After a recent study conducted by Horizons ETFs found that Canadian investment advisors expect Canadian stocks to continue to perform well in the first quarter of 2017, we caught up with Sadiq S. Adatia, Chief Investment Officer at Sun Life Global Investments
, to get his view on the current state of the markets.
“I do think we’ll see continued momentum in both the energy space and gold, and our financial sector should also continue to do well,” Adatia says. “When you put energy, commodities and financials together those are the three big areas in Canada and I still see room for them all to go higher up.”
Adatia thinks Canadian equities have the potential to perform well throughout the rest of the year, although he does not foresee a repeat of 2016’s performance, when a lot of stocks rebounded well after reaching all-time lows.
From an asset allocation perspective, Adatia thinks investors should consider being overweight the U.S. market at the moment. Away from the disruptive noise around the Trump administration, the U.S. has strong growth, good unemployment numbers, and households currently have record levels of wealth. “There are a lot of good things going on and if Trump can put through the additional stimulus package of tax cuts and additional spending, we’re going to get a much stronger U.S. economy, which is better for the U.S. equities market,” Adatia says. With higher yields, the potential for deregulation and increased wealth leading to more lending, Adatia expects U.S. financials to perform particularly well. “We’re also in the early stages of an interest rate cycle, so financials are going to continue to benefit from that,” Adatia says.
Despite the confidence investors are showing in the markets, the uncertainty caused by major geopolitical events is hard to shake. During these times, Adatia believes that advisors are “worth their weight in gold”. “When the markets are volatile, advisors play an important role in making sure investors are doing the right things and investing in the right places,” he says. “In the current markets it’s important for advisors to have the right managers in place to pick the right asset classes, rather than doing it on their own. Market dynamics are changing so much and advisors should look towards managed solutions.”
Adatia sees many benefits for advisors who utilize a third party to make investment decisions. Money managers can keep a close and dedicated eye on investments and have the ability to scale and tactically adjust as needed. “That allows advisors to focus on financial planning and gives them more time to interact with their clients day-to-day,” he says.
The value of advisors is only going to increase throughout the unpredictable Trump administration, which Adatia compares to a rollercoaster ride: there will be a lot of ups and downs but by the end you would probably have enjoyed the ride. “Make sure you have some things that act as a seatbelt, like gold for example,” Adatia says. “It’s one of those things that can protect you on the downside and allow you to stay the course on the more aggressive stuff.”
Things to consider in times of market volatility
An advisor’s view on creating a retirement plan