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Morning commuters walk on Wall Street in New York's financial district Sept. 5, 2013.Brendan McDermid/Reuters

Nearly twice as many Canadian investors think the U.S. equity market will offer the best returns this year, compared to 2014.

At the same time, expectations for Canadian stock market returns have decreased 12 per cent since last year, according to the 2015 Franklin Templeton Global Investor Sentiment Survey that was released Wednesay. Despite the drop, 53 per cent of Canadian investors still expect positive returns in 2015.

To gain those investment returns, Canadian investors are looking south of the border, which could be a dangerous game said Stephen Lingard, senior vice-president and portfolio manager, Franklin Templeton Solutions.

"With U.S. equity markets up 13.7 per cent in 2014, it is not surprising that Canadian investors are tempted to chase one of last year's winners in terms of top performing asset classes," said Mr. Lingard. "It is never a bad idea to diversity and in many cases your first equity market would be domestic stocks. For those who have very little U.S. exposure, it won't be a bad thing to add this into a portfolio but our word of caution would be for those investors with significant allocations in U.S. equities as you are buying into a market that is generally more fully valued than any other global equity markets."

Survey results also found that, while 45 per cent of Canadian investors are concerned about the state of the global economy and 37 per cent worried about falling oil prices, 85 per cent of Canadian investors are more optimistic about reaching their financial goals than they were last year.

More than half of the 11,500 investors surveyed in 23 countries across the Americas, Africa, Asia Pacific and Europe believe their local stock market will post positive returns in 2015. Whereas, 64 per cent of North American investors believe their local stock market returns will be positive this year.

"Investors have experienced a tough few quarters in the equity markets, especially in Canada where energy represents about a quarter of the market," said Ronice Barlow, senior vice president, Franklin Templeton Investments, in a release. "This highlights the importance of seeking professional advice to help Canadian investors ensure they diversify their portfolio across asset classes that reflect their risk tolerance."

When looking for investment opportunities, Canadian investors believe stocks, real estate and precious metals will be the top performing asset classes in 2015 and over the next 10 years. There is a considerable drop in the number of investors who think non-metal commodities will perform best this year (8 per cent) compared to 2014 (13 per cent).

"The recent volatility in energy and the Canadian dollar is causing investors to evaluate their portfolio holdings," said Mr. Lingard. "Our team's energy view is still fairly neutral to bearish. We view the recent bounce in energy and oil prices with caution because in our view supply is still outstripping demand and will so for the rest of this year. Anytime there is a demand/supply imbalance, that obviously has a negative impact on prices."

While Canadian investors remain optimistic about future stock market returns, expectations for the year ahead have decreased. Globally, stocks are clearly viewed as providing the best potential returns both in the near term and long term; yet investors also view this asset class to be the riskiest in 2015 and over the next 10 years.

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