Heading into the second quarter of 2015, Canadian advisors and investors are increasingly bearish on the majority of asset classes, according to a survey conducted by Horizons ETFs Management (Canada) Inc.
The survey asked advisors and investors for their expectations of returns — bullish, bearish or neutral — on 13 asset classes for the upcoming quarter.
Overall, bullish sentiment for both advisors and investors declined for the majority of asset classes. Advisors were less bullish on nine out of 13 major indices and asset classes, while investors were less bullish on seven out of the 13. For both advisors and investors, the largest drops in bullish sentiment were observed when asked about Canada’s key indices, such as the S&P/TSX 60 Index, S&P/TSX Capped Financial Index and S&P/TSX Capped Energy Index.
Just over half of advisors (54%) said they were bullish on S&P/TSX 60 Index, compared to 57% for Q1. Investors were much less optimistic about the index heading into Q2, with bullishness declining 11% to 42%, compared to 53% last quarter. Advisor and investor bullish sentiment for the index was one of the largest sentiment disparities in the survey, differing by 12%. At the end of Q1, the index only rose by 1.69% (as at March 31, 2015).
Bullish sentiment for advisors on the S&P/TSX Capped Financial Index fell to 40%, down from 57%, a total decline of 17%. Similarly, 36% of investors said they were bullish on financials, compared to 48% last quarter. For the three-month period ended March 31, 2015, the index fell 3%.
For the S&P/TSX Capped Energy Index, bullish sentiment for advisors dropped 12% quarter-over-quarter, where 41% of advisors were bullish heading into Q2. Meanwhile, investors’ bullish sentiment dropped 5% to 33%. For the three-month period ended March 31, 2015, the index fell 1.61%.
Looking at U.S. indices (the S&P 500 and NASDAQ-100 Indices), advisors and investors remain bullish on U.S. equities, but less so than last quarter. Sixty-eight percent of advisors said they are bullish on the S&P 500, down from 74% last quarter; advisors that were bearish rose to 18% from 14% last quarter. However, bullish sentiment for advisors outweighed that of investors, which remains at 48%, and is down from the 59% last quarter, with bearish sentiment among investors rising by 5% to 29%.
Changes in sentiment on the NASDAQ-100 Index resulted in a 9% drop in bullish sentiment for advisors, down to 65%, while for investors it fell 13% to 49%. Between advisors and investors, the outlook on these U.S. indices were the largest disparities in the survey: the sentiment gap for the S&P 500 was 20%, 16% for the NASDAQ-100 Index.
U.S. indices’ performance was flat over Q1, with the S&P 500 only rising 0.44%, meanwhile the NASDAQ-100 Index rose 2.3%.
Bullishness for crude oil prices fell for both groups by 9%, with 48% of advisors and 35% of investors bullish heading into Q2. Bearish sentiment for advisors increased markedly to 30%, compared to 17% last quarter. Investors have maintained their bearishness on crude with 36% bearish this quarter, compared to the 35% last quarter.
For Q1, the spot price of crude fell 10.6%, down to US$55.41/barrel.
Bearish sentiment on natural gas for advisors rose 10% to 28%, and 14% to 40% for investors. The price of a natural gas one-month forward contract dropped 8.62% in Q1.
Expectations for crude and natural gas played into sentiment for the Canadian dollar versus the greenback. Both advisors and investors displayed more bullishness and reduced bearishness for domestic currency. Bullish sentiment for advisors rose 3% to 23%, and bearishness declined by 9% to 41% compared to last quarter. Investors’ bullishness rose by 3% to 24%, while bearishness decreased by 8% to 44%. The Canadian dollar lost more than 8% against the U.S. dollar last quarter.
Advisors and investors diverged in their sentiment towards gold bullion. The number of investors bullish on gold jumped to 43%, compared to 39% last quarter. Meanwhile, bullish advisors declined to 30% from 34%. Investors are also more positive about gold stocks heading into Q2, raising sentiment on the S&P/TSX Global Gold Index to 38%, up from 34% last quarter. Advisors, however, dropped in bullish sentiment for gold stocks, with 30% remaining bullish, compared to 34% last quarter.
Following the increase in bullish sentiment on gold prices, investors also showed increased bullishness for silver bullion, moving to 41% from 36% last quarter. The majority of advisors were neutral on silver, at 43%.