Despite the volatility in the market of late, many Canadian investment managers are bullish on Canadian, U.S. and overseas equities, according to the latest Russell Investment Manager Outlook.

Bullishness towards Canadian equities has remained fairly steady at 42% yet various sectors appear to be falling in and out of favour. For example, bullishness towards traditionally “recession proof” Consumer Staples rose from 29% to 59%, and bullishness towards Information Technology leapt from 39% to 72%.

Meanwhile, sentiment has slipped for Consumer Discretionary, Energy and Financial Services stocks.
U.S. equities and emerging equities registered solid up-ticks in bullishness, with both markets now at 52%. EAFE equities continue to be the most consistently exciting asset class in the world with 67% of Canadian investment managers expressing bullish sentiment.

“Virtually unchanged since our last quarterly report, the majority of Canadian investment managers surveyed are looking beyond Canadian borders and are bullish on EAFE equities,” said Tim Hicks, chief investment officer, Russell Investments, in a release. “But, perhaps the most intriguing result of this quarter’s survey is a sharp increase in the number of respondents who rate Canadian equities as undervalued. After several quarters in single digits, over 24% of investment managers now say Canadian stocks are a relative bargain.”

“Meanwhile, though over the last few days the dollar has certainly been the story, we found when managers were surveyed, they indicated that its dramatic run-up may soon be exhausted,” said Hicks. “Bearishness towards our dollar has increased considerably from 28% to 41% with bullishness slipping from 50% to 44%.”

Added Hicks, “In our previous Spring Q2 survey, bond market sentiment had turned sharply negative, with the number of bearish managers soaring from 38% to 77%. Bears now account for only 42% of managers and bullishness towards Canadian bonds has more than doubled to 15%.” “In this years’ first two quarters, managers were braced for rate increases from the Bank of Canada, but are now seeing rates hold steady,” said Hicks, “so few are expecting another hike in the near-term. This may be contributing to the more modest outlook on the loonie and reduced pessimism about Canadian bonds.”

The quarterly poll of Canadian investment managers was conducted by Russell Investments Canada from August 28 to September 4.