Investors and advisors diverge on 2021 outlook

Professionals harbour mixed feelings as investors show no fear, quarterly survey shows

Investors and advisors diverge on 2021 outlook

As financial markets started the year on an uncertain note, investors are stepping on the gas while advisors have their foot on the brake.

In the first-quarter 2021 Advisor and Investor Sentiment Surveys conducted by Horizons ETFs, investor confidence in Canadian equities came in at 56%, a 19-percentage-point rise over the previous quarter, in response to the S&P/TSX 60 index’s 6.98% advance in Q4 2020. Meanwhile, advisors took a doubtful view, dialling down their bullish outlook by 13 percentage points to 48%.

The strong pickup in the S&P/TSX Capped Energy Index, which delivered a 39.91% return in the fourth quarter, raised investors’ bullish view by 25 percentage points to 52% bullishness overall. While advisors also saw a potential heating up in Canadian energy markets, their optimism registered at just 39% off a 3% rise in bullishness.

With financials achieving a 15.4% Q4 gain as shown by the S&P/TSX Capped Financials Index, investor bullishness surged 22% to 52% overall, whereas advisor bullishness slipped one percentage point to 45%.

Advisors and investors were more aligned when it came to the Canadian dollar’s strength relative to the U.S. dollar. The loonie gained 4.61% in value relative to the greenback, prompting both groups to retreat from their bearish sentiment; investors grew 6% more bullish to reach 37% bullishness overall, while advisors showed 41% bullishness following a 10-percentage-point uptick in confidence.

"With 2020 in the rearview mirror, it's clear that many Canadian investors are optimistic about the New Year ahead for our country, whereas Advisors are clearly entering 2021 with a cautious tone," said Mark Noble, Executive Vice-President of ETF Strategy at Horizons ETFs.

Going outside Canadian borders, the remarkable ascent in U.S. equities left investors 55% and 59% bullish on the S&P 500 and NASDAQ-100 indexes, respectively. Advisors expressed a more conflicted view: they were 48% overall bullish on the tech-heavy NASDAQ, marking a 16-percentage point reversal from Q4, though their bullishness on the S&P 500 stood at 69%.

International equities, represented by the MSCI Emerging Markets Index, advanced 19.34% in Q4, sparking an 18-percentage-point advance to 59% overall bullishness among investors. Advisors were also remained overall bullish at 57%, though that was after a 2-percentage-point moderation.

“It is interesting to note that the NASDAQ-100 was consistently one of the top-ranking indices for advisors through much of 2020, and this quarter represented a stark reversal in that sentiment,” Noble said. “This may underpin a belief amongst advisors that the cyclical sectors that really struggled in 2020 might be poised to outperform the technology-heavy NASDAQ-100, as the world hopefully embarks on a global recovery from the COVID-19 Pandemic.”

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