Q4 market outlook survey reveals divergent views on outlook for market recovery across sectors and asset classes
After three quarters of that have seen both losses and uncertainty in the financial markets, advisors and investors are coming into the last three months of 2020 with divergent expectations of a broad market recovery.
In the latest round of its quarterly Advisor and Investor Sentiment Surveys, Horizons ETFs found that 61% of advisors had bullish expectations for the S&P/TSX 60 Composite Index in Q4, following the benchmark’s 3.54% advance in Q3. However, investors were decidedly less confident as just 37% said they were bullish, while 38% had a bearish stance.
“The divergence between advisors and investors is interesting and could be explained by advisor fixation on market performance, while investors are 'baking in' their personal experiences with unemployment, gas consumption, mortgage deferrals and other timely economic indicators into their outlook equation,” said Horizons ETFs President and CEO Steve Hawkins.
Attitudes toward international equities were similarly split. With respect to the S&P 500, which emerged with an 8.47% gain from the third quarter, 60% of advisors had a bullish attitude, compared to just 43% of investors. The NASDAQ’s 12.42% gain last quarter similarly left 64% of advisors feeling bullish for Q4, while only 48% of investors felt the same.
Emerging markets, as depicted by the MSCI Emerging Markets Index, rose by 8.73% last quarter, leading to a 17% rise that left 59% of advisors feeling bullish on the index. In contrast, investors showed a 7% drop that led to just 41% holding a bullish stance.
Turning back to Canadian equities, 46% of advisors expressed optimism on the S&P/TSX Capped Financials Index, compared to just 30% of investors. The two groups were more closely aligned on the S&P/TSX Capped Energy Index, with just 36% of advisors and 27% of investors feeling bullish on the index’s Q4 prospects despite the expectation of greater fuel consumption as winter comes in.
That negative overall attitude toward energy is reflected in the respondents’ outlook on crude. While crude oil futures managed to eke out a 2.42% gain in the previous quarter, advisors and investors ratcheted back their bullish views by 12% and 14%, respectively, with the upshot being just 39% and 35% of investors were confident in the space heading into Q4.
Still, the story for the natural gas space is drastically different. After the commodity posted a phenomenal 44.32% gain in Q3, the proportion of advisors with bullish outlooks on it rose 4% quarter-on-quarter to end at 44%. Investors appeared decidedly more excited as the bullish cohort within that group increased by 21%, ending with 54% in the bulls’ camp for Q4.
Looking at defensive assets, the prospects of lower-for-longer interest rates has left a dismal 14% of advisors and 20% of investors with a bullish view on fixed income as represented by the Solactive 7-10 Year Treasury Bond Index. On the other hand, gold and silver bullion – the latter of which surged by 27.62% in Q3 – are becoming more favoured, with 59% of advisors and 65% of investors bullish on gold, and 50% of advisors and 62% of investors bullish on silver going into Q4.
And as the cannabis space continues on its multi-quarter slide, just a 23% minority of advisors said they were optimistic that the North America Marijuana Index would rise in Q4. In contrast, investors showed greater bullishness, with 40% of said they were bullish on the sector.
“As a young industry, Canada's licensed producers and cannabis companies have had to learn to navigate these difficult times to stay afloat, while having less access to the capital markets to raise cash and wait things out,” Hawkins said. “Despite this, sales continue to increase here in Canada and there is the potential for significant marijuana reform and growth in the United States with the increasing possibility of a Democrat Presidential win in November, which could provide strong momentum for the sector going into 2021.”
