Heading into the first quarter of 2015, more Canadian advisors than investors were bullish in nine out of 15 asset classes, particularly U.S. stocks and commodities, according to a Horizons ETFs report.
For Q1, 74% of advisors said they were bullish on the S&P 500, up from the 69% of advisors who expressed bullish sentiment in the last quarterly survey. The S&P 500 had the second largest disparity in sentiment of the asset classes surveyed, with a 15% gap between advisors and investors in bullishness: only 59% of investors were bullish this quarter, a drop from 62% last quarter. A similar 14% gap occurred with the NASDAQ-100 Index, where 76% of advisors were bullish versus 62% of investors.
In terms of performance, the S&P 500 rose 4.39% during Q4, 2014, and since then, is down 2.12% year-to-date, as at January 14, 2015. The NASDAQ-100 Index rose 4.61% during Q4 and has since fallen 2.13% for the year-to-date, as at January 14, 2015.
“Given the S&P 500’s rally in the last quarter and the end of quantitative easing, our survey results indicate that advisors expect the momentum to continue, while investors remain cautious and less trusting of the signals of true recovery,” says Howard Atkinson, president of Horizons ETFs. “Canadian investors seem somewhat more focused on our domestic markets; this is an opportunity for advisors to continue communicating the importance of diversification and investing outside of Canada.”
Looking at domestic markets, bullish sentiment for the S&P/TSX 60 fell slightly among advisors to 57% in Q1 from 62% in Q4. Meanwhile, it remained flat for investors at 53%, who remained more cautious in their outlook.
Regarding commodities, advisors and investors greatly diverged on crude oil, with 57% of advisors bullish for the asset class versus only 41% of investors. Compared to last quarter, advisor sentiment was bullish for oil prices, increasing to 57% from 51%, while investor bullish sentiment fell seven percentage points to 41% from 48%.
The spot price of crude oil fell 41.28% to US$53.27 from US$90.73 for Q4, the three-month period ended December 31, 2014.
Natural gas showed the largest declines in bullish sentiment among both advisors and investors. Advisors bullishness towards the asset class fell 10 percentage points to 48%, and for investors the decline was 19 percentage points, where 44% were bullish in Q1, compared to the 65% in Q4.
Bearishness towards the Canadian dollar versus the U.S. dollar also fell slightly, where 50% of advisors — compared to 59% last quarter — indicated they were bearish. More than half (52%) of investors were bearish on the loonie. The Canadian dollar fell 3.54% over Q4 and continues to fall in 2015.
Energy and mining stocks experienced the largest rise in bullish sentiment from investors, while advisor sentiment for those sectors remained flat. Heading into Q1, investor bullish sentiment towards the S&P/TSX Capped Energy Index rose 12 percentage points, up from 41% last quarter. Overall, the S&P/TSX Capped Energy Index was one of the only sectors where positive sentiment was equal between advisors and investors, at 53%. Meanwhile, advisor bullishness towards this index slightly declined from the 55% that were bullish in Q4.
One of the most notable findings in the survey was the drop in advisor sentiment for the S&P 500 VIX Short-Term Futures Index. Advisor bullish sentiment for the VIX fell 12 percentage points to 39%; last quarter more than half of the advisors (51%) were positive on the index. Investors echoed advisors’ sentiment with only 40% bullish on the index.
There was no change in bullish sentiment towards gold bullion among advisors, which remained at 34%. Investor sentiment was slightly more bullish at 39%, up from 32% last quarter.
Similarly, for gold stocks, 34% of advisors were bullish on the S&P/TSX Global Gold Index heading into Q1. Investors’ bullish sentiment was also at 34%, compared to 30% last quarter.