Q4 2021 Advisor Sentiment Survey Results
Q4 2021 Investor Sentiment Survey Results

TORONTO – October 27, 2021 – Heading into the fourth quarter of 2021, Canadian investors and advisors are at odds over where most market indices and asset classes are headed for the remainder of the year, according to the fourth-quarter 2021 Advisor and Investor Sentiment Surveys (“Q4 Surveys”) from Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).

Each quarter, Horizons ETFs surveys Canadian investors and investment advisors for their outlook on expected returns for distinct asset classes. These expectations are expressed in terms of bullish, bearish, or neutral sentiment. The Q4 Surveys cover the period beginning September 30, 2021, and ending December 31, 2021.

Thematic Asset Classes and Sectors: Bitcoin, Psychedelics and Marijuana

Despite another quarter of volatility, including the banning of cryptocurrency transactions in China, Bitcoin has emerged as a collective favorite among both Canadian advisors and investors. 
Bitcoin, the world’s most popular cryptocurrency, saw a +25.59% increase in its price during Q3 2021. In response, advisors, previously bearish on the asset class, according to the prior Q3 Surveys, bullishly charged forward, adding 19 percentage points of positive sentiment for a 53% bullishness overall. Investors, also previously bearish, reversed their position as well, adding 12 percentage points of positive sentiment for 52% bullishness overall.  

The burgeoning psychedelics sector, as represented by the North American Psychedelics Index, performed poorly throughout Q3 2021, registering a -16.59% return – the second worst record among the Q4 Surveys’ measured asset classes and indices. Previously bullish on the sector, Canadian investors this quarter decided to shift to an overall neutral position after reducing their bullishness by 9 percentage points. Advisors on the other hand were surprisingly optimistic – perhaps sensing a value opportunity – adding 16 percentage points of positive sentiment and moving from a previously bearish position into a bullish one. 

 The Canadian marijuana industry, as represented by the North American Marijuana Index, was the worst performing in Q3 2021, among the sectors and asset classes measured by the Q4 Surveys, with a -24.72% return. Once again, advisors, perhaps sensing the potential for rebound from relative low valuations, shifted from an overall neutral stance into an optimistic position, after adding 4 percentage points of positive sentiment for 36% bullishness overall. While investors’ positive sentiment fell by 4 percentage points to 42% bullishness, they remained bullish on the sector, overall.

“Bitcoin, one of the most unpredictable asset classes that our surveys measure, seems to have sentiment swings to match, with both advisors and investors shedding their bearish conviction and charging ahead as bulls into the last quarter of 2021,” said Mark Noble, Executive Vice President, ETF Strategy at Horizons ETFs. “Meanwhile, the emerging sectors of marijuana and psychedelics have languished amid that same market volatility, awaiting news of broader U.S. liberalization that could lift their fortunes.”


Canadian Equities and the Dollar

After successive quarters of relative strength in Canadian Equities, as represented by the S&P/TSX 60™ Index, Q3 2021 saw tepid underperformance, with a -0.48% return. In measured reaction, Canadian investors signaled a weakening in bullishness on the index, reducing their positive conviction by 3 percentage points to 50% bullishness overall. Meanwhile, advisors lurched ahead, tacking on 10 percentage points to their positive sentiment, for a commanding 69% bullishness overall; among their most confident positions, as measured by the Q4 surveys.
Canadian Energy, as represented by the S&P/TSX Capped Energy™ Index, registered a +3.26% return in Q3 2021. While remaining bullish overall, investors chose to downgrade their positive sentiment by 7 percentage points to 55% bullishness overall, while advisors’ positive sentiment remained flat at 64% bullishness overall.
Canadian Financials, as represented by the S&P/TSX Capped Financials™ Index, saw more muted performance in Q3 2021, with just a +0.31% gain. While both Canadian advisors and investors remained bullish on the asset classes, both groups reduced their positive sentiment by 11 percentage points to 53% bullishness and 7 percentage points to 46% bullishness, respectively.
Following the -2.24% performance of the Canadian dollar relative to the U.S. dollar in Q3 2021, investors, remaining bearish, reduced their positive sentiment among by 3 percentage points to 26% bullishness overall, while conversely, advisors registered a 9 percentage point increase in positive sentiment, landing an overall bullish standing at 48%.

The broader resilience of Canada’s economy and the recent run-up in energy, in particular, crude oil, seems to have boosted confidence in Canada’s markets, as represented by the S&P/TSX 60,” said Mr. Noble. “Sentiment has cooled on Canadian financials – the largest proportion of the overall sector weighting of the Canadian marketplace. This could be due to a variety of factors, including proposed policies to increase taxes on Canadian banks, or simply because of valuations, which have risen to become relatively high in the last year, after a strong run up.”

U.S. and International Equities

In Q3 2021, U.S. Equities achieved a minor expansion, with the S&P 500™ Index posting an +0.23% return, while the NASDAQ-100® Index achieved a +0.93% bump. In response to the lukewarm returns, advisors were more hesitant on U.S. equities, dropping their positive sentiment on the S&P 500 by 4 percentage points to 52% bullishness overall, while remaining 59% bullish overall on the NASDAQ-100, quarter-over-quarter.
In lockstep, investors were also cautious, similarly dropping 4 percentage points of positive sentiment on the S&P 500 to 52% bullishness overall. On the NASDAQ-100, they retracted just 1 percentage point of positive sentiment to land at 52% bullishness overall on the index.
Last quarter, one of the largest gulfs between advisors and investors was on Emerging Markets, as represented by the MSCI Emerging Market Index, according to our Q3 Surveys. Following a
-8.84% return in the index, heading into Q4 2021, advisor and investor sentiment has narrowed  as advisors reduced their confidence by 10 positive percentage points in emerging markets to 51% bullishness overall. Investors dropped their faith in the potency of these global economies by 5 percentage points to be a 42% bullishness overall.
Valuations on U.S. equities continue to stay near all-time highs. This likely has investors and advisors assessing what could drive U.S. equity earnings higher given that economic growth seems to be moderating after its huge spike in the last year and with seems to be the worst of the COVID-19 pandemic behind us,” said Mr. Noble. “Meanwhile, concerns about the impacts of China’s market interventions and the knock-on effects of lingering debt-default issues, such as those with Evergrande, appear to have cooled some prospects for speculation on emerging markets.”    

Commodities and Alternative Energies

For another quarter in a row, the best performing asset class, as measured by the Q4 Surveys, was natural gas, with a +60.74% gain in Q3 2021. Both advisors and investors upgraded their bullishness on the commodity, with advisors tacking on 23 percentage points of positive sentiment – their largest increase across any measured asset class in the Q4 Surveys – to 69% bullishness overall. Investors increased their bullishness by 11 percentage points to 62% bullishness overall.
Crude Oil Futures continued their positive run, albeit at a milder pace, with a return of +2.12% in Q3 2020. Investors appeared less enthused by the slowing run-up, cutting their bullishness by 7 percentage points for a still commanding 54% bullishness overall. Advisors instead voted Crude Oil one of their most bullish asset classes at 69% bullishness overall, after adding 12 percentage points of positive sentiment.  
For the first time ever in the history of the Horizons ETFs’ Sentiment Surveys, sentiment on three key alternative energies: uranium, lithium and hydrogen, were recorded. For uranium, as represented by the Solactive Global Uranium Pure-Play Index, the inaugural sentiment tally found that both investors and advisors were both positive on the nuclear fuel, at 53% bullishness and 44% bullishness, respectively. In Q3 2021, the Solactive Global Uranium Pure-Play Index gained +22.05%.
Lithium, as represented by the Solactive Global Lithium Producers Index, proved to be the most popular alternative energy among both groups, with advisors signaling a 63% bullishness on the metal and investors 2 percentage points ahead at 65% bullishness overall. In Q3 2021, the Solactive Global Lithium Producers Index rose +24.61%.
Advisors and investors were more cautious on hydrogen, as represented by the Solactive Global Hydrogen Industry Index. While advisors were bullish at 45% overall, investors chose were 45% neutral overall. In Q3 2021, the Solactive Global Hydrogen Industry Index fell -15.84%.

“It seems that Canadian advisors and investors are taking notice of the so-called fuels of the future: uranium, lithium and hydrogen,” said Mr. Noble. “While traditional commodities like natural gas and crude oil continue to be strong performers, the initial bullishness in our surveys on these three alternative energies suggests a recognition that they could disrupt and usurp market share as governments and consumers become more aware of cleaner energy options and averse to traditionally carbon-intensive commodities.”

Defensive Asset Classes: Gold, Silver, and Fixed Income

Gold Bullion dropped -0.74% in Q3 2021, while Silver Bullion fell further at -15.14% over the same period. Response among advisors and investors was similar. Investors held fast on Gold Bullion at 43% bullishness overall, while advisors possibly saw value in its potential value during volatile market swings, adding 9 percentage points to reach 52% bullishness overall. On Silver Bullion, advisors tacked on 5 percentage points of positive sentiment for a score of 48% bullishness. Investors withdrew 2 percentage points to land on 43% bullishness overall.  
On the S&P/TSX Global Gold™ Index, Q3 2021 brought underperformance from gold miners, with a -10.48% loss. Investor enthusiasm rose 1 percentage point to 45% bullish overall and advisors chose to add 8 percentage points of positive sentiment for 48% bullishness overall.
U.S. Treasuries, as represented by the Solactive 7-10 Year Treasury Bond Index, continued their apathetic performance with a -0.20% loss for Q3 2021. However, advisors saw opportunity among fixed income, adding 21 percentage points of positive sentiment, moving out of bear territory to a 44% bullishness weighting overall. While the overall percentage of bearish sentiment among investors decreased quarter-over-quarter, so did their bullishness, dropping 3 percentage points and leaving investors at 46% neutral overall on the fixed income index.  
“There is a growing conversation as to whether the inflation that consumers are seeing is transitory or here to stay. The answer to that question will influence how an advisor or investor feels about the current fixed income market and precious metals like gold and silver,” said Mr. Noble.

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 $20 billion of assets under management and 101 ETFs listed on major Canadian stock exchanges.

For media inquiries:
Contact Jonathan McGuire
Assistant Vice President, Corporate Communications
Horizons ETFs Management (Canada) Inc.
(416) 640-2956

Commissions, management fees and expenses all may be associated with an investment in exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

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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.