Investor optimism in Canada has reached its highest point in 5 years, new research shows.
Manulife’s Investor Sentiment Index increased by 6 points to +22 in May from +16 last December, the largest rise since 2011. Canadians’ confidence in nearly all investment types increased, with the largest spikes in stocks (+11) and fixed income (+13); both increased by 10 percentage points in the last six months.
“Optimism is growing amongst Canadians when it comes to investing,” said Philip Petursson, Chief Investment Strategist, Manulife Investments. “As oil prices have rebounded, so has the Canadian equity market and the Canadian dollar. Investor sentiment seems to be feeding off these improvements.”
Manulife’s semi-annual index of investor sentiment which has been published since 2000, increased by 6 points to +22 in May from +16 last December. The index is based on investor views on a range of asset classes and their confidence in these areas.
Sentiment across the country
In the past six months, sentiment in Atlantic Canada (+28) had the largest increase and is up eight points, closely followed by Quebec (+16) which is up seven points. An increasing number of Canadians feel they are on track with or ahead of their financial goals (50 per cent) and also to feel that they will be in a better financial position in two years (41 per cent).
Six in 10 Quebec investors say they are on track or ahead of schedule with their financial goals, higher than the Canadian average of 50 per cent.
“We’re seeing some major differences in Quebec compared to the rest of the country,” said Petursson. “The increase in sentiment among Quebecers may be related to the improvements in the province’s economy and labor market.”
Popular investment choices
While sentiment around investing is up, there remains a cautious tone. Cash remains the most popular type of investment for the next 12 months at 24 percent. Investors stated they like to have cash on hand when needed (19 per cent) and there is no investment risk which makes them feel secure (14 per cent).
“Although investor sentiment seems to have improved with the Canadian equity market, the interest in cash may imply that investors are still wary about taking on more risk,” said Petursson.
ETF’s have climbed out of negative territory compared to the December 2015 survey results, hitting an all-time high on the index (4 points). However, 14 per cent of Canadians say they are investing less in registered retirement savings plans (RRSPs) and 12 per cent are putting less into tax-free savings accounts (TFSAs). These accounts are, respectively, the Canadian equivalent of IRAs and Roth IRAs in the U.S.
Top concerns for Canadian investors are:
27 per cent said they want to manage their current lifestyles.
20 per cent said they were concerned with running out of money in retirement. Though, the number of Canadians who are concerned about running out of money in retirement and entering into retirement with debt decreased by five per cent (from 37 per cent to 32 per cent) since 2014.
Canadian millennials (ages 25-34) are feeling more optimistic about their financial situations than older Canadians. Millenials (40 per cent) feel they will be in a better financial situation than they were two years ago, whereas only 25 per cent of respondents aged 55-plus feel the same. Six in 10 millenials say they will be in a better financial position two years from now.
Millennials are less likely than other age groups to plan renting over owning a home (52 per cent), and more likely (39 per cent) to buy a house in the next 12 months.
Now in its 16th year, the Manulife Investor Sentiment Index is a semi-annual measure of investors’ views on a range of asset classes, and savings and investment vehicles, as well as their confidence in these areas. The general population data is representative of all Canadians and is based on an online survey of 1,500 respondents who were at least 25-years-old. The survey was conducted in May 2016 by Environics Research.