Investment managers expect 2010 will end on a high note, which should continue into 2011, according to Russell Investments’ quarterly survey.
More than three quarters (77%) said they were bullish on Canadian equities for the fourth quarter, while 82% said they were bullish on the S&P/TSX for next year. The percentage of managers expressing bearish sentiment fell from 31% in the third quarter, to just 15% in the Q4 survey.
“Although Canada is not immune to economic challenges – especially if the US recovery continues to lag – our nation’s strong resource base is clearly a valuable asset as the global economy picks up steam,” says Sadiq S. Adatia, chief investment officer of Russell Investments Canada.
Nearly one-in-three believe the returns on the S&P/TSX will be 10% or higher.
“Indeed, in a market that offers high and increasing dividend yields, double-digit returns do not seem out of reach,” says Adatia. “We believe the secret to investment success during this period of economic recovery is to leverage the skill and experience of active portfolio managers.”
The energy sector is the focus of bullishness, with 80% of managers surveyed saying they expected positive results for the fourth quarter, up from 54% in the Q3 survey.
“In a recovery, increasing infrastructure development typically translates into higher energy needs, which places the Canadian oil patch in an enviable position,” Adatia says.
Optimism is not limited to the Canadian market, though. Sixty percent of managers were bullish on international equities, while the outlook for American stocks is the worst, although 54% of managers are bullish on the U.S. market.
Adatia warns that all this optimism may be premature, though.
“The Greek debt crisis has faded from headlines, and investment managers may be feeling that no news is good news,” he says. “However, we don’t believe the full dimensions of that crisis have yet been uncovered, and expect that European markets may experience further setbacks, such as the recent negative news on Irish banks.”
The outlook on emerging markets is second only to Canadian stocks, with 69% of managers saying they are optimistic toward returns for the fourth quarter – only 8% were bearish.
“Emerging markets stand to benefit from the rehabilitation of the western consumer, but are also making strides in developing domestic demand – a two-pronged strategy that should lead to strong economic performance in the coming years,” says Adatia.