Heading into the fourth quarter of 2014, Canadian investment advisors were more bullish than Canadian investors in most asset classes, particularly on Canadian and U.S. stocks, according to the Q4 Advisor and Investor Sentiment Surveys conducted by Horizons ETFs Management (Canada) Inc.

This was the first time Horizons ETFs measured investor sentiment in a separate survey from its usual quarterly Advisor Sentiment Survey.

The surveys asked both advisors and investors for their expectations on 15 distinct asset classes — bullish, bearish or neutral — on the anticipated returns for these asset classes in the fourth quarter.

For Q4, 69% of advisors said they were bullish on the S&P 500, up from the 57% of advisors that expressed bullish sentiment in the Q3 Advisor Survey.

This was the highest rise in sentiment along with the S&P/TSX Capped Financials Index, where bullishness also increased by 12% to 58% during the same period.

For investors, 62% expressed positive sentiment towards the S&P 500.

In terms of performance, the S&P 500 rose 0.62% the three-month period ended September 30. Since October 1, the S&P 500 was up 0.55%, as at October 28.

Looking at domestic markets, bullish sentiment for S&P/TSX 60 Index remained relatively flat for advisors, rising to 62%, up 1% from last quarter. Investors were more cautious on their outlook with just over half (53%) stating they were bullish on the Index.

One of the most notable findings in the survey was the discrepancy in sentiment between advisors and investors for the S&P 500 VIX Short-Term Futures Index, a measure of market volatility. Just over half of advisors (51%) expect to see a higher VIX Index at quarter-end compared to 37% of investors. Over the course of Q3, the S&P 500 VIX Short-Term Futures Index rose 9.84%.

“The difference in sentiment around the VIX suggests that advisors anticipate volatility rising in the market, but remain optimistic about overall long-term stock returns,” said Howard Atkinson, President of Horizons ETFs, in a release.

Energy stocks and miners experienced the largest declines in positive sentiment. Heading into Q4, 55% of advisors were bullish towards the S&P/TSX Capped Energy Index compared to the 70% who were bullish last quarter.

This was the sharpest drop in sentiment followed by the S&P/TSX Global Base Metals Index, where advisor sentiment declined 14 percentage points, down to 26% from 40% last quarter. During Q3, the S&P/TSX Capped Energy Index returned -12.38%.

Of the commodities, investors expressed the most positive sentiment towards natural gas at 65%, compared to advisors at 58%. Advisor bullish sentiment also increased in this area by 10 percentage points, up from 48% last quarter.

“The drop in sentiment for commodities coincides with the dip in oil prices we have seen since June, with barrels of West Texas Intermediate (WTI) Crude Oil falling to below 85 dollars a barrel,” said Atkinson. “The devaluation of oil could also be a factor impacting the demand for the Canadian dollar.”

Bearishness towards the Canadian dollar versus the U.S. dollar increased, where 59% of advisors – compared to 44% last quarter — indicated they were bearish. More than half (52%) of investors were bearish on the loonie.

For Q4, only 34% of advisors were bullish on gold bullion, compared to the 46% that expressed positive sentiment last quarter. Investor sentiment for gold bullion was comparable at 32%.

Similarly for the gold stocks, 35% of advisors were bullish on the S&P/TSX Global Gold Index heading into Q4, a large decline of 11 percentage points from the 46% that were bullish last quarter. For Q3, the S&P/TSX Global Gold Index had a total return of -15.26%, while gold bullion returned -8.98%.