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Investing takes backburner as Canadians focus on debt

Canadians are more focused on paying off debt instead of investing, but they remain optimistic about reaching their financial goals over the longer term.

The Manulife Financial Investor Sentiment Index, a semi-annual survey that measures views about whether it's a good time to invest, showed that investor sentiment softened slightly through the second half of 2012.

The index is at 20, down four points from July's reading of 24. It fell further from a December 2011 reading of 26.

"Canadians are now more focused on paying down debt, which may be causing them to be more cautious about investing," Paul Lorentz, executive vice-president, investment and insurance solutions, said in a statement late last week.

Lorentz said the slight decline returns the index to the December 2010 level, but that investor sentiment continues to remain significantly stronger than during the height of the economic downturn in 2008-2009.

Canadians are also taking to heart warnings about record household debt levels by reducing debt loads and taking a more conservative approach to financial planning, according to the index that is based on an online survey of 2,126 Canadians conducted between Nov. 30 and Dec. 11.

Nearly eight in ten Canadians are confident about achieving their financial goals, the index shows. Key financial priorities for 2013 include:

  • paying down debt (31 per cent)
  • tightening household budgets (40 per cent)
  • creating a will or estate plan (13 per cent)
  • setting up an emergency fund (13 per cent)
  • Nearly one-quarter say maintaining their current lifestyle is a key financial priority

Investment advisors remain hopeful

Despite the uncertain economic outlook and tepid optimism from Canadian investors, a recent survey conducted by Horizons Exchange Traded Funds shows a majority of investment advisors -- nearly 8 out of 10 -- expect the Canadian stock market to rally in the first quarter.

Advisors are bullish on North American stocks, despite meager or negative returns last quarter on the S&P/TSX 60 and S&P 500 indexes, the sentiment survey shows. They also favor emerging market issues, base metals and natural gas.