After a quarter of healthy returns, a clear majority of Canadian investment advisors are now bullish on the prospects for higher stock returns, according to survey results published Friday.

The Q4 2010 Advisor Sentiment Survey, conducted by BetaPro Management Inc., asked advisors to give their outlook on 15 distinct asset classes. Advisors responded whether they were bullish, bearish or neutral on the anticipated returns for these asset classes in the next quarter.

Advisors’ outlook for broad-based equity indexes turned clearly bullish as most major stock indexes delivered healthy returns in the third quarter.

Advisors’ bullish sentiment for the S&P/TSX 60 Index increased by 25 percentage points from 39% in the Q3 survey to 64% in the Q4 survey, as this index delivered an 8.00% return for the third quarter.

In a complete reversal of sentiment, the majority of Canadian advisors surveyed (52%) are now bullish on U.S. large-cap stocks for Q4, represented by the S&P 500 Index. In the third quarter, the same proportion of advisors was bearish on this index, which returned 10.72% for the period. Bullish sentiment on the Nasdaq 100 Index jumped from 42% in the Q3 survey to 64% in the Q4 survey, as that index delivered a 14.89% return for Q3.

“Stock markets showed strong gains in Q3, and the results of this survey suggest that advisors expect that upward momentum to continue through the next quarter,” says Howard Atkinson, oresident of BetaPro.

Consistent with trends observed in the past surveys, investment advisors polled continue to be bullish on further growth in the gold market, despite the fact the spot price of gold is already trading at an all-time record high. Roughly two-thirds of advisors surveyed (66%) expect gold bullion to continue to rise over the next quarter. Similarly, 64% of advisors surveyed are bullish on the S&P/TSX Global Gold Index for the fourth quarter. Advisor sentiment on silver, which had a very strong quarter growing 16.28% in value, also remains bullish, with 62% of advisors surveyed expecting the price of silver to continue to move upward during Q4.

“Longstanding trends that we’ve observed with advisors choosing commodities over stocks, domestic and emerging market stocks over U.S. stocks, and the Canadian dollar over the U.S. dollar, all seem to remain intact,” Atkinson says. “However, the consistently bullish view that advisors surveyed have had on the Canadian dollar versus the U.S. dollar appears to be waning. Slightly less than half — 47% — of Canadian advisors surveyed were bullish on the loonie versus the greenback for Q4, with a further 43% neutral.”

In energy asset classes, a majority of advisors surveyed continue to have a bullish outlook on natural gas, with 52% of the view it will continue to rise in Q4, despite the fact the Nymex Natural Gas Index lost 21.13% last quarter. Bullish sentiment on crude oil jumped slightly by 3 percentage points in the Q4 survey, with 55% of advisors surveyed expecting further increases in the price of crude oil for the fourth quarter.

Canadian advisors are historically quite accurate in predicting future trends in the Advisor Sentiment Surveys. In the Q3 survey, there were above-average neutral views reported, which BetaPro believes was a result of the high degree of uncertainty about the direction of many assets classes.

“Advisors batted .500 last quarter, accurately predicting the direction for 7 of 14 indices,” Atkinson says. “In cases where the majority of advisors were bullish, they were accurate on five out of the six asset classes.”

The Q4 survey was conducted between September 29 and October 1, and gauged the opinion of more than 100 Canadian investment advisors.

IE