Advisors bullish on U.S. and Marijuana Stocks

TORONTO – July 18, 2018 – Canadian investment advisors continue to have a bearish outlook on Canadian equities going into the third quarter of 2018, according to the Q3 2018 Advisor Sentiment Survey (“Q3 Survey”) conducted by Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).

The Q3 Survey asked Canadian investment advisors for their expectations of returns – bullish, bearish or neutral – on 14 distinct asset classes for the upcoming quarter (“Q3 2018”), which ends on September 30, 2018.

Only 47% of Canadian investment advisors were bullish on Canadian equities – slightly lower than the 48% of advisors who stated they were bullish on the S&P/TSX 60™ Index, as indicated in the previous Q2 Advisor Sentiment Survey (“Q2 Survey”). Despite the bearish sentiment, Canadian equities had a very strong second quarter, primarily due to the solid run in Energy prices, with the S&P/TSX 60 Index generating a 6.2% return.

This generally bearish outlook extended to the other surveyed Canadian sectors, with the exception being the S&P/TSX Capped Energy Index, where 55% of Canadian advisors were bullish on the outlook for energy related equities. The S&P/TSX Capped Energy Index generated a 16.25% return last quarter.

Advisors were also bullish on Crude Oil, as represented by WTI Crude Oil Futures, with 53% of advisor respondents suggesting that oil prices will continue to rise in Q3. Advisors were not as bullish on Natural Gas, with only 35% expecting natural gas prices would rise. Natural gas futures contracts were up nearly 7% last quarter.

One cause for weaker performance expectations may be related to recent Canada/U.S. tariffs and an ongoing climate of concern surrounding the fate of NAFTA,” said Steve Hawkins, President and Co-CEO of Horizons ETFs. “NAFTA apprehensions don’t have any real impact on the price of crude oil, which was up another 14% last quarter. Canadian energy producers continue this reversal-of-fortune from previous quarterly surveys, where investors were generally bullish on Canada, but bearish on Energy stocks.

High Expectations for Marijuana Stocks

While not technically a Canadian sector, but certainly a sector dominated by Canadian stocks, the Marijuana sector, as represented by the North American Marijuana Index, had the highest level of bullish sentiment, with 58% of advisors expecting Marijuana stocks to deliver positive returns in Q3. This index was up 5.78% from last quarter, with much of that performance coming from the announcement of final dates for the legalization of recreational marijuana in Canada.

October 17, 2018 is the date that many marijuana investors have circled on their calendars, as this is when recreational marijuana will become legal in Canada,” said Mr. Hawkins. “Since this sector is such a news-driven space, many advisors may be expecting the sector to get a big bump in interest as we near the big day.

Advisors Stay Bullish on the U.S.

Outlook on U.S. equities remained in-line with the Q2 Survey results with 56% of responses indicating bullish sentiment. The S&P 500® Index underperformed Canadian equities last quarter, delivering a modest return of 2.93%. The technology-focused NASDAQ-100 fared much better, delivering a 6.98% return on the quarter. Subsequently, 57% of advisors were bullish on U.S. equities.

Advisors are also favouring the U.S. dollar vs. the Canadian dollar, with 56% of advisors outright bearish on the Canadian dollar vs. the U.S. dollar. Sentiment on fixed income was mixed however, with only 26% of advisors bullish on U.S. treasuries, 36% neutral and 34% bearish. The bearish sentiment on bonds is likely due to the fact that the U.S. Fed continues to raise interest rates. Typically, rising interest rates are beneficial for currencies, but negative for bonds, which might explain the opposing opinions.

The relative outperformance of Canadian equities vs. U.S. equities last quarter seems to have taken advisors by surprise. Despite this, they’re still optimistic that the U.S. will generate relative outperformance vs. Canada,” said Mr. Hawkins. “When it comes to currency, NAFTA and rising interest rates are probably weighing heavily on the minds of advisors – the majority of whom are bearish on the loonie. While the U.S. offers higher interest rates, it’s hard to see the Canadian dollar outperforming the U.S. dollar unless we see a sustained rally in crude oil prices.

One of the most significant reductions in bullish expectation was the Emerging Market equities outlook (as represented by the MSCI Emerging Markets Index). Bullish sentiment declined by nearly 25%, with only 43% of advisors indicating a positive forecast for the global index comprised of Emerging Markets across the Americas, Europe, Africa, Asia and the Middle East. The MSCI Emerging Markets Index lost nearly 9% last quarter.

Emerging Markets were on a tear for most of early part of 2018, but that run came to a staggering halt with the escalating trade tensions between the U.S. and China,” Mr. Hawkins said. “Fundamentally, not much has changed in terms of the earnings being generated by these companies, but investors are clearly concerned about the economic impact of U.S. tariffs on Chinese goods.

About the Q3 2018 Advisor and Investor Sentiment Surveys
Horizons ETFs conducts the only quarterly sentiment survey of Canadian advisors and investors. Both results have been collectively branded under the title ‘Q3 2018 Advisor and Investor Sentiment Surveys’. The surveys quantitatively measure advisors’ and investors’ quarterly outlooks of key benchmarks covering equities, bonds, currencies and commodities. For full survey results, visit www.HorizonsETFs.com/sentimentsurvey.

About Horizons ETFs Management (Canada) Inc.
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has more than $10 billion of assets under management and 80 ETFs listed on major Canadian stock exchanges. Horizons ETFs Management (Canada) Inc. is a member of the Mirae Asset Global Investments Group.

For investor inquiries:
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
info@horizonsetfs.com

For media inquiries:
Contact Jonathan McGuire
External Communications Manager
Horizons ETFs Management (Canada) Inc.
(416) 640-2956
jmcguire@horizonsetfs.com

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Amendment to December 2017 Annual Non-Cash Reinvested Distributions

Horizons ETFs fait partie de Mirae Asset Global Investments. Investir dans les fonds négociés en bourse gérés par Horizons ETFs Management (Canada) Inc. (les « FNB ») peut donner lieu à des commissions, des frais de gestion et des taxes de vente, s'il y a lieu. Les FNB ne sont pas garantis, leur valeur fluctue souvent et leur rendement passé peut ne pas se répéter. Le prospectus contient de l'information détaillée importante à propos des FNB.Veuillez lire le prospectus concerné avant d'investir.

Les produits négociés en bourse Horizons comprennent nos produits BetaPro, soit nos FNB quotidiens haussiers 2x et baissiers 2x (les « FNB quotidiens 2x »), nos FNB à rendement inverse (les « FNB inverses ») et nos FNB VIX (décrits ci-après). Les FNB quotidiens 2x et certains autres produits BetaPro utilisent des techniques de placement assorties d’un effet de levier qui peuvent amplifier les gains et les pertes et peuvent accroître la volatilité des rendements. Les produits BetaPro sont donc exposés aux risques liés à l’effet de levier et peuvent aussi être assujettis aux risques liés aux techniques de placement dynamiques et aux risques de volatilité des cours, tels qu’ils sont décrits, selon le cas, dans leur prospectus respectif. Chaque FNB quotidien 2x vise à obtenir un rendement, avant déduction des frais et des dépenses, correspondant soit à 200 % soit à -200 % du rendement d’un indice, d’une marchandise ou d’un indice de référence sous-jacent pertinent (la « Cible ») sur une période d’un jour. Chaque FNB inverse vise à obtenir un rendement correspondant à -100 % du rendement de la Cible respective. En raison de la capitalisation des rendements quotidiens, le rendement d’un FNB quotidien 2x ou d’un FNB à rendement inverse pour toute période autre qu’un jour fluctuera probablement, et, pour le FNB quotidien 2x, peut-être dans le sens opposé du rendement de sa (ses) Cible(s), pour la même période. Le produit BetaPro dont la Cible est l’indice S&P 500 VIX Contrats à court terme™ (le « FNB VIX »), qui est un FNB VIX 1x, est un instrument de placement spéculatif non conventionnel, comme décrit dans le prospectus. La Cible des FNB VIX est très volatile. En conséquence, le FNB VIX n’est généralement pas considéré comme un investissement à long terme autonome. La Cible des FNB VIX a toujours eu tendance à revenir vers sa moyenne historique. En conséquence, le rendement de la Cible des FNB VIX devrait être négatif à long terme et ni le FNB VIX ni sa Cible ne devraient afficher de rendement positif à long terme. Les investisseurs devraient surveiller leurs placements quotidiennement pour s’assurer que ceux-ci restent conformes à leurs stratégies de placement.

* Les taux de rendement indiqués sont des rendements globaux annuels historiques ou annuels composés (selon les indications), qui comprennent les changements de valeur unitaire et le réinvestissement de tous les dividendes ou distributions, et ne tiennent pas compte des frais de ventes, de rachats, de distributions, des frais optionnels, ni de l’impôt payable par tout porteur de titres, lesquels auraient réduit les rendements. Les taux de rendement indiqués dans ce tableau ne visent pas à prédire les valeurs futures du FNB, l’indice/les indices, ou les rendements des placements dans le FNB. On ne peut investir directement dans l’indice/les indices. Seuls les rendements sur les périodes d’un an ou plus sont des rendements annualisés.