TORONTO – October, 22, 2019 – After three consecutive financial quarters punctuated by market volatility, investors and advisors are taking a reserved approach to investing in Q4 2019, placing a greater emphasis on traditionally defensive asset classes like precious metals, according to the fourth-quarter 2019 Advisor and Investor Sentiment Surveys (“Q4 Surveys”) from Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).
Every quarter, Horizons ETFs surveys investment advisors and investors for their outlook on expected returns for 14 distinct asset classes. These expectations are expressed in terms of bullish, bearish or neutral sentiment. The Q4 Surveys cover the period beginning September 30, 2019, and ending December 31, 2019.
Canadian and U.S. Equities
With Canadian equity indices posting stronger average returns than U.S equities over Q3 2019, as represented by S&P 500® Index and the NASDAQ-100® Index, advisors are signaling growing confidence on investing in Canada.
Advisors registered a strong 8% increase on bullishness toward the S&P/TSX 60™ Index, as well as a 3% growth in bullishness on Canada’s banks, as represented by the S&P/TSX Capped Financials™ Index
Investors similarly found greater confidence, increasing their optimism on the S&P/TSX Global Gold™ Index by 4% to an overall 60% bullishness weighting. However, both advisors and investors lost faith in Canadian energy, as represented by the S&P/TSX Capped Energy™ Index, amid a weak -2.15% performance in Q3 2019.
“While sentiment on Canadian equities has improved, Canadian advisors and investors are still skeptical of the growth of Canadian equities, particularly in comparison to U.S. equities,” said Steve Hawkins, President and CEO of Horizons ETFs. “The outcome of the upcoming federal election will likely weigh heavily on advisor sentiment and we could see substantial changes in sentiment next quarter depending on the outcome.”
Expectations south of the border have waned following tepid performances from the S&P 500 and NASDAQ-100, which posted returns of 1.70% and 1.29%, respectively, in Q3 2019. While still overall bullish, Advisors withdrew -8% from their overweight bullishness on the S&P 500 and -9% from the NASDAQ-100. Investors also cooled on the two major U.S. indices but by a marginal -1% on each.
“One of the U.S. equity stories of 2019 is the volatility that the ongoing trade war with China has wrought on performance,” said Mr. Hawkins. “Major gains – and losses – have been made possible on the back of a single tweet. Despite this, U.S. equities are on pace to finish the year with impressive double-digit returns, which likely explains why these stocks remain somewhat favorable with advisors despite the decline in sentiment.”
Defensive Assets Find Favour
Gold and silver, as represented by the spot prices of Gold Bullion and Silver Bullion, has continued a significant upward sentiment trend since Horizons ETFs’ Q1 2019 survey, conducted in December 2018.
In Q1 2019, advisors were 35% bullish on Gold Bullion, in near-equal weighting to the neutral and bearish sentiment shared. Since then, advisor preference for the precious metal has risen 23%, with silver following at a strong 17%.
On the investor side, confidence in gold and silver has been steady throughout 2019, with an outlook towards gold holding near or over 50% bullishness throughout the year. Silver has similarly held a bullish position with investors from Q1 to Q4 2019 among investors, concluding the year at 50% bullishness. Looking at Q4 2019, investors registered 60% bullishness on gold – their highest rating, alongside the S&P/TSX Global Gold™ Index.
“Amid the rise of cryptocurrencies and alternative investments, Gold is and will remain, a defensive standard for investors,” said Mr. Hawkins. “Its growth in popularity over 2019 is a reaction to a volatile marketplace and deflationary pressures, where investors are seeking a solid, tangible asset to provide some protection in their portfolio.”
After sentiment fell to outright bearish lows, outlook for fixed income, as represented by the Solactive US 7-10 Year Treasury Bond Index is growing following a 2.73% Q3 2019 performance. From a previous 16% bullishness, dwarfed by 48% bearishness on the asset class, advisors have increased their bullish confidence to 29% – putting it on equal standing as bearish skeptics. In contrast, investors have waned further, signaling a -5% pullback on an already bearish footing.
Natural Gas and Crude Oil
Investors and advisors both registered a bullish growth on natural gas in-line with the transition into its seasonally strong period. Advisors became bulls, awarding the commodity 10% greater confidence, while investors followed suit with a 9% increase in confidence. Futures on Natural Gas saw a modest uptick in performance at 0.95% during Q3 2019.
While still outright bullish, amid a -7.53% rout by Crude Oil, both advisors and investors withdrew some support for the fuel source. Investors withdrew by -4% while advisors retreated by -9%.
“Following the attacks on Saudi Arabia’s Aramco production facilities in September, there was some expectation that reduced supply would boost oil prices – but that wasn’t the case,” said Mr. Hawkins. “Greater U.S. domestic production and faster-than-expected repairs have meant crude oil has not been constrained, to the delight of those at the pump and the disappointment of some speculative oil traders.”
Marijuana Loses its Buzz
After hemorrhaging -36.07% in performance over Q3 2019, the cannabis sector, as represented by the North American Marijuana Index, registered the biggest confidence drop of the asset classes among investors, at -15%.
Despite the steep sentiment tumble, investors are still bullish on marijuana, with bulls edging out the bears at 43% to 39%. For investors, marijuana was also the least likely to have neutral sentiment provided, among the 14 asset classes measured.
Since the Q3 2019 survey, advisors have been overall bearish on the pot stocks index, with the trend continuing in to Q4 2019. Bearish sentiment increased 3% to 42%.
“While there are some that are decrying the ‘marijuana moment’ over, there is a silver lining to these significant sector declines, and that is valuations are now more aligned with fundamentals, establishing a more balanced entry point for investing in cannabis,” said Mr. Hawkins.
About the Q4 2019 Advisor and Investor Sentiment Survey
Horizons ETFs conducts the only quarterly sentiment survey of Canadian advisors and investors. The survey quantitatively measure advisors’ and investors’ quarterly outlooks of key benchmarks covering equities, bonds, currencies and commodities. For full survey results, visit www.horizonsetfs.com/sentimentsurvey.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
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 more than $10 billion of assets under management and 91 ETFs listed on major Canadian stock exchanges.
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Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
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Contact Jonathan McGuire
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Horizons ETFs Management (Canada) Inc.
Advisor Sentiment Survey Results
Investor Sentiment Survey Results