Gold has finally lost its lustre for many Canadian investment advisors, who are increasingly looking at stocks to deliver higher returns, according to a first quarter survey conducted by exchange traded fund manager BetaPro Management Inc.

Advisors’ bullish sentiment for the S&P/TSX 60 Index remained relatively level at 62% compared to BetaPro’s fourth quarter survey, as this index delivered a 14% return in 2010, including 8.25% in the fourth quarter alone.

A vast majority of advisors were also bullish on the outlook for U.S. large-cap stocks, represented by the S&P 500 (63%), and emerging market stocks, represented by the MSCI Emerging Markets Index (67%).

The S&P 500 returned 10.28% last quarter, while the MSCI Emerging Markets Index returned 7.26%.

Bullishness on financial stocks, represented by the S&P/TSX Financials Index, increased dramatically, moving to 57% for the first quarter from 47% in the fourth quarter against a backdrop of positive returns last quarter, during which this index increased 5.14% for the quarter and finished the year up 8.51%.

“Stock markets showed strong gains in 2010, particularly in the fourth quarter, and the results of this survey suggest that advisors expect many stock indices to continue to deliver strong returns,” said Howard Atkinson, president of BetaPro, in a release.

The lone equity sector that was the exception to this trend was the S&P/TSX Global Gold Index, which saw a stark reversal of sentiment. Bullish sentiment dropped to 33% in first quarter from 64% in the fourth quarter, despite the fact that gold stocks delivered returns of more than 25% on the year. Similarly, bullish sentiment on gold bullion dropped to 35% in the first quarter from 66% in the fourth quarter.

“For the last two years, advisors have been consistently bullish on the prospects for gold, coinciding with phenomenal returns for the asset class. This survey seems to suggest that most Canadian investment advisors feel that gold has had its run and may now be fairly- or even over-valued,” Atkinson said.

Advisor sentiment on energy stocks was overwhelmingly bullish for the first quarter, with 73% of advisors expecting stronger returns from that sector, represented by the S&P/TSX Energy Index. Similarly, a strong majority (61%) of advisors were also bullish on prospects for crude oil, up seven percentage points from the fourth quarter.

Despite bullish sentiment on crude oil and Canadian stocks, advisors seemed undecided on the direction of the Canadian dollar versus the U.S. dollar, with only 39% of advisors bullish on the direction of the loonie, and 44% neutral.

Canadian advisors historically have a good batting average in predicting future trends in BetaPro’s advisor sentiment surveys. Last quarter was no exception.

“Advisors were extremely accurate in predicting the direction for 14 of 15 indices,” Atkinson said. “The uncertainty we observed in previous recent surveys seems to have subsided, with the majority of advisors seemingly making very clear directional bets on certain asset classes.”

The first quarter survey was conducted between January 5 and 14, and gauged the opinion of more than 100 Canadian investment advisors.

IE