The U.S. stock market has continued its upward march.
However, more than half of Canadian investors (52%) expect market volatility to increase, says the Q3 2013 Advisor Sentiment Survey.
The survey asked them to share their outlooks on 16 distinct asset classes, indicating whether they were bullish, bearish or neutral on the anticipated returns of each in Q3 2013. Collectively, advisors were bullish on only 5 of 16 asset classes.
That said, optimism about the S&P/TSX 60 rose from 47% last quarter to 53%, despite a 4.9% decline in the index last quarter. Also, bullish sentiment about the S&P 500 remained steady this quarter at 55%, after the large-cap U.S. stock index returned 2.36% in Q2 2013.
When it comes to the NASDAQ 100, investors were also positive—sentiment inched up from 53% to 56%—after it returned 3.23% in Q2 2013.
Read: Equities better than bonds for rest of 2013
“Canadian stocks have lagged U.S. stock returns considerably for a number of quarters now, and advisors may be expecting the Canadian market to make up some of that difference given its strong historical correlation to U.S. stocks,” says Howard Atkinson, president of Horizons ETFs.
He adds, “The Canadian market has such a heavy weighting in resource stocks, which have been out of favour. It’s possible that Canadian stocks will continue to diverge from the fortunes of the U.S. market.”
Survey breakdown
Bearish sentiment on gold bullion and silver bullion rose from 34% to 49% and 28% to 42%, respectively. Atkinson says both were hit hard “last quarter, with both asset classes seeing double-digit declines during the quarter. Gold lost 22.69%, and silver lost 30.63%.”
He adds, “This is probably the lowest we’ve ever seen sentiment on gold since we started this quarterly survey six years ago. In many ways this might be a contrarian signal, suggesting that sentiment on gold has hit a low.”
Read: Will gold rise or fall?
Meanwhile, base metals are being favoured, with sentiment increasing from 29% last quarter to 38%. The S&P/TSX Global Base Metals Index consolidated 13.71% in Q2 2013.
Sentiment on crude oil remained little changed at 45% bullish. The same holding pattern was observed in energy stocks, as represented by the S&P/TSX Capped Energy Index. Natural gas sentiment also remained unchanged at 39%, following natural gas’ loss of 11.41% last quarter.
“Crude didn’t move much one way or the other during the first 6 months of this year, and natural gas pulled back last quarter from a big rally, finishing Q2 essentially flat on the year,” says Atkinson. “All in all, it seems there haven’t been any market developments in energy to drastically shift advisor opinion.”
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Regarding currency, bearish sentiment on the Canadian dollar versus the U.S. dollar increased from 40% to 52%. The Canadian dollar lost 3.40% against the U.S. dollar in Q2 2013, leaving many advisors with a negative outlook.
Read: U.S. Economy in the lead