Financial advisors more optimistic about U.S. markets than Canada: survey

Toronto—Canada’s financial advisors are more optimistic about the performance of U.S. markets compared to any other major global equity market, including Canada, over the next 12 months, according to a new survey.

The Sun Life Advisor Sentiment Index found 78 per cent of advisors are optimistic about U.S. markets (including the Dow Jones Industrial Average and the S&P 500 Index), compared to 60 per cent of advisors who say they are optimistic about Canada’s S&P/TSX Composite.

“How well the U.S. economy is doing continues to surprise many people and Canada’s financial advisors are taking notice of this upward trend,” said Sadiq S. Adatia, chief investment officer, Sun Life Global Investments. “We have been optimistic about the U.S. markets since last year and think they offer the most opportunities over the other major equity markets, followed by emerging markets.”

Advisors see a variety of global economic factors threatening the Canadian economy over the next year.

More than half consider a major downturn in China to be among the three greatest threats.

57 per cent of advisors said a significant slowdown in the Chinese economy could pose a threat to Canada in the next 12 months, while 43 per cent of advisors said the same about a breakup of the Euro Zone.
The survey also found 39 per cent of advisors said a sovereign debt crisis is among the top three risks to Canada.

Weak consumer spending (36 per cent), the price of oil (35 per cent) and inflation (22 per cent) also pose threats to our economy.

“While advisors raise valid concerns, we have also found through our past research that some domestic issues threaten the Canadian economy,” Adatia said. “We believe Canadians continue to add debt even though they’re already shouldering significantly large amounts. Savings are low and the housing market grows more overheated every day.”

The majority of advisors (71 per cent) believe Canada’s overnight interest rate will be higher on June 30, 2013 than it is today, while another 69 per cent believe the Consumer Price Index will rise either one or two per cent over the next 12 months.

Recession impact

The effects of the 2008 financial downturn are still being felt by Canadian investors.

Advisors believe almost half (48 per cent) of their clients are more risk adverse since 2008, while 37 per cent believe their clients are pessimistic about the current market conditions.

Fear of losing capital is the number one concern advisors hear from their clients at 62 per cent, followed by fear that their investment performance won’t be enough to achieve their lifestyle goals (61 per cent).

Conducted by Ipsos Reid, the Sun Life Advisor Sentiment Index measures Canada’s financial advisors’ sentiments on capital markets and key economic factors.