Facebook

Q4 Sentiment Survey results show an increase in bullishness across half of industry benchmarks.

TORONTO – October 16, 2017 – After a relatively flat quarter, Canadian investment advisors have turned quite bullish on Canadian equities, energy and a number of other industry benchmarks, according to the Q4 2017 Advisor Sentiment Survey (“Q4 Survey”) conducted by Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).

The Q4 Survey asked Canadian investment advisors for their expectations of returns – bullish, bearish or neutral – on 14 distinct asset classes for the upcoming quarter (Q4 2017), which ends December 31, 2017.

Canadian investment advisors have turned positive on equity indices after extremely high levels of bearish sentiment in the Q3 2017 Advisor Sentiment Survey (“Q3 Survey”). On the S&P/TSX 60™ Index, 62% of advisors in the Q4 survey stated they are bullish on the Canadian blue-chip equity index, compared to the 42% surveyed last quarter.

Similarly, bullish sentiment on Canadian financials and energy has also picked up since last quarter, rising to 62% from 54% on financials (Q4 Survey versus Q3 Survey), as represented by the S&P/TSX Capped Financials Index, and 53% versus 40% on energy equities, as represented by the S&P/TSX Capped Energy Index, which rose 10.48% over the quarter.

Advisors have watched oil recover from its 2016 lows and believe that the valuations of Canadian blue chips are at compelling levels,” said Steve Hawkins, President and Co-CEO of Horizons ETFs. “We will likely see ETF asset flows follow this sentiment heading into Q4.

The number of advisors optimistic on crude oil increased significantly in the Q4 Survey, where 53% are bullish on the commodity, versus the 41% that were bullish last quarter. The increase in sentiment reflects the commodity’s performance, where crude oil prices rose 12.33% last quarter to USD $52.95 (as at September 30, 2017). Similarly, sentiment towards natural gas also picked up, where 47% stated they were bullish, compared to only 21% last quarter. Performance of natural gas has yet to catch up to sentiment, where prices actually remind flat in Q3, dipping 0.92%.

Oil supply and demand has come more into balance over the last quarter, and we see that reflected in the advisors’ growing bullishness for the asset class,” said Mr. Hawkins. “Oil hovering around the $50 mark is no longer just a spike, but a new longer-term reality.” Sentiment in U.S. equity benchmarks remained quite flat, despite positive performance over the quarter.

The S&P 500® Index saw bullish sentiment stay level at 53% in the Q4 Survey compared to the Q3 Survey, despite the fact the S&P 500® Index delivered a 3.96% return in Q3 and is up 14.04% year-to-date. Similarly, 51% of advisors were bullish on the NASDAQ-100® Index, only slightly up from 50% last quarter. The NASDAQ-100® Index continues to top record highs after delivering a 22.94% return year-to-date.

Advisors continue to hold their breath when it comes to U.S. equities and appear to be waiting for a correction,” said Mr. Hawkins. “Despite the strong performance equities have shown, sentiment reflects the hesitancy or flat nature we see in flows for this asset class.

On U.S. bonds, only 15% of advisors were bullish on the S&P U.S. Treasury Bond 7-10 Year Index (total return), while 50% were bearish. Despite fears about rising interest rates, this asset class is up about 0.45% over the last quarter.

There is still a lot of concern over rising interest rates and uncertainty regarding the U.S. Federal Reserve’s plans,” Mr. Hawkins explained. “Advisors are waiting to see who the next Fed chair will be before they make any drastic moves.

Canadian advisors continue to be outright bearish on the direction of the Canadian dollar (“CAD”), with 55% of advisors believing the CAD will decline in value (relative to the U.S. dollar – “USD”) over the next quarter, in-line with the 53% of advisors that were bearish last quarter. The CAD versus USD had a positive return last quarter of 3.96% due to rising interest rates and recovering commodity prices.

Given the recovery of oil and the rise of Canadian interest rates, an overly bearish sentiment can at first seem surprising,” Mr. Hawkins explained. “However, when you consider the uncertainty regarding U.S. interest rates and Canada’s mortgage balances; if a U.S. rate were to happen, the Bank of Canada likely can’t follow suit – this is the crux of what advisors are worried about.

The majority of advisors were bullish on emerging market equities, as represented by the MSCI Emerging Markets Index, where 63% stated they were bullish heading into Q4. The MSCI Emerging Markets Index was up 7.02% last quarter.

We will see interest in emerging markets continue to grow, especially as these equities are relatively cheap compared to those in North America.” Mr. Hawkins said. “As oil recovers worldwide, sentiment will continue to stay bullish, as commodities fuel global growth.” Advisors were bullish on seven of 14 industry benchmarks, which was a dramatic increase in bullish sentiment compared to last quarter, where advisors only bullish on four industry benchmarks.

About the Q4 2017 Advisor and Investor Sentiment Surveys
Horizons ETFs conducts the only quarterly sentiment survey of Canadian investment advisors. Both results have been collectively branded under the title ‘Q4 2017 Advisor and Investor Sentiment Surveys.’ The surveys quantitatively measures advisors’ and investors’ quarterly outlooks as they relate to key benchmarks covering equities, bonds, currencies and commodities.

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 suite 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 currently has more than $8.2 billion of assets under management and 77 ETFs listed on the Toronto Stock Exchange. Horizons ETFs Management (Canada) Inc. is a member of the Mirae Asset Global Investments Group.

For more information:
Olivia Fazekas
Manager, Content Marketing, PR and Social
Horizons ETFs Management (Canada) Inc.
(416) 601-2502
ofazekas@horizonsetfs.com

Next article
 

Horizons ETFs Launches the Horizons Intl Developed Markets Equity Index ETF

This website uses cookies to ensure we give you the best experience. By continuing to browse the site, you are agreeing to our use of cookies. Click here to read our privacy policy.

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 ETFs 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 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. The BetaPro Products consist of our Daily Bull and Daily Bear ETFs (“Leveraged and Inverse Leveraged ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the Leveraged and Inverse Leveraged ETFs and the Inverse ETFs are the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and BetaPro Marijuana Companies Inverse ETF (“HMJI”), which track the North American MOC Marijuana Index (NTR) and North American MOC Marijuana Index (TR), respectively. The Leveraged and Inverse Leveraged ETFs and certain other BetaPro Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These BetaPro Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, among other risks, which are described in their respective prospectuses. Each Leveraged and Inverse Leveraged ETF seeks a return, before fees and expenses, that is either up to, or equal to, either 200% or –200% of the performance of a specified underlying index, commodity futures index or benchmark (the “Target”) for a single day. Each Inverse ETF seeks a return that is –100% of the performance of its Target. Due to the compounding of daily returns a Leveraged and Inverse Leveraged ETF’s or Inverse ETF’s returns over periods other than one day will likely differ in amount and, particularly in the case of the Leveraged and Inverse Leveraged ETFs, possibly direction from the performance of their respective Target(s) for the same period. For certain Leveraged and Inverse Leveraged ETFs that seek up to 200% or up to or -200% leveraged exposure, the Manager anticipates, under normal market conditions, managing the leverage ratio as close to two times (200%) as practicable however, the Manager may, at its sole discretion, change the leverage ratio based on its assessment of the current market conditions and negotiations with the respective ETF’s counterparties at that time. Hedging costs charged to BetaPro Products reduce the value of the forward price payable to that ETF. Due to the high cost of borrowing the securities of marijuana companies in particular, the hedging costs charged to HMJI are expected to be material and are expected to materially reduce the returns of HMJI to unitholders and materially impair the ability of HMJI to meet its investment objectives. Currently, the manager expects the hedging costs to be charged to HMJI and borne by unitholders will be between 10.00% and 45.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager publishes on its website, the updated monthly fixed hedging cost for HMJI for the upcoming month as negotiated with the counterparty to the forward documents, based on the then current market conditions. The VIX ETF, which is a 1x ETF, as described in the prospectus, is a speculative investment tool that is not a conventional investment. The VIX ETF’s Target is highly volatile. As a result, the VIX ETF is not intended as a stand-alone long-term investment. Historically, the VIX ETF’s Target has tended to revert to a historical mean. As a result, the performance of the VIX ETF’s Target is expected to be negative over the longer term and neither the VIX ETF nor its target is expected to have positive long-term performance. BetaPro Bitcoin ETF (“HBIT”), and BetaPro Inverse Bitcoin ETF (“BITI”), which are a 1X ETF, and an up to -1X ETF, respectively, as described in the prospectus, are speculative investment tools that are not conventional investments. Their Target, an index which replicates exposure to rolling Bitcoin Futures and not the spot price of Bitcoin, is highly volatile. As a result, neither ETF is intended as a stand-alone investment. 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 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.

Horizons Total Return Index ETFs (“Horizons TRI ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver index returns in a low-cost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the index in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons TRI ETF receives the total return of the index (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons TRI ETFs (Horizons Nasdaq-100 ® Index ETF and Horizons US Large Cap Index ETF) use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF use cash accounts and do not track an index but rather a compounding rate of interest paid on the cash deposits that can change over time.

*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or 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 or returns on investment in the ETF. Only the returns for periods of one year or greater are annualized returns.