It’s a happy Canada Day for Canadian equities.
According to the latest Investment Manager Outlook, by Russell Investments, Canadian investment managers are shining a favourable light on the asset class.
Of the investment managers surveyed, 70% said they were bullish on Canadian equities in the second quarter of 2012. By comparison, 56% were bullish in the first quarter and only 43% were bullish a year ago at this time.
“The sell-off in April and May has improved valuations and that has led to increased bullishness in Canadian stocks,” said Greg Nott, chief investment officer with Russell Investments Canada Limited. “In addition, despite gaining in the first quarter, Canadian equities lagged their global counterparts in that period, making their relative valuations even more attractive.”
Assessing the Canadian market as a whole, 73% of investment managers say it is undervalued. That is a big shift from the previous quarter, when only 17% of investment managers thought the Canadian market was undervalued.
Other findings from the survey include the following:
- Investors are least bullish on real estate; only 6% have a favourable outlook, versus 56% bearish.
- For Canadian high yield bonds, only 11% of managers hold a favourable outlook—compared to 29% in the first quarter.
- On the fixed income side, bullish sentiment has risen slightly, but the overall outlook remains bearish. Bulls rose to 20% from 12%, while bears slipped from 65% to 71%.
- Sentiment is generally positive on U.S. equities, with 65% of investment managers indicating they have a positive outlook for that asset class. However, this is down from 72% in the first quarter.
- Investors have become far more cautious on emerging markets, with only 40% bullish and 35% bearish on the outlook for that region.
- Unsurprisingly, with Europe wrestling with debt woes and political unrest, sentiment towards the EAFE region is quite bearish. Only 25% have a positive outlook on EAFE equities, down from 44% in the Q1.
- Among sectors, investors remain generally bullish on energy and bearish on utilities. However, bullishness on industrials has risen dramatically, with 74% of investment managers positive on the outlook for that sector compared to only 33% in the first quarter.