Canadian investment advisors continue to have a bearish outlook on Canadian stocks, according to the Q3 2018 Advisor Sentiment Survey conducted by Horizons ETFs Management (Canada).
The Q3 Survey, the results of which were released July 18, asked Canadian investment advisors for their expectations of returns – bullish, bearish or neutral – on 14 distinct asset classes for Q3 2018, which ends on September 30.
Forty-seven per cent of Canadian investment advisors surveyed were bullish on Canadian equities. This is a slight decline compared to the 48 per cent of advisors who stated they were bullish on the S&P/TSX 60™ Index Horizon ETFs as indicated in the previous Q2 Advisor Sentiment Survey.
Despite this bearish sentiment, Horizons ETFs observes that domestic equities had “a very strong second quarter, primarily due to the solid run in energy prices, with the S&P/TSX 60 Index generating a 6.2 per cent return.”
Concerns surrounding the fate of NAFTA
"One cause for weaker performance expectations may be related to recent Canada/U.S. tariffs and an ongoing climate of concern surrounding the fate of NAFTA," says Steve Hawkins, President and Co-CEO of Horizons ETFs. "NAFTA apprehensions don't have any real impact on the price of crude oil, which was up another 14 per cent last quarter. Canadian energy producers continue this reversal-of-fortune from previous quarterly surveys, where investors were generally bullish on Canada, but bearish on Energy stocks."
Advisors have high expectations for pot stocks
Horizons ETFs notes that while it is technically not a Canadian sector, the marijuana sector is dominated by Canadian stocks, as represented by the North American Marijuana Index. This sector had the highest level of bullish sentiment, says the survey with 58 per cent of advisors expecting marijuana stocks to deliver positive returns in Q3.
The North American Marijuana Index was up 5.78 per cent from last quarter, with much of that performance coming from the announcement of final dates for the legalization of recreational marijuana in Canada, says Horizons ETFs.
Recreational marijuana legalization
"October 17, 2018 is the date that many marijuana investors have circled on their calendars, as this is when recreational marijuana will become legal in Canada," says Hawkins. "Since this sector is such a news-driven space, many advisors may be expecting the sector to get a big bump in interest as we near the big day."