A majority of investment managers remain in favour of Canadian equities, while an increasing number of managers expect U.S. equities to provide growth in the second quarter, according to the latest Investment Manager Outlook conducted by Russell Investments in February 2011.
While the results show that bullishness toward Canadian equities fell 9% this quarter, 68% of managers remain in favour of Canadian stocks. Nine percent stated a bearish attitude toward these equities.
With Canada’s economy remaining a resilient event as the economic crisis affected markets globally, Russell’s analysis of the results suggests managers are likely beginning to look elsewhere for new undervalued investment opportunities. Bullish sentiment toward U.S. equities has jumped to 64% from 54% this quarter, according to the survey, with just 15% of managers bearish.
“U.S. GDP growth is expected to surpass Canada’s in 2011, and we have recently seen strong U.S. corporate earnings, including in the financial sector. Add to this a relatively cheap stock market and the safety net of November’s quantitative easing program, and the case for U.S. equities has certainly become stronger in recent months,” says Sadiq S. Adatia, chief investment officer with Russell Investments Canada Ltd.
The results show a less positive attitude toward markets outside North America. Bullish sentiment toward equities on the MSCI EAFE Index—an index that measures the performance of markets in Europe, Southeast Asia and Australia—fell to 38% from 60%, according to survey results. (Note: the survey took place before the Japan disaster.)
“Housing is still weak, international banks have more stress tests on the horizon, and Greece and surrounding nations may not have seen the last of their fiscal challenges,” says Adatia.
When asked which commodity they expect to perform the strongest in 2011, 52% of investment managers said oil. A further 21% named natural gas, and 15% identified copper. Support for gold, silver and uranium, which have all performed well over the past year, ranged from 3% to 6%.
“After a long period when preserving capital was a top priority, investment managers are once again pursuing growth—whether shifting capital from gold to oil, or from Canada to the U.S.,” says Adatia.
“Capital flows will always be dynamic, and we believe the best way to have exposure to the right opportunities is to remain fully invested and intelligently diversified.”
Read the full Investment Manager Outlook.