadian investment advisors to share their outlook on 15 distinct asset classes and express their sentiment — bullish, bearish or neutral — on the anticipated returns for these asset classes in the upcoming calendar quarter (Q3). Collectively, advisors were bullish on the following Canadian asset classes: S&P/TSX 60TM Index and S&P/TSX Capped Energy Index™.
For Q3, 61% of advisors said they were bullish on the S&P/TSX 60TM Index, which is a large increase in sentiment from the Q2 survey, where less than half (47%) of the Canadian advisors were bullish on Canadian equities. For Q2, the three-month period ending June 30, 2014, the Index returned 6.32%. Meanwhile, expectations regarding U.S. equities remained positive, but stagnant, with 57% of advisors bullish on the S&P 500® for Q3, up from 53% last quarter. Over the Q2 period, the S&P 500® had a total return of 1.68%.
Canadian advisors have also become optimistic about energy, with 70% stating they are bullish on the S&P/TSX Capped Energy Index™ heading into Q3, compared to the 53% that were bullish on the Index last quarter. Similarly, sentiment for natural gas rose dramatically, where nearly half of advisors (48%) said they are bullish this upcoming quarter, compared to the 30% that were bullish last quarter. For Q2, the S&P/TSX Capped Energy Index™ returned 13.19%.
"Canadian advisors are seeing a lot more value in domestic asset classes than their U.S. counterparts," said Howard Atkinson, President of Horizons ETFs. "With the bull run we've had in the U.S. since December, advisors believe that U.S. equities are overvalued, whereas the Canadian market is ripe for growth and returns."
Other notable findings included a 12% increase in bullish sentiment for the S&P 500 VIX Short-Term FuturesTM Index, where 54% of advisors felt positive about the Index going into Q3, up from 42% last quarter. Meanwhile, the VIX futures Index returned -32.40% over Q2.
"The positive expectations for a turnaround in VIX futures suggests that advisors are expecting more volatility in the U.S. marketplace in the upcoming quarter," said Atkinson. "This explains why bullishness on the U.S. equities has been muted, and we've seen an uptick in commodities and precious metals expectations heading into Q3."
For Q3, 46% of advisors were bullish on gold bullion, compared to the 43% that were positive in Q2. Nearly 50% of advisors increased their positive expectations for the S&P/TSX Global Gold IndexTM up from the 42% that were bullish last quarter. For Q2, the Index had a total return of 2.57%, while gold returned 3.01%. Bullish expectations for silver bullion have also risen to 42% from 38% quarter over quarter, silver bullion returned 6.35% in Q2.
"Increased expectations for volatility are pushing advisors to become more bullish on precious metals, like gold, which are seen as a store of value," said Atkinson. "Regardless of gold's price performance, gold equities are expected to retain their value in a potential stock market correction."
Advisors expressed more positivity towards the Canadian dollar versus the U.S. dollar. In Q3, positive sentiment towards the Canadian dollar rose to 25% from 20% in Q2. The Canadian dollar fluctuated between approximately 91.7 cents and 93.8 cents per U.S. dollar over Q2.
"The market keeps expecting interest rates to rise, and as a result, the demand for the Canadian dollar has slowly recovered from its dip below 90 cents (U.S.) in early 2013," said Mr. Atkinson. "While the current recovery in the dollar is minor, it further reflects the positive sentiment advisors are displaying towards domestic asset classes in Q3, which is critical for Canadian investors looking to keep their assets north of the border."
About the 2014 Advisor Sentiment Survey
Horizons ETFs 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. For full survey results, visit http://www.HorizonsETFs.com/sentimentsurvey.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. and its affiliate AlphaPro Management Inc. are innovative financial services companies offering the Horizons ETFs family of exchange traded funds. 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 $4.1 billion in assets under management and 70 ETFs listed on the Toronto Stock Exchange (as at June 30, 2014), the Horizons ETFs family makes up one of the largest families of ETFs in Canada. Horizons ETFs Management (Canada) Inc. and AlphaPro Management Inc. are members of the Mirae Asset Global Investments Group.
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the "Horizons Exchange Traded Products"). The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. Certain Horizons Exchange Traded Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These Horizons Exchange Traded Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk. The prospectus contains important information about the Horizons Exchange Traded Products. Please read the prospectus before investing.
The Horizons Exchange Traded Products include the Horizons Bull Plus and Bear Plus ETFs ("Plus ETFs"), the Horizons Index ETFs ("Index ETFs"), Inverse ETFs ("Inverse ETFs"), VIX ETFs (defined below) and active ETFs. The Plus ETFs, and certain other Horizons Exchange Traded Products, use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These Horizons Exchange Traded Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, which, where applicable, are described in their respective prospectuses. Each Plus ETF seeks a return, before fees and expenses, that is either 200% or -200% of the performance of a specified underlying index, commodity or benchmark (the "Target") for a single day. Each Index ETF or Inverse ETF seeks a return that is 100% or – 100%, respectively, of the performance of a specified Target for a single day. Due to compounding of daily returns, a Plus ETFs' or Inverse ETFs' returns over periods other than one day will likely differ in amount, and possibly the expected direction, from the performance of their respective Target(s) for the same period. The Horizons Exchange Traded Products whose Target is the S&P 500 VIX Short-Term Futures Index™ (the "VIX ETFs"), one of which is a Plus ETF, one of which is an Index ETF and one of which is an Inverse ETF, as described in their prospectus, are speculative investment tools that are not conventional investments. The VIX ETFs' Target is highly volatile. As a result, the VIX ETFs are not generally viewed as stand-alone long-term investments. Historically, the VIX ETFs' Target has tended to revert to a historical mean. As a result, the performance of the VIX ETFs' Target is expected to be negative over the longer term and neither the VIX ETFs nor their Target are expected to have positive long-term performance. Investors should monitor their holdings, as frequently as daily, to ensure that they remain consistent with their investment strategies.
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SOURCE: Horizons ETFs Management (Canada) Inc.
For further information: Howard Atkinson, President, Horizons ETFs Management (Canada) Inc., (416) 777-5167, [email protected]