cnbc fed survey, july 29, 2014

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CNBC Fed Survey July 29, 2014Page 1 of 28

FED SURVEYJuly 29, 2014

These survey results represent the opinions of 36 of the nations top money managers, investment

strategists, and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses were collecte

on July 24-25, 2014. Participants were not required to answer every question.

Results are also shown for identical questions in earlier surveys.

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

1.Do you believe the Federal Reserve will, on net, increase thesize of its balance sheet, reduce it, or keep it the same in 2014

and in 2015:

100%

0% 0%

20%

14%

66%

0%

20%

40%

60%

80%

100%

120%

Increase Reduce Keep same

2014 2015


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2.Average Expected Change in Balance Sheet Size:

$408

$(104)

$416

$(146)

$480

$24

-$200

-$100

$0

$100

$200

$300

$400

$500

$600

2014 2015

Billions

March 18 April 28 July 29


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3.Do you expect the Federal Reserve to taper its purchases of

assets at its July meeting?

97%

0%3%

0%

20%

40%

60%

80%

100%

120%

Yes No Don't know/unsure


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By how much do you expect the Federal Reserve to taper at its

July meeting?(Only asked of those who said yes to Q3.)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$5 $10 $15 $20 $25 $30 $35 $40 $45 $50 Morethan

$50

Billions

Average:

$10.42billion


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4.The Federal Reserve should:

29%

27%

37%

19%19%

10% 11%8%

50%

59%

53%

72%

2%5%

0% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

January 28 March 18 April 28 July 29

Taper faster Taper slower Taper at the same pace Don't know/unsure

Taper slower

Taper at same pace

Don't know/unsure

Taper faster


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

28%

43%

17%

13%

49%

43%

6%

3%

0%

10%

20%

30%

40%

50%

60%

Too accommodative Just right Too restrictive Don't know/unsure

July 31, 2012 July 29, 2014


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6.Overall, how do you rate the clarity and credibility of Fed

communications?

5%7% 7% 7%

10%

11%

55%

54%

56%

61%

54%51%

21%

24%26%

17%

8%

29%

18%

15%12%

15%

28%

6%

0%

10%

20%

30%

40%

50%

60%

70%

Oct 29 Dec 17 Jan 28 Mar 18 Apr 28 Jul 29

Very clear and credible Somewhat clear and credible

Somewhat not clear and credible Not very clear and credible

Somewhat clear and credible

Not very clear and credible

Veryclear and credible

Somewhat not clear and credible


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7.Which of these is the bigger risk to your forecasts for Fed polic

in 2014 and 2015?

26% 26%

40%

9%

49%

34%

14%

3%

0%

10%

20%

30%

40%

50%

60%

Fed will be moredovish than I

expect

Fed will be morehawkish than I

expect

Risks are balanced Don't know/unsure

2014 2015


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8.Relative to an economy operating at full capacity, what best

describes your view of the amount of resource slack in the U.Sright now for labor and for production capacity?

48%

36%

4%

8%

4%

0%

12%

56%

8%

16%

4% 4%

0%

10%

20%

30%

40%

50%

60%

Considerablymore slack

now

Modestlymore slack

now

No differenceModestly lessslack now

Considerablyless slack

now

Don'tknow/unsure

Labor Production Capacity


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9.What best describes your view of the most likely outcome from

the current period of extraordinary monetary policy?

34% 34%

26%

6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

It will end badlywith one or more of

the following: astock market crash,

high inflation,recession

The Fed willnavigate a smooth

transition to morenormal policy

Odds are evenly splitbetween either

outcome

Don't know/unsure


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

1857

1913 1924

1937

1956

2000

20172029

2053

2075

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

Dec 17 Jan 28 '14 Mar 18 Apr 28 Jun 4 July 29

Survey Dates

December 31, 2014 June 30, 2015 December 31, 2015


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What do you expect the yield on the 10-year Treasury note will b

on ?

3.44%

3.37% 3.32%

3.21%

2.90%

2.83%

3.54%

3.24%

3.15%

3.43%

2.0%

2.5%

3.0%

3.5%

4.0%

Dec 17 Jan 28 '14 Mar 18 Apr 28 Jun 4 Jul 29

Survey Dates

December 31, 2014 June 30, 2015 December 31, 2015


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What is your forecast for the year-over-year percentage change i

real U.S. GDP for ?

Jan29,'13

Mar19

Apr 30 Jun 18 Jul 30Sep17

Oct 29Dec17

Jan28,'14

Mar18

Apr 28 Jun 4 Jul 29

2014 +2.56 +2.60 +2.62 +2.56 +2.52 +2.63 +2.53 +2.62 +2.77 +2.78 +2.75 +2.33 +1.89

2015 +2.90 +3.02 +3.00 +2.81 +2.75

+2.56%+2.60% +2.62%

+2.56%+2.52%

+2.63%

+2.53%

+2.62%

+2.77% +2.78% +2.75%

+2.33%

+1.89%

+2.90%

+3.02% +3.00%

+2.81%

+2.75%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2014 2015


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10. What is your forecast for the year-over-year percentage

change in the headline U.S. CPI for ?

1.78%

2.02%2.02%

2.29%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Jun 4 Jul 29

Survey Dates

2014 2015


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12. When do you expect the Fed to allow its balance sheet to

decline?

Note: In the April survey, the question was phrased as: When do you believe the Fed will be

reducing the size of its balance sheet?

0%

5%

10%

15%

20%

25%

30%

Oct

Nov

Dec

Jan'15

Feb

Mar

Apr

May

JunJul

Aug

Sep

Oct

Nov

Dec

Jan'16

Feb

Mar

Apr

May

JunJul

Aug

Sep

Oct

Nov

Dec

Jan'17

AfterJan

Apr 28 Jun 4 Jul 29

Averages:April 28 survey:October 2015

June 4 survey:March 2016

June 29 survey:

December 2015


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13. When do you think the FOMC will first increase the fed funds

rate?

0%

5%

10%

15%

20%

25%

30%

April 28 Jun 4 Jun 29

Averages:April 28 survey:

July 2015

June 4 survey:

August 2015

July 29 survey:

August 2015


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Where do you expect the fed funds target rate will be on ?

Jul 30 Sep 17 Oct 29 Dec 17Jan 28

'14Mar 18 Apr 28 Jun 4 Jul 29

Dec 31, 2014 0.28% 0.21% 0.21% 0.20% 0.19% 0.15% 0.27% 0.17% 0.21%

Jun 30, 2015 0.50%

Dec 31, 2015 0.97% 0.92% 0.82% 0.70% 0.72% 0.83% 0.99% 0.68% 1.05%

0.28%

0.21% 0.21%0.20%

0.19%

0.15%

0.27%

0.17%

0.21%

0.50%

0.97%

0.92%

0.82%

0.70%0.72%

0.83%

0.99%

0.68%

1.05%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%


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14. Which of the following best describes your view on the effect

of the Russian conflict with Ukraine on U.S. growth?

3%

30%

68%

0%3%

18%

79%

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

It will have asubstantial effect

It will have amodest impact

It will have almostno impact

Don'tknow/unsure

Apr 28 Jul 29


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How much concern do you have that trouble between Russia and

Ukraine could create wider global risks?

1= Not concerned at all

10= Highest level of concern

3%

14%

27%

14%

3%

11%

8%

19%

3%

0%

0%

15%

24%

12%

12%

9%

18%

9%

3%

0%

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

1

2

3

4

5

6

7

8

9

10

Apr 28 Jul 29

Averages:

April 28 survey: 4.8

July 29 survey: 4.8


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15. Which of the following best describes your view on the effect

of the Israeli conflict with Palestinianson U.S. growth?

0%

18%

82%

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

It will have asubstantial effect

It will have amodest impact

It will have almostno impact

Don'tknow/unsure


21/28



How much concern do you have that the Israeli conflict with

Palestinians could create wider global risks?

1= Not concerned at all

10= Highest level of concern

6%

32%

12%

9%

12%

9%

6%

9%

6%

0%

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

1

2

3

4

5

6

7

8

9

10

Jul 29

Average:

4.2


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16. In the next 12 months, what percent probability do you place

on the U.S. entering recession? (0%=No chance of recession,100%=Certainty of recession)

Aug11,

2011

Sep19

Oct31

Jan23,

2012

Mar16

Apr24

Jul31

Sep12

Dec11

Jan29,

2013

Mar19

Apr30

Jun18

Jul30

Sep6

Oct29

Dec17

Jan28

2014

Mar18

Apr28

Ju29

Series1 34.0 36.1 25.5 20.3 19.1 20.6 25.9 26.0 28.5 20.4 17.6 18.2 15.2 16.2 16.9 18.4 17.3 15.3 16.9 14.6 16.

34.0%

36.1%

25.5%

20.3%

19.1%

20.6%

25.9%

26.0%

28.5%

20.4%

17.6%

18.2%

15.2%

16.2%

16.9%

18.4%

17.3%

15.3%

16.9%

14.6%

16.2

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates


23/28



17. What is the single biggest threat facing the U.S. economic

recovery?

0% 5% 10% 15% 20% 25% 30% 3

European recession/financial crisis

Tax/regulatory policies

Slow job growth

High gasoline prices

Overall inflation

Deflation

Debt ceiling

Too little budget deficit reduction

Too much budget deficit reduction

Rise in interest rates

Geopolitical risks

Other

Don't know/unsure

Europ

reces

/fina

cris

Tax/regul

atory

policies

Slow job

growth

High

gasoline

prices

Overall

inflationDeflation

Debt

ceiling

Too little

budget

deficit

reduction

Too

much

budget

deficit

reduction

Rise in

interest

rates

Geopoliti

cal risksOther

Don't

know/un

sure

Apr 30 2031%20%2%0%2%2%2%9%11%0%

Jun 18 1528%20%2%3%3%0%2%13%13%0%

Jul 30 8%30%22%4%0%2%2%0%4%10%14%4%

Sep 17 4%27%22%7%2%0%4%2%4%18%7%2%

Oct 29 8%29%24%3%3%3%3%3%5%8%13%0%Dec 17 5%32%29%5%2%0%2%2%2%15%2%2%

Jan 28 '14 7%21%30%2%2%0%0%2%2%12%21%0%

Mar 18 1023%26%3%3%5%0%0%8%5%18%0%

Apr 28 3%26%21%0%3%5%0%3%3%8%18%13%0%

Jul 29 1229%12%0%6%3%0%0%0%12%12%12%3%

Apr 30 Jun 18 Jul 30 Sep 17 Oct 29 Dec 17 Jan 28 '14 Mar 18 Apr 28 Jul 29


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18. What is your primary area of interest?

Comments:

Robert Brusca, Fact and Opinion Economics: Fed is laggingASSUMING inflation pressures will drop. It seems to be gettingbehind the inflation eight-ball. Economic models work too badly toignore contrary real events especially when they involve inflation.Fed needs to look harder at reality and less hard at its own forecasts.

John Donaldson, Haverford Trust Co.:Regarding criticism ofJanet Yellen's comments on asset valuation: she is in a "no win"position. If she says nothing, the Fed is tone deaf and not in touch. If

she does comment, that is inappropriate and not her job.

Kevin Giddis, Raymond James/Morgan Keegan: We continue togrow, but at a slower pace, and not very even. What is lacking is atrue wealth creator like a technology or housing boom that we haveexperienced in the past. Think slowly. Think deliberately. Think low

Economics43%

Equities20%

Fixed Income17%

Currencies

0%

Other

20%


25/28



interest rates with limited inflation. Over time, we will work our waythrough this phase and I believe that the Fed is well positioned to

react to this and, when that occurs, they will have the correctresponse.

Stuart Hoffman, PNC Financial Services Group: Either Americanworkers have suddenly become highly unproductive or real GDPgrowth is much better than estimated in 1H 2014. Part-time, lowwage jobs are all the private sector is creating is an "Urban Myth."

Hugh Johnson, Hugh Johnson Advisors:An absolute decline in

the level of financial assets on the balance sheet of the FederalReserve is quite unusual (3 in 56 rolling one-year periods.) Reservegrowth is unlikely, under current circumstances, to lead to anacceleration in loan growth and monetary growth (and inflationexpectations). If an acceleration occurs, it is quite manageablethrough (a) interest payments on excess reserves and (b) reverserepos. But, importantly, there is not now, nor is it likely, that we willexperience "acceleration" in the growth rate of lending and monetarygrowth that would lead to late 1970s levels of monetary growth and

inflation. In addition, a detailed outline of the Fed's exit strategy,which should be managed "over time," would be interesting althoughnot entirely necessary. Concerns about the ability of the Fed tomanage the process (exit strategy) are significantly overdone.

John Kattar, Ardent Asset Advisors: The current pace ofimprovement in labor markets and subdued inflation suggest the Fedshould be raising rates by late this year. But the risks are to thedownside and the Fed will stay dovish through 2015. Tighter

monetary policy coincident with any signs of economic weakeningwould be the nightmare scenario for stocks.

David Kotok, Cumberland Advisors: Geopolitical risk premiumscannot be measured, only estimated. They seem to be rising.Observe the widening between SKEW and VIX.


26/28



Subodh Kumar, Subodh Kumar & Associates: There is plenty ofgrit plus grist for the investment mill. From the mix of new issues to

cash, from bonds to equities, markets remain focused on centralbanks. However, geopolitical risks and the ability of companies todeliver depend on real events. Equity valuation appears to assumewell above historical earnings growth and sovereign bonds little risk,inflation or otherwise. We favor quality and maintaining some cashreserves.

Guy LeBas, Janney Montgomery Scott: The fact that the"business spending" story failed to emerge in 2014 is very telling.

CEOs are very concerned about long term prospects for the U.S.economy and aren't making long-term investments as a result. Thatfact points to a "secular stagnation-lite" situation for the U.S.

John Lonski, Moody's: The dullest U.S. economic recovery sinceWWII and subpar growth outside the U.S. limit the upsides forinflation and bond yields. A nearly 2.5% 10-year U.S. Treasury yieldlooks juicy versus comparably-dated government bonds of 0.6%from Japan, 1.17% from Germany, 1.47% from France, and 2.15%

from Canada.

Drew Matus, UBS Investment Research: We argued in 2012 that"the Fed will find it far more difficult to exit than they have found itto enter given the limitations of the exit tools."

Rob Morgan, Fulcrum Securities: The Fed recently commentedthat valuations in the social media and biotech sectors are stretched.Although I agree with that appraisal, I believe the comment is

outside the Fed dual mandate of keeping full employment andinflation within an acceptable band.

Joel Naroff, Naroff Economic Advisors: By year's end, laborshortages will be appearing, wage gains will be accelerating and allthe conditions for a Fed tightening will be in place. It will just be a


27/28



matter of how quickly Yellen pulls the trigger.

Lynn Reaser, Point Loma Nazarene University: The Fedcontinues to feed risk-taking in financial markets, but little is spillingover into more spending on plant and equipment. Inflation, jobgains, and unemployment are firmer than anticipated, but lacklusterwage gains suggest that labor market slack remains. It is too earlyto slam on the brakes.

Hank Smith, Haverford Investments: The key to a successfulunwind of the extraordinary accommodative monetary policy is the

implementation of pro-growth fiscal policy with regulatory reform.That is unlikey for a couple of years

Diane Swonk, Mesirow Financial: The taper tantrum had animpact on the Fed and they want to make sure markets are preparedand strong enough to raise rates

Peter Tanous, Lynx Investment Advisory: "Calm before thestorm." While the world is moving dangerously closer to irreversible

deadly conflagrations that threaten civilization on multiple fronts, thestock market continues on its giddy path of insouciance andobliviousness. Can this possibly end well for investors?

Scott Wren, Wells Fargo Advisors: Stocks are no longer cheapbut in the modest growth/modest inflation environment we envisionlooking ahead, equities can do fine. For 2015 & 2016 a 6% to 9%total return for the S&P 500 seems likely. This cyclical bull markethas more room to run. Volatility is your friend, not your enemy. Add

to stocks on pullbacks. I think we will get some opportunities to buystocks at lower levels.

Mark Zandi, Moody's Analytics: U.S. economic growth prospectsare good and getting better, and the risks to this optimism appearincreasingly less risky.


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Clare Zempel, Zempel Strategic: Focus should be more onnominal GDP growth, and less on the Fed's balance sheet and

interest rate levels.

cnbc fed survey, july 29, 2014

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