Canadian advisor and investor optimism has declined across almost all asset classes heading into the first quarter of 2019, according to the advisor and investor sentiment surveys published Monday by Toronto-based Horizons ETFs Management Canada Inc.
Although bullishness has dropped across the board, investors are significantly more pessimistic than advisors, the surveys suggest.
Despite a nearly 10% drop in the S&P/TSX 60 index last quarter, 56% of advisors have maintained their bullish outlook on Canadian equities going into the first quarter of 2019. Similarly, 67% were bullish on U.S. equities, as represented by the S&P 500, despite a nearly 14% drop in that index last quarter.
Investors, however, are “outright bearish” on Canadian equities, and divided on U.S. equities, Horizons ETFs says. Among investors, bullish sentiment fell by 15% or more for all three major North American indices (the S&P/TSX 60, NASDAQ-100 and the S&P 500).
“Despite end-of-year volatility, advisors appear to still expect Canadian and U.S. equities to generate positive returns over the next three months,” Steve Hawkins, president and CEO of Horizons ETFs, says in a statement. “While advisors may be viewing the sell-off from last quarter as a buying opportunity, investors clearly think there is more pain to come.”
Both advisors and investors were more bearish on emerging markets after a 7.8% decline in the MSCI Emerging Markets Index last quarter. Hawkins says the “lingering trade war” between the U.S. and China continues to generate hesitation, even as emerging markets fare decently well.
Nearly two-in-three investors are bullish on gold bullion (60%), and 48% are bullish on silver bullion (both of which delivered positive returns last quarter). In contrast, only 35% of advisors were bullish on gold bullion and 34% bullish on silver bullion. Likewise, 36% of advisors were bearish on gold stocks, whereas 57% of investors expressed bullishness.
There is a well-documented historical gap in the preferences of advisors and investors, Hawkins says, with investors having a “stronger disposition” toward precious metals and precious metals equities.
“Since these are generally viewed as defensive assets, it makes sense that advisors—who are generally bullish—would favour stocks over gold and silver,” he says. “In contrast, investors favour the precious metals over most of the major stock indices.”
Marijuana equities (as represented by the North American Marijuana Index) lost more than 40% after recreational legalization in Canada, and both advisors’ and investors’ expectations dropped in tandem, with bullish sentiment falling by 15% or more. For Q1 2019, 31% of advisors were bullish on pot stocks versus 56% of investors. As more companies have the opportunity to demonstrate their fundamentals through financial reporting, Hawkins says, analysts will be able to more accurately predict and gauge growth.
Bullish sentiment on energy dropped significantly for both advisors and investors, which can be attributed to stalled energy infrastructure projects across the country, Hawkins says. About 50% of both advisors and investors are still bullish on crude oil one-month futures, but natural gas lost investor confidence and dropped from its bull status to bear.