It’s amazing what can happen to the markets, and to investor confidence, in a few short months. Almost half a year ago, one of Canada’s biggest finance service companies took the Canadian investor pulse and it could only have been described as luke-warm, at best.
Fast-forward and these same investors are reporting a surge in confidence in all investment types—with the largest spike in stocks and fixed income (both increased by 10%).
“Optimism is growing amongst Canadians when it comes to investing,” said Philip Petursson, chief investment strategist at 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 has been tracking investor sentiment since the year 2000, using a semi-annual survey and is based on investor views on a range of asset classes as well as their confidence in these areas.
According to this most recent survey, 50% of Canadians “feel they are on track with or ahead of their financial goals,” while 41% “feel that they will be in a better financial position in two years.”
Cash still the most popular asset
Even as Canadian investors seem to be more optimistic about their investments, cash remains the most popular type of investment. Almost a quarter (24%) of investors will focus on cash resources in the next 12 months. According to the Index, 19% of investors like to have cash on hand when needed, while 14% stated that the elimination of investment risk was the reason for choosing cash.
Apparently, investors also have more confidence in exchange-traded funds. In the results from the previous Investor Index, ETFs were in negative territory when it came to investor confidence. This has changed in the last six months, with consumer confidence in ETFs “hitting an all-time high on the index.”
According to investor responses, 27% of investors make decisions based on whether or not they could maintain their current lifestyle into retirement, while 20% invested out of fear that they’d run out of money in retirement. Another 32% were worried that they’d enter retirement with debt.
Perhaps the most troubling is that 14% of Canadians reported that they were investing less in their RRSPs, while 12% were putting less in their TFSAs. This could be an indication that Canadians are prioritizing paying off debt, or it could be a signal that budgets are stretched and retirement savings are the first casualty.
Millennials remain optimistic
The millennial generation (those aged 25 to 34) appear more optimistic about their financial situations than older, Baby Boomer Canadians. According to the Index, 40% of millennials “feel they will be in a better financial situation than they were two years ago,” whereas only 25% of Canadians over the age of 55 felt the same optimism.
Quite surprisingly, given the heated real estate market, 39% of millennials planned on buying a house in the next 12 months.
Surge of optimism in Belle Province
While investor sentiment was fairly uniform across the country, Quebec investors did seem to have a more optimistic perspective about their current and future financial prospects. Six out of 10 Quebec investors say they are on track or ahead of schedule with their financial goals, higher than the Canadian average of five out of 10.
“The increase in sentiment among Quebecers may be related to the improvements in the province’s economy and labour market,” said Petursson.