cnbc fed survey - july 21, 2011

8/6/2019 CNBC Fed Survey - July 21, 2011

1/12

CNBCs Fed Survey July 21, 2011Page 1 of 12

FED SURVEYJuly 21, 2011

These survey results represent the opinions of 79 of the nations top money managers,investment strategists and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses werecollected between July 14 and July 19, 2011.

Except for an opportunity to write comments at the end of the survey, participants were told their answers would be reported only in the aggregate unless CNBC requested and received

permission to publicly reveal specific responses. Participants were not required to answer every question.

This is not intended to be a scientific poll and its results should not be extrapolated beyond those who did accept our invitation.

1. Will there be another Federal Reserve quantitative easing program in the nextyear (12 months)?

2. For those respondents who replied Yes to question #1. How large do youexpect the new quantitative program will be over the next year (12 months)?Please do not include reinvestment of maturing securities.

Average 376.67

19.0%

68.4%

12.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No Don't Know/Unsure


2/12



3. How would you characterize the Fed's current monetary policy?

4. Where do you expect the S&P 500 stock index will be on ?

40.5%

51.9%

2.5%5.1%

0%

10%

20%

30%

40%

50%

60%

Too accommodative Just right Too restrictive Dont know/Unsure

1325.84

1363.91

1420.58

1,260

1,280

1,300

1,320

1,340

1,360

1,380

1,400

1,420

1,440

July 20 Actual Close December 31, 2011 June 30, 2012

+4.2%

+2.9%


3/12



5. What do you expect the yield on the 10-year Treasury note w ill be on ?

6. What is your forecast for the year-over-year percentage change in real U.S.GDP?

2.93%

3.41%

3.75%

0

0

0

0

0

0

0

0

0

July 20 Actual Close December 31, 2011 June 30, 2012

+2.47%

+2.85%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2011 2012


4/12



7. Where do you expect the Fed Funds target rate will be on ?

0.06%0.2%

0.5%

1.0%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

July 20 Actual December 31,2011

June 30, 2012 December 31,2012


5/12



8. Thinking about the Fed's exit strategy, when do you think the Fed will ...

6.4%

16.7%

30.8%

21.8%

8.9%

7.7%

1.3%

2.6%

0.0%

0.0%

3.9%

0% 5% 10% 15% 20% 25% 30% 35%

2011-Q3

2011-Q4

2012-Q1

2012-Q2

2012-Q3

2012-Q4

2013-Q1

2013-Q2

2013-Q3

2013-Q4

2014 or later

1.3%

6.3%

17.7%

21.5%

22.8%

11.4%

8.9%

2.5%

1.3%

1.3%

5.1%

0% 5% 10% 15% 20% 25% 30% 35%

2011-Q3

2011-Q4

2012-Q1

2012-Q2

2012-Q3

2012-Q4

2013-Q1

2013-Q2

2013-Q3

2013-Q4

2014 or later

... First Raise the Fed Funds rate?

End its extended period language?


6/12



0.0%3.8%

15.2%

13.9%

11.4%

13.9%

11.4%

10.1%

7.6%0.0%

12.7%

0% 5% 10% 15% 20% 25% 30% 35%

2011-Q32011-Q4

2012-Q1

2012-Q2

2012-Q3

2012-Q4

2013-Q1

2013-Q2

2013-Q32013-Q4

2014 or later

Begin toreduce the size

of its balancesheet through

asset sales?

1.3%

20.3%

27.9%

15.2%11.4%

8.9%

2.5%

1.3%

1.3%

1.3%

8.9%

0% 5% 10% 15% 20% 25% 30% 35%

2011-Q3

2011-Q4

2012-Q1

2012-Q22012-Q3

2012-Q4

2013-Q1

2013-Q2

2013-Q3

2013-Q4

2014 or later

End its reinvestment policy?


7/12



7. What grade would you Fed Chairman Ben Bernanke?

8. What is the probability, in your opinion, that each of the following countrieswill default on its debt in the next three years? (0%=No chance of default,100%=Certainty of default)

A21.5%

B48.1%

C19.0%

D5.1%

F2.5% Don'tKnow/Unsure

3.8%

52.5%

47.6%

23.9%

83.2%

28.2%

4.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Portugal

Ireland

Italy

Greece

Spain

United States


8/12



11.What is your outlook for the European Monetary Union five years from now?

12. How do you believe stocks would be affected by a deal, or no deal, to raisethe U.S. debt ceiling by the August 2 deadline?

No countrieswill be

ejected orleave

42.3%Some

countries willbe ejected or

leave

52.6%

It will belargely

dissolved andmost

Europeancountries will

have theirown currency

0.0%

DontKnow/Unsure

5.1%

No Deal

Deal

0%10%20%30%40%50%60%70%80%90%

65%

16%9%

22%34%

18% 16%6%

No Deal Deal


9/12



13. What is your primary area of interest?

Comments:

David Kotok, Cumberland Advisors: Washington is populated by elected fools in both

political parties.

Tom Porcelli, RBC : Just remember, that Aug 2 debt ceiling deadline is actually a softdeadline - it can probably go as far as Aug 15th. So our expectation for market reaction isbased on this fact. If Aug 15 rolls around and there is no deal, we would expect an extremereaction and not necessarily just from a market perspective. The worst possible outcomefrom this would be recession, period.

Subodh Kumar, Subodh Kumar & Associates : Risk Stratification is back due to concernsabout sovereign solvency and deficit flaccidity. By contrast, 1980s vigilante behavior was overinflation. Effect is of higher long bond yields, no equity valuation expansion and earningsexpansion below consensus into 2012.

Chad Morganlander, Stifel Nicolaus : We can no longer be surprised by the frailties of ourfinancial system. Over indebted companies and distressed sovereigns should be allowed toreorganize their obligations. Not allowing the system to cleanse itself creates a debilitatingenvironment.

Joel Naroff, Naroff Economic Advisers : Obviously, if the debt limit is not raised anythingforecasted is useless. But two hurdles face the economy: short term cuts in governmentspending that come as part of any debt ceiling agreement and the continued high levels of

Economics45.6%

Equities27.9%

FixedIncome12.7%

Currencies1.3% Other

12.7%


10/12



gasoline. If these two restraints are not eased, the potential for growth is limited and thatraises real questions about the ability of the economy to shift gears.

Robert Brusca, Fact and Opinion Economics : Bernanke's real grade is a B+. There wasno spot for this response but U.S. monetary policy is still TOO TIGHT. While U.S. will notdefault, I expect a trap vote scenario where a deal is struck and fails to pass; marketscollapse and put the fear of God into God-fearing Republicans who then come-around andvote for nearly the same plan.

John Augustine, Fifth Third Asset Management : Fed is not the economic enemy, asmany characterize. Congress is not equipped to handle economy's management. Bestsituation is that both the Fed and Congress/White House move back out of the economicheadlines.

Diane Swonk, Mesirow Financial: We are a country based on the basic freedom to

choose, and the path for our future is still a matter of choice. Why would we give up thatprivilege to foreigners making those choices for us? We must be better than that.

Guy LeBas, Janney Montgomery Scott : The outgrowths of a Treasury default are veryunpredictable. My biggest concern is the functioning of repo markets, which could seize upand create liquidity risks for banks, which borrow trillions via repo.

Rob Morgan, Fulcrum Securities : If the economy reaccelerates in the 2nd half of the yearthe way Bernanke expects, then the stock market could show a repeat of 2010 with a bigsecond half move to the positive.

Alan Kral, Trevor Stewart Burton & Jacobsen : Fed is still in mode to reelect presidentwith all moves geared in that direction.

Mike Dueker, Russell Investments : I expect the Fed to make a lot of noise along theselines: > Policy on hold in the face of gradually improving economic conditions = moreaccommodative policy. > The Fed does not need QE3 to make policy more accommodativethan it is now. As Fed "asset sales," I would include the reverse repurchase program.

Brian Gendreau, Financial Network : With sluggish growth, high unemployment, and fiscaltightening on the table it is hard to envisage a tightening of monetary policy any time soon.

Larry McMillan, McMillan Analysis : As long as the Fed thinks Keynesian economics isworking, they won't abandon it.

Lynn Reaser, Point Loma Nazarene University : The U.S. debt issue has shifted from (a)concerns over default (the U.S. is likely to continue to pay interest and principal) to (b)concerns about whether the debt ceiling will be raised (highly likely) to (c) concerns whethera deficit reduction plan will be "credible" (now the credit agencies' focus). A 10-year deficitreduction plan may be approved but its implementation or lack thereof will depend on whooccupies seats in Congress and the White House over the next decade. Further Fed ease atthis point (such as through more quantitative easing) could have fewer real effects than ayear ago as businesses and investors anticipate another round of commodity price increasesand adjust prices and inflationary expectations more quickly.


11/12



Lee Hoskins, Pacific Research Institute : Fed needs to stop responding to short termfluctuations in real GDP and employment and focus on the one thing it can achieve - pricestability. It needs an explicit inflation target now.

Dean Baker, Center for Economic and Policy Research : The debate over the debt ceilingis a tragic distraction at a time when our political leaders should be focused on creating jobs.

Donald Luskin, Trend Macrolytics : Be not afraid.

Stanley Nabi, Silvercrest Asset Management : Corporate balance sheets, stock valuationsand sociopolitical stability provide reliable support to the market.

Barry Knapp, Barclays PLC : Any rally or correction in equities is a function of the form of the debt limit extension. A McConnell/Reid type solution would be negative, the $2.4 trillion

deal that the Administration balked at would be neutral and a $4 trillion deal that avoided theS&P downgrade a positive. Any reaction seems likely to be limited by the lack of a negativereaction thus far and the European situation that has now gone systemic and requires anexpansion of the mandate and size of the EFSF to stem the risk, not clarification of privatesector involvement of latest Greek package (the German position).

John Kattar, Eastern Investment Advisors : I think there is some chance we may see aresumption of something like QE in the U.S., the Eurozone, and Japan around the end of theyear, coupled with the end of tightening in China. If so, it has the potential to be very bullishfor stocks.

Chris Rupky, Bank of Tokyo-Mitsubishi : Investors are too busy fighting old battles andlooking out for what will go wrong. As a result this is one of the most fragile recoveries fromrecession on record. Since the Global funding crisis in 2007 there has been a steady streamof bad news, and that's what we are all too busy trying to look out for. We see so many risksout there that it is making us more cautious about spending. Our best guess is all theseheadwinds, or at least Europe, debt ceiling, Libya, will get resolved shortly and the economywill pick up speed as fear and uncertainty will get turned back down a notch.

Richard Sichel, Philadelphia Trust Co .: Strong corporate earnings will drive the markethigher in spite of debt, housing and job concerns. Companies will get more active with theirvery high levels of cash currently earning very little interest.

Kevin Ferry, Cronus Futures Management : The Fed no longer targets the funds rate.

Richard Steinberg, Steinberg Global Asset Management : It is now time to get themajor players' mothers or oldest living relative in a room with the politicians and tell them tostart to behave like adults!

Constance Hunter, Aladdin Capital : I only see additional QE, (LSAP or some other mode)in the event a European default causes a liquidity seizure. If by some miracle a Greek defaultcan be orderly, then the Fed's powers to create liquidity may not be needed.


12/12



John Silvia, Wells Fargo : Issue is more than the debt ceiling--are they really going to alterthe path of spending/deficits going forward? If not, then the debt ceiling is simply a phonyissue.

Scott Wren, Wells Fargo Advisors : Three things keep me up at night: housing,unemployment and Euro sovereign debt issues. Unfortunately, none are moving in the rightdirection right now. It will be tough to move out of a slow growth GDP environment if theseissues do not at the very least stabilize and show modest improvement.

Mark Vitner, Wells Fargo : Not only is getting an agreement to raise the debt ceilingimportant but Congress must establish a credible framework to reduce the deficit.

Clare Zempel, Zempel Strategic : Domestic political uncertainties/fears continue to restraineconomic recovery. Markets continue to discount the worst. Any positive economic/politicalnews -- roll back regulations, curb spending -- would be powerfully bullish for stocks (but not

bonds).

Marc Pado, Cantor Fitzgerald : The U. of Mich. Consumer Sentiment says it all: Americansare aware and are nervous that a U.S. default could unravel the economic recovery, shallowthough it may be.

cnbc fed survey - july 21, 2011

Documents