Canadian advisors are increasingly bullish on stocks in the fourth quarter (Q4 2018), according to the results published Friday from a survey conducted by Toronto-based Horizons ETFs Management (Canada) Inc.
More than half (56%) of advisors say they’re bullish on Canadian equities in Q4 2018, up from 47% in Q3 2018. This is true despite a 1.35% fall in the S&P/TSX 60 Index on a total return basis since the Q3 2018 survey, Horizons ETFs says in a news release.
Interestingly, marijuana saw a 10% drop in bullish sentiment from advisors. On pot, bulls (48%) and bears (45%) are in close proximity, despite the highest index gain of all tracked asset classes during the quarter (the North American marijuana index returned 34.45%).
“At an expressed 71% bullish sentiment, investors are considerably more optimistic about marijuana than advisors, by a margin of 23%,” Steve Hawkins, president and CEO of Horizons ETFs, says in a news release.
“Marijuana investing has been driven primarily by retail end-investors seeking exposure to this budding sector. Valuations on these stocks are very high relative to almost all other sectors. In our view, it makes sense that risk-averse advisors managing client portfolios may be reserved following a turbulent quarter.”
The survey also found that, post-trade deal, advisors are optimistic on the loonie’s competitiveness with the greenback, lowering their bearish stance by 8% compared to Q3 2018.
“Given the recent, landmark agreement on NAFTA’s successor, the USMCA, it makes sense that advisors are increasingly bullish on Canada amid a renewed free trade environment,” Hawkins says. “There’s likely a sense that Canadian equities have been trading at a historical discount, relative to the U.S. given the strong economic growth in Canada and rising oil prices. The elimination of trade concerns around NAFTA has likely renewed optimism for Canadian stocks.”
Bullish expectations also increased on U.S. equities, and enthusiasm around the NASDAQ 100 Index, which has gone up 8.33% since last quarter, remains.
“Despite trading at record highs, Canadian advisors continue to believe that the U.S. stock market will continue to rise,” Hawkins says. “We suspect a lot of this enthusiasm stems from the fact that most of the world’s largest technology companies are based in the U.S. and the technology sectors continue to lead most of the equity growth globally.”
More advisors are bullish on emerging markets since last quarter, too, despite a 2% decrease in the MSCI emerging markets index.
“There has been a huge growth in bullish sentiment in emerging markets,” Hawkins says. “It’s quite possible that advisors feel the sell-off we’ve witnessed in the emerging markets this year is overdone even with trade concerns still lingering. Similar to the Canadian equity outlook, advisors might be expecting emerging market stocks to start to play catch-up relative to developed markets.”
Advisors are also bullish on energy in Q4 2018, especially natural gas, the survey reported, but slightly bearish on precious metals.