The U.S. and Canadian markets could be going in opposite directions, according to investment managers surveyed in the latest Russell Investment Manager Outlook.

The survey reveals that bullishness towards U.S. equities climbed from 33% to 45%, and bearishness dropped 13% to 31%.

In contrast, bullishness towards Canadian equities has dropped from 43% to 33%. Digging deeper, bullishness towards the materials sector — dominated by gold stocks — plummeted from 62% to just 32%. And, while 51% of managers remain bullish toward the energy sector, bears have surged from 23% to 41%. In addition, over 95% of investment managers say the Canadian market is either fairly-valued or overvalued, as opposed to undervalued.

“Looking at the big picture, it’s likely that investment managers are simply finding better relative values in the weaker U.S. market than elsewhere in the world, and may be looking to shift profits from Canada and other markets back into American stocks,” says Sadiq Adatia, chief investment officer of Russell Investments Canada Ltd.

“In our view, this illustrates the increasing divide between those who believe Canadian natural resources are in the midst of a long-term secular growth trend driven by a fundamental shift in the global economy, and those who believe we are merely witnessing a classic bubble.”

The outlook wasn’t entirely negative for Canada’s sectors. The level of bullishness towards industrials — such as airlines and railways — climbed significantly from 22% to 42%. Similarly, bullishness towards the consumer discretionary sector rose from 19% to 32%. Information technology also saw bullishness rise considerably, from 40% to 69%, although Russell notes this sector is largely a proxy for Research in Motion.

The financial services sector has two distinct camps: the 43% of investment managers who are bullish and believe we will see a rebound within a reasonable timeframe, and the 43% who are bearish and see the sub-prime debt issue as a serious, long-term problem.

Bullishness towards EAFE equities slipped from 34% to 26%, and bullishness towards emerging markets fell from 36% to 28%.

When asked what specific factors are negatively affecting equity performance, 65% of investment managers cited a slowing economy, while credit markets, low corporate earnings, inflation and energy costs were also cited at a lesser extent. Interest rate policy was identified by less than 5% of investment managers.

Overall, investment managers continue to strongly favour equities over bonds. With no immediate expectation of future rate cuts, bullishness towards Canadians bonds sits at only 18%, and more than 61% of investment managers polled say they are now bearish.

The investment managers expressed these views in the latest quarterly Russell Investment Manager Outlook poll conducted by Russell in late May and June of 2008. There were 46 respondents across Canada this quarter: 65% of the respondents were portfolio managers, 9% were chief investment officers, 7% were investment strategists, 2% were research analysts, other respondents consisted of 17%.