Bullish sentiment on upswing
Monday, July 13, 1998
By Carolyn Leitch
Toronto -- Things are looking up for the Canadian stock market and its prospects six months from now, according to The Globe and Mail's latest Bulls v. Bears survey of financial market professionals.
Fifty-six per cent of respondents forecast the Toronto Stock Exchange 300-stock composite index will close higher in six months, up from 44 per cent who made that call two weeks earlier. The pessimists, meanwhile, have edged down to 30 per cent of those surveyed, compared with 33 per cent in the previous questionnaire.
The balance of opinion -- the bearish percentage subtracted from the bullish -- has brightened to 26 this week from 11 two weeks ago.
That marks the second consecutive survey in which bullishness is on the rise.
The performance of the TSE 300 over the past two weeks has come out almost flat, with a slim gain of less than 1 per cent.
Sentiment about the broadest index of U.S. stocks, the S&P 500, remains pretty much on par with the previous survey.
Thirty-three per cent of the market watchers stood in the bulls camp, compared with 37 per cent who were optimistic last time around. Those calling for lower stock prices in the United States eased to 44 per cent from 48 per cent.
That means the percentage of fence-sitters increased to 23 from 15.
The balance of opinion remains unchanged from the previous survey, when it registered minus 11.1.
Bulls v. Bears can give a useful snapshot of trends in professional market sentiment. However, it is important to note that some market pundits consider sentiment surveys to be contrary indicators. Extreme bullishness has historically been a harbinger of a correction.
By the same token, the outlook for stocks is often gloomiest in an up market.
The balance of opinion on the S&P 500, for example, has remained mired in negative territory for the past two years, despite the record-smashing performances of U.S. markets through that time.
Since the previous survey, the S&P 500 has advanced 2.7 per cent.
Meanwhile, the outlook for bond prices has become considerably rosier -- a suggestion that not all experts anticipate higher rates six months from now. (When interest rates and bond yields rise, bond prices drop.)
About 56 per cent of survey respondents believe bond prices will move higher in the next two quarters, up from 52 per cent in the previous survey. Twenty per cent are bearish on bond prices, down from 36 per cent two weeks ago.
The balance of opinion now stands at 36, which is its highest mark in two years.
On the gold front, the degree of optimism has waned slightly among Canadian experts.
Forty-six per cent of survey participants are positive about the performance of the yellow metal six months out, while 25 per cent are gloomy. That compares with 50 per cent who were bullish in the past survey and 25 per cent who were bearish.
That means some of the past survey's bulls have jumped up on the fence, with 29 per cent undecided, compared with 25 per cent who declined to make a call two weeks ago.
On Friday, bullion for next month's delivery fell $1.25 (U.S.) to $290.85 an ounce on the New York Mercantile Exchange's Comex division.
Gold prices have largely followed changes in the U.S. dollar against the yen since June, when the Japanese currency slumped to an eight-year low. As the dollar strengthens, it increases the cost to Japanese investors because bullion is priced in U.S. dollars. Japan is the seventh-largest gold-consuming nation.
Bulls v. Bears is a proprietary survey developed by The Globe and Mail as an indicator of Canadian professional market sentiment. There were 27 respondents to the latest survey.
BULLS VERSUS BEARS
The Investment Pros Fight It Out
Bull And Bear Survey...Mid July.
Every two weeks we survey money managers, strategists and advisers on where they
expect financial markets to be in six months -- up, down or unchanged. Here
is what they think this week.
Trend line charts show balance of opinion (% bullish minus % bearish).
% Bullish % Bearish*
TSE 300 55.6 29.6
S&P 500 33.3 44.4
Bond prices 56.0 20
Gold 45.8 25
* The rest are neutral |
