Canadian advisors are more bullish than investors on several asset classes heading into the final quarter of 2021, suggests the latest sentiment surveys from Horizons ETFs Management (Canada) Inc., released on Wednesday.
The surveys poll advisors and investors on their expected returns for distinct asset classes and express those expectations as bullish, bearish or neutral sentiment. The reference period for the latest surveys is Sept. 30 to Dec. 31.
Canadian equities, represented by the S&P/TSX 60 Index, posted a -0.48% return in the third quarter, Horizons said in the release. Advisors added 10 percentage points to their positive sentiment on the index, for an overall bullishness rating of 69% — advisors’ highest rating, tied with natural gas (+23 percentage points) and crude oil (+12 percentage points).
“The broader resilience of Canada’s economy and the recent run-up in energy, in particular, crude oil, seems to have boosted confidence in Canada’s markets,” said Mark Noble, executive vice-president of ETF strategy at Horizons ETFs, in the release.
Investors reduced their positive outlook on the Canadian index by three percentage points, to 50% bullishness overall.
Canadian energy, represented by the S&P/TSX Capped Energy Index, had a +3.26% return in the third quarter. Advisors’ positive sentiment remained at 64% bullishness, while investors downgraded their sentiment by seven percentage points to 55% bullishness.
On Canadian financials, both advisors and investors reduced positive sentiment, though advisors were again relatively more bullish (53% versus 46% for investors). The S&P/TSX Capped Financials Index returned +0.31% in Q3.
“Sentiment has cooled on Canadian financials,” Noble said. “This could be due to a variety of factors, including proposed policies to increase taxes on Canadian banks or simply because of valuations, which have risen to become relatively high in the last year, after a strong run-up.”
Both advisor and investor sentiment also cooled on pricey U.S equities, after the S&P 500 Index posted a +0.23% return last quarter. Each group dropped their positive sentiment on the index by four percentage points, to 52% bullishness.
Compared to the previous surveys, advisors were significantly less bullish on emerging markets, following a -8.84% return for the MSCI Emerging Market Index in Q3, though advisors were still more bullish than investors (51% versus 42%).
“Concerns about the impacts of China’s market interventions and the knock-on effects of lingering debt-default issues, such as those with Evergrande, appear to have cooled some prospects for speculation on emerging markets,” Noble said.
Within thematic asset classes and sectors, Bitcoin was favoured by both advisors and investors, after the cryptocurrency had a +25.59% increase in its price during the third quarter, the release said. Previously bearish advisors added 19 percentage points of positive sentiment to be 53% bullish, while previously bearish investors added 12 points to be 52% bullish.
The second-worst performing asset class measured in the surveys — psychedelics, represented by the North American Psychedelics Index (-17% in Q3) — had investors scaling back their bullishness by nine points, to 37% neutral. Conversely, advisors added 16 percentage points of positive sentiment, to be 47% bullish — “perhaps sensing a value opportunity,” the release said.
The worst performing asset class measured in the surveys was marijuana, represented by the North American Marijuana Index (-25%). Advisors added four percentage points of positive sentiment, pivoting from neutral to 36% bullish, while investors’ positive sentiment on the index dropped by four percentage points to 42% bullishness.
Advisors also saw an opportunity in fixed income despite the Solactive 7–10 Year Treasury Bond Index posting a 0.20% loss in Q3, the release said. Advisors added 21 percentage points of positive sentiment, moving out of bear territory to be 44% bullish on the index. Investors were 46% neutral.
For the first time, the surveys included sentiment on three alternative energies — uranium, lithium and hydrogen.
Lithium proved most popular — with investors slightly more bullish (65% versus 63% for advisors). Investors were also more bullish than advisors on uranium (53% versus 44%), while advisors were more bullish on hydrogen (45%) relative to investors’ neutral sentiment.
“While traditional commodities like natural gas and crude oil continue to be strong performers, the initial bullishness in our surveys on these three alternative energies suggests a recognition that they could disrupt and usurp market share as governments and consumers become more aware of cleaner energy options and averse to traditionally carbon-intensive commodities,” Noble said.
Full results are available in the advisor sentiment survey and investor sentiment survey.