We all know that past performance is no guarantee of future returns, but a strong quarter on the stock market sure can change your outlook. That’s been the case with Canadian advisors, who have turned “clearly bullish” on equities, according to the latest quarterly survey by BetaPro Management.

The survey asked advisors for their outlook — bullish, bearish or neutral — on 15 distinct asset classes for the coming quarter.

A substantial majority — 64% — were bullish on the S&P/TSX 60 Index in the Q4 survey, up 25 percentage points from the beginning of Q3. That surge in confidence comes hard on the heels of an 8% return on the index in Q3.

The outlook on the S&P 500 Index also improved, with 52% of advisors now saying they are bullish on U.S. equities. In the Q3 survey, 52% had said they were bearish. Could that reversal have anything to do with the 10.72% return posted by the S&P 500? Likely, says Howard Atkinson, president of BetaPro.

“Stock markets showed strong gains in Q3, and the results of this survey suggest that advisors expect that upward momentum to continue through the next quarter,” he said.

The NASDAQ 100 gained 14.89% in Q3, while bullish sentiment jumped from 42% at the beginning of that quarter, to 64% now.

Long-term trends remain intact, Atkinson said, with advisors preferring emerging markets and Canadian equity over U.S. equity, and commodities over stocks.

Strong returns excited enthusiasm across asset classes, as gold hit new nominal highs in Q3. No surprises: 66% of advisors said they were bullish on bullion for the remaining three months of the year, while 64% were bullish on the S&P/TSX Global Gold Index.

Fifty-five percent were bullish on crude oil, up three percentage points since the last survey, which probably makes sense ahead of the winter months. A slim majority (52%) were still bullish on natural gas, even though the NYMEX Natural Gas Index lost 21.13%. Energy analysts largely consider natural gas to be a losing bet, at least through 2011.

Sentiment toward the Canadian dollar weakened slightly, although more advisors are bullish on the loonie than bearish.

“The consistently bullish view that advisors surveyed have had on the Canadian dollar versus the U.S. dollar appears to be waning,” said Atkinson. “Slightly less than half — 47% — of Canadian advisors surveyed were bullish on the loonie versus the greenback for Q4, with a further 43% neutral.”

The Q4 Survey was conducted between September 29 and October 1, 2010, and gauged the opinion of more than 100 Canadian investment advisors.

(10/08/10)