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SURVEY: Bearish Sentiment Out Of Hibernation For Advisors & Investors In Q3 2022

Download 2022 Q3 Sentiment Survey Results

TORONTO – July 18, 2022 – With most asset classes and equity indices negative in Q2 2022 as well as on a year-to-date basis, both Canadian investors and advisors are signaling that they’re bracing for more pain in the quarter ahead, according to the third-quarter 2022 Advisor and Investor Sentiment Surveys (“Q3 Surveys”) from Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).

Every quarter, Horizons ETFs survey Canadian investors and investment advisors for their outlook on expected returns for distinct asset classes. These expectations are expressed in terms of bullish, bearish or neutral sentiment. The Q3 Surveys cover the period beginning July 1, 2022, and ending September 30, 2022.

Oil, Gas and Alternative Energy
One of the only positive asset classes measured by the Q3 Surveys was crude oil futures, which returned +5.46% in Q2 2022. Despite the outperformance, both advisors and investors were split on the asset class, with bullish and bearish sentiment tied at 38% and 37%, respectively. The draws follow a significant decline in bullish sentiment from last quarter, with bullishness by 17 percentage points for investors and an 8 percentage point decrease in bullish sentiment among advisors.

Following a strong performance in Q1 2022, natural gas futures cooled in Q2 2022, posting a -3.86% return at the end of the quarter. According to the Q3 Surveys, among investors, bullish sentiment decreased 13 percentage points to 35% bullishness and was outpaced by a 38% bearishness score – marking a reversal from investors’ previously bullish position in Q2 2022. Advisors remained bullish on the commodity but cut 8 percentage points of positive sentiment from their score for 43% bullishness.

In the previous Q2 Surveys, lithium, as represented by the Solactive Global Lithium Producers Index, achieved a 75% bullish rating from investors, before posting a -23.54% return in the quarter. In our Q3 Surveys, that bullish sentiment has been slashed by more than half, following a 38 percentage point drop to 37% bullishness; tied with bearish sentiment at 37% as well. Similarly, advisor sentiment was evenly split between bullish and bearish, at 39% each, respectively, following a single percentage point drop in bullish sentiment.

Following a strong Q1 2022 return, uranium, as represented by the Solactive Global Uranium Pure-Play Index, fell -27.39% in Q2 2022. Previously their third most bullish asset class according to the Q2 Surveys, this quarter, investor bullishness declined 26 percentage points to 37% bullishness. Advisors also withdrew some optimism, cutting 6 percentage points of bullish sentiment to reach a score of 40% bullishness. Despite the declines, both groups remained primarily bullish on nuclear fuel.  

Hydrogen, as represented by the Solactive Global Hydrogen Industry Index, fell -29.88% in Q2 2022. Both investors and advisors reduced their confidence in the prospects of hydrogen adoption while still avoiding a full bearish reversal, with investors cutting 14 percentage points of bullish sentiment for a score of 38% bullishness and advisors shedding 6 percentage points of bullish sentiment, landing at 37% bullishness.  

Throughout the increasingly volatile market environment this year, commodities appeared to be the best shelter from the inflationary storm,” said Mark Noble, Executive Vice President, ETF Strategy, at Horizons ETFs. “However, with fears of recession and slowdowns in development on the horizon, coupled with supply gluts in certain commodities now materializing, it seems that there’s a growing sentiment that our eyes were bigger than our stomachs when it comes to our appetite for commodity consumption.”

Canadian Equities and the Dollar

During Q2 2022, Canada’s major equities benchmark – the S&P/TSX 60™ Index – dropped -13.32%. For investors, this decline was enough to trigger a sentiment reversal, with bullish sentiment falling 16 percentage points to just 37% bullishness. In comparison, advisors affirmed their conviction on Canadian resilience, adding 4 percentage points of bullish sentiment for a score of 52% bullishness overall. 

Energy stocks – the only other positive index or asset class measured by the Q3 Surveys – represented by the S&P/TSX Capped Energy Index, registered a modest +2.66% return in Q2 2022. While both investors and advisors remained bullish on the index, according to the Q3 Surveys, there was a significant gulf in their reaction. Investors cut 26 percentage points of bullish sentiment to 41% bullishness, while advisors added a single percentage point of bullishness for a score of 44% bullishness.

Financials, as represented by the S&P/TSX Capped Financials Index, fell -12.90% in the second quarter of 2022. Previously bullish on the index in our previous surveys, both investors and advisors are now primarily bearish on the Canadian financial sector. Investors decreased their bullishness by 18 percentage points to 35% just bullishness overall – outflanked by a bearishness score of 42%. Advisors withdrew 5 percentage points of bullish sentiment for 39% bullishness; below the 46% bearishness score this quarter.

In Q2 2022, the Canadian dollar underperformed the U.S. dollar, falling -2.84%. Previously neutral last quarter, investors are now bearish on the loonie against the greenback, after adding 14 percentage points of negative sentiment for a score of 38% bearishness. In the Q2 Surveys, the Canadian dollar’s prospects earned one of the advisors’ top positive sentiment gains. However, according to the Q3 Surveys, advisors are now bearish, following a 9 percentage point increase in negative sentiment, reaching 45% bearishness.

While energy continues to help buoy our markets, consumer confidence among Canadians has declined this year, as interest rate hikes have yet to materially batten down the hatches against runaway inflation,” said Mr. Noble. “For many Canadians, their dollar does not go as far as it once did, whether at the gas pump, at the grocery store, or during the surge in post-COVID travel. That pessimism is translating into their faith in the resilience of our economy.”

U.S. and International Equities

The United States’ major indices continued their decline this year in Q2 2022, with the S&P 500® Index falling -16.45%, while the NASDAQ-100® Index plummeted -22.47% during this time.

Once again, advisors and investors were effectively split. On the S&P 500®, investor bullishness and bearishness were tied at 37% each, according to the Q3 Surveys. That result follows a 9 percentage point decrease in bullishness, quarter-over-quarter. Among advisors, bearish attitudes narrowly beat out the bullish sentiment, registering 38% bearishness, compared to 37% bullishness, following a 5 percentage point decline in bullish sentiment. Last quarter, advisors were equally split on the S&P 500® index. 

On the NASDAQ-100®, the sentiment decline was more pronounced. Investors reduced their positive sentiment by 14 percentage points for just 35% bullishness, moving from bullish territory from last quarter to bearish for Q3 2022. Advisors were equally split on the outlook for the NASDAQ-100® at 40% bullishness and bearishness each, following a 5 percentage point decline in bullishness when compared to last quarter.

International equities, as represented by the MSCI Emerging Markets Index, were also weak in Q2 2022, falling by -12.36%. Both investors and advisors maintained their positioning this quarter, with investors still bearish, adding 3 percentage points of negative sentiment for a 38% bearishness score. Advisors remained bullish, despite removing 3 percentage points of positive sentiment for a score of 41% bullishness on the index.   

“While no equity marketplace globally has been spared in the current rout, many investors and advisors were caught off guard by the continuing declines south of the border; particularly after the returns that have been delivered by the high-flying U.S. technology sector over the past few years,” said Mr. Noble. “But with most asset classes and international equities eroded in the past quarter, there’s still a prevailing sense that the U.S. is still worth the exposure, especially if there’s a chance that downward trends could reverse.”

Thematic Asset Classes and Sectors: Bitcoin and Marijuana

The worst performing asset class by performance measured by the Q3 Surveys was the spot price of Bitcoin, which cascaded -59.07% in Q2 2022. Investors slashed 12 percentage points of bullish sentiment from the cryptocurrency, landing at 38% bullishness – just a few percentage points above the bearish sentiment score of 35% bearishness. Advisors transitioned into bear territory this quarter after cutting 7 percentage points of bullish sentiment from last quarter’s score, which fell to 38% in the Q3 Surveys.

The second-worst performing asset class by performance, as measured by the Q3 Surveys, were Marijuana companies, as represented by the North American Marijuana Index, which fell -42.54% in Q2 2022. Expectations among investors and advisors remained relatively flat, with advisors fortifying their bearish stance, adding 2 percentage points of negative sentiment for 44% bearishness. Investors’ negative opinion remained unchanged at 37% bearishness.

“Many cryptocurrency evangelists hailed Bitcoin as a non-correlated asset class and an inflation hedge. Unfortunately for them, the performance of the broader cryptocurrency marketplace so far in 2022 has not supported that theory,” said Mr. Noble. “For Horizons ETFs, our best performing ETF this year has been our Inverse Bitcoin ETF, BITI, which has returned 91.50% as at June 30, 2022.”

Precious Metals

Despite historically offering a safe harbor against waves of inflation and volatility, precious metals saw their value erode in Q2 2022, with gold bullion falling -6.72% and silver bullion rising -18.21% in the quarter.

Both investors and advisors have reacted to the rebuffed expectation for gold, with investors switching from overall bullish last quarter to bearish looking ahead into Q3 2022, registering a 16 percentage point decrease in positive sentiment to 36% bullishness – outflanked by a 38% bearishness score. Advisors remained slightly bullish on the metal, despite a 4 percentage point drop in positive sentiment to 40% bullishness.

On silver, investors withdrew 14 percentage points of positive sentiment to 37% bullishness – a single percentage point ahead of the 36% bearishness score. Advisors switched from bullish last quarter to bearish for Q3 2022, withdrawing 6 percentage points of bullish sentiment to land at 37% bullishness.

On the S&P/TSX Global Gold Index, Q2 2022 saw a double-digit decline from gold miners, with a -24.84% return. Many investors became bears on the index, dropping 14 percentage points of positive sentiment for a score of just 39% bullishness, which was 53% bullishness overall last quarter. Advisors dropped 7 percentage points of positive sentiment for a score 39% bullishness.

Fixed Income

Record inflation and rising rates continue to underwhelm fixed income markets. U.S. Treasuries, as represented by the Solactive 7-10 Year Treasury Bond Index, posted a negligible -4.27% return in Q2 2022. Both advisors and investors remained bearish on U.S. Treasuries but moderated their negative sentiment slightly, with investors reducing bearishness by 1 percentage point to 41% bearishness and advisors reducing it by 2 percentage points to 40% bearishness. “The current fixed income marketplace continues to offer little solace for advisors and investors seeking safety for their portfolios,” said Mr. Noble. Instead, it has ultimately been a further drag on portfolio performance this year. We are on pace for the first calendar year in more than half a century where both fixed income and broad equities could finish the year in the negative.”

About Horizons ETFs Management (Canada) Inc. (
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers
one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family
includes a broadly diversified range of solutions for investors of all experience levels to meet their
investment objectives in a variety of market conditions. Horizons ETFs has over $21 billion of
assets under management and 104 ETFs listed on major Canadian stock exchanges.

For investor inquiries:
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745

For media inquiries:
Contact Jonathan McGuire
Assistant Vice President, ETF Strategy
Horizons ETFs Management (Canada) Inc.
(416) 640-2956

Annualized Performance (%) as at June 30, 2022

1 Mo 3 Mo 6 Mo YTD 1 Yr 3 Yr 5 Yr 10 Yr SIR**
BetaPro Inverse
Bitcoin ETF(BITI)
60.47 117.05 91.50 91.50 15.68 62.17

**Fund performance since inception on April 14, 2021, as at June 30, 2022

Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the “Horizons Exchange Traded Products”). The Horizons Exchange Traded Products are not guaranteed, their value changes frequently and past performance may not be repeated. Certain Horizons Exchange Traded Products may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the ETF. Please read the relevant prospectus before investing.

The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF(s) or future returns on investment in the ETF(s). Only the returns for periods of one year or greater are annualized returns.

The Horizons Exchange Traded Products include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds, and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in shares of a BetaPro Product decreases in value. BetaPro Inverse Bitcoin ETF (“BITI”), which is an up to -1X ETF, as described in the prospectus, is a speculative investment tool and is not considered a conventional investment. The Target, an index which replicates exposure to rolling Bitcoin Futures and not the spot price of Bitcoin, is highly volatile. As a result, the BITI is not intended as a stand-alone investment. The returns of BITI over periods longer than one day will, under most market conditions, be in the opposite direction from the performance of its Underlying Index for the same period, and the returns of BITI can, based on historical returns, generally be expected to be substantially similar to the inverse performance of its Underlying Index for the same period, when BITI’s exposure is at -100% of the Underlying Index throughout the period. However, the deviation of returns of BITI from the inverse performance of its Underlying Index can be expected to become more pronounced as the volatility of the Underlying Index, and/or the period of time, increases.

There are inherent risks associated with products linked to crypto-assets, including Bitcoin Futures. While Bitcoin Futures are traded on a regulated exchange and cleared by regulated central counterparties, direct or indirect exposure to the high level of risk of Bitcoin Futures will not be suitable for all types of investors. An investment in BITI or any of the BetaPro Products is not intended as a complete investment program and is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment. Please read the full risk disclosure in the prospectus before investing. Investors should monitor their holdings in BetaPro Products and their performance at least as frequently as daily to ensure such investment(s) remain consistent with their investment strategies.

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

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