In the wake of 2018’s last-quarter volatility, bearish sentiment has increased on nearly all asset classes
Horizons ETFs has released the findings from its first-quarter 2019 Advisor and Investor Sentiment Surveys, which suggest a widening outlook gap between the two groups.
Despite a near-10% drop in the S&P/TSX 60 Index, 56% of advisors stuck to their bullish outlook on Canadian equities going into 2019. Their expectations for the S&P 500 Index of US equities also remained high at 67%, in spite of a 13.97% drop in the index last quarter.
In contrast, bullish sentiment among investors dropped by at least 15% across all three of the major North American indices, including the S&P/TSX 60, the NASDAQ-100, and the S&P 500. All in all, investors are now bearish on Canadian equities and split on US equities.
Advisors kept their faith in Canadian financial stocks, with 58% being bullish on the S&P/TSX Capped Financials Index in spite of its more-than-12% decline last quarter. A more bearish attitude prevailed among investors, with the percentage of bullish respondents declining by 9% to settle at 40%.
“While advisors may be viewing the sell-off from last quarter as a buying opportunity, investors clearly think there is more pain to come,” observed Horizons ETFs President and CEO Steve Hawkins.
The sentiment gap is narrower when it comes to Emerging Markets. Following last quarter’s 7.8% decline in the MSCI Emerging Markets Index — which was less than the pain suffered by most developed markets — only 48% of advisors and 37% of investors were bullish on developing markets.
Gold, silver, and gold equities delivered positive returns last quarter, with gold bullion and silver bullion scoring returns of 7.54% and 5.42%, respectively. Still, just over a third of advisors were bullish on gold bullion (35%) and silver bullion (4%) heading into Q1 2019. In stark contrast, 60% of investors were bullish on gold bullion, and 48% felt the same about silver bullion. And even though the S&P/TSX Global Gold Index advanced by 20.84% during Q4 2018, only 36% of advisors were bullish on gold stocks while investors were 57% bullish.
The survey also showed a vanishing halo of enthusiasm around cannabis stocks. The North American Marijuana Index shed more than 40% after the legalization of recreational cannabis in Canada. Following that, positive expectations for pot among both advisors and investors plummeted by 15% or more, leaving 31% of advisors and 56% of investors bullish for Q1 2019.
The deep 28.62% erosion in performance for the S&P/TSX Capped Energy Index caused a chill among advisors, with only 51% now optimistic on the sector compared to 67% last quarter. Investors are even less bullish as only 40% said they have positive expectations for the sector in Q1 2019.
Natural Gas and Crude Oil One-Month Futures also saw severe bleeding, with the latter suffering a 38.01% rout in the fourth quarter. Nevertheless, 50% of advisors and investors maintained their bullishness on Crude Oil. They were less charitable to Natural Gas, however, as confidence in the sector swung from bull to bear territory in the wake of a mere 2.26% loss in Q4 2018.
“Much of growing pessimism among Canadian advisors and investors about the Energy sector can be traced to ongoing issues with stalled and challenged energy infrastructure projects across the country," Hawkins noted.