Canadian investment managers are growing more enthusiastic about Canadian stocks as their view on U.S. stocks diminishes, according to the latest fund manager outlook survey from Russell Investments. The survey, conducted between Aug. 30 and Sept. 9, found that bullishness toward the Canadian market rose to 57 per cent from 43 per cent in the second quarter, while bullishness toward the U.S. market fell to 47 per cent.
The funny thing, though, is that the U.S. market has been surprisingly strong during the recent bout of market volatility, especially when you take the rising U.S. dollar into account. Since the survey period ended, the S&P 500 has actually risen less than 0.1 per cent and 2.7 per cent in Canadian dollar terms. Meanwhile, Canada's S&P/TSX composite index has fallen 6.4 per cent.
This continues a trend. Since the start of the year, the TSX has slumped 13.8 per cent and is down 18.9 per cent from its near-term high at the beginning of April. The moves by the S&P 500 have been more tame, falling 8.3 per cent since the start of the year and 15.5 per cent from its near-term high at the end of April.
The problem with the Canadian market, of course, is that it has a heavier concentration of commodity producers – and energy and materials stocks are in bear-market declines.
The release that accompanies the survey noted that investment managers do favour more defensive sectors, such as consumer staples and telecom services. But with 73 per cent of responses saying that the U.S. economy is not heading into another recession, they clearly aren't overly defensive. Indeed, bullishness toward energy stocks stands at 61 per cent, down only slightly from the previous survey.