Despite recent market volatility, many investment managers are still optimistic about Canadian, U.S. and overseas equities, according to a report.
The Russell Investment Manager Outlook finds that bullishness towards Canadian equities has remained fairly steady at 42%. However, various sectors appear to be falling in and out of favour.
Bullishness towards consumer staples rose to 59% from 29% and bullishness towards information technology jumped to 72% from 39%. Meanwhile, sentiment has slipped for consumer discretionary, energy and financial services stocks.
U.S. equities and emerging equities registered solid upticks in bullishness, with both markets now at 52%. EAFE equities continue to be the most consistently exciting asset class in the world with 67% of Canadian investment managers expressing bullish sentiment.
“Virtually unchanged since our last quarterly report, the majority of Canadian investment managers surveyed are looking beyond Canadian borders and are bullish on EAFE equities,” says Tim Hicks, Russell Investments’ chief investment officer. “But, perhaps the most intriguing result of this quarter’s survey increase in the number of respondents who rate Canadian equities as undervalued.”
After several quarters in single digits, 24% of investment managers now say Canadian stocks are a relative bargain.
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In the Spring Q2 survey, bond market sentiment turned sharply negative, with the number of bearish managers soaring to 77% from 38%. Now, bears account for only 42% of managers and bullishness towards Canadian bonds has more than doubled to 15%.
Managers also expect the dramatic run-up in the Canadian dollar may soon be exhausted. Bearishness towards our dollar has increased considerably to 41% from 28% with bullishness slipping to 44% from 50%.
In the first half of the year, managers were braced for rate increases from the Bank of Canada, but now they expect rates to stay steady, adds Hicks. “This may be contributing to the more modest outlook on the Loonie and reduced pessimism about Canadian bonds.”
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