Advisors and investors seem to be on opposite sides when it comes to their views on how the markets will perform this year, particularly after the fourth-quarter volatility around the world, according to a survey from Horizons ETFs Management Canada.
In the face of a near 10% drop in the S&P/TSX 60™ Index last quarter, 56% of advisors have maintained their bullish outlook on Canadian equities going into 2019, quarter-over-quarter. Advisors are also partial to U.S. equities despite a 13.97% drop in the S&P 500 last quarter.
Investors bearish on Canadian equities
But not so for investors who seem to think markets will get worse. Bullish sentiment among investors fell by 15% or more for all three of the major North American indices, which includes the S&P/TSX 60, NASDAQ-100 and the S&P 500. Investors are now also bearish on Canadian equities and divided on U.S. equities.
Bullish sentiment among advisors on the S&P/TSX Capped Financials Index was 58%, a four percentage point increase over last quarter, despite the fact the sector lost more than 12% in the last quarter of 2018. Again, investors took a more bearish tone, with only 40% of investors bullish on Canadian financials, a 9% drop from last quarter.
When it came to emerging markets, both advisors and investors were more bearish. Only 48% of advisors and 37% of investors were bullish on this asset class after a 7.8% index decline last quarter.
Lingering trade war
"While the USMCA trade deal has alleviated North American industry anxieties, the lingering trade war between the U.S. and China continues to generate pessimism and hesitation for the global marketplace,” said Steve Hawkins, president and CEO of Horizons ETFs.
Gold, silver and gold equities were three of the four asset classes surveyed that delivered positive returns last quarter, but only one in three advisors (35%) were bullish on gold and silver bullion going into the first quarter of this year. This is in stark contrast to investors, where nearly two out of three investors (60%) were bullish on gold bullion and 48% were bullish on silver bullion.
While there has been much discussion about the legalization of marijuana in Canada, the North American Marijuana Index lost more than 40%. In lockstep, both advisors and investors registered a steep loss of positive expectation for the sector.
In the energy sector, only 40% of investors were bullish on the sector, with 51% of advisors still optimistic.