CNBC Fed Survey, June 16, 2015

CNBC Fed Survey June 16, 2015 Page 1 of 31

FED SURVEY June 16, 2015

These survey results represent the opinions of 39 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 collected on June 11-12, 2015. 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 who did accept our invitation.

1. Will the Federal Reserve raise the federal funds rate in 2015?

84%

11%

5%

92%

5% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Don't know/unsure

Apr 28 Jun 16



2. Relative to an economy operating at full capacity, what best describes your view of the amount of resource slack in the U.S. right now for labor?

July 29August

20Sep 16 Oct 28 Dec 16 Jan 27 Mar 17 Apr 28 Jun 16

Considerably more slack now 48% 34% 20% 18% 16% 16% 13% 6% 5%

Modestly more slack now 36% 40% 60% 69% 55% 50% 63% 64% 54%

No difference 4% 6% 3% 0% 0% 6% 11% 0% 15%

Modestly less slack now 8% 11% 6% 5% 24% 19% 11% 22% 15%

Considerably less slack now 4% 9% 9% 8% 5% 9% 3% 8% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Modestly less slack

Modestly more slack

Considerably less slack

No difference

Considerably more slack



Relative to an economy operating at full capacity, what best describes your view of the amount of resource slack in the U.S. right now for production capacity?

July 29August

20Sep 16 Oct 28 Dec 16 Jan 27 Mar 17 Apr 28 Jun 16

Considerably more slack now 12% 9% 8% 8% 8% 0% 14% 8% 10%

Modestly more slack now 56% 60% 64% 64% 55% 59% 57% 57% 62%

No difference 8% 14% 8% 15% 13% 19% 14% 5% 8%

Modestly less slack now 16% 9% 14% 8% 24% 13% 11% 19% 13%

Considerably less slack now 4% 9% 3% 5% 0% 9% 5% 11% 8%

0%

10%

20%

30%

40%

50%

60%

70%

No difference

Modestly more slack

Modestly less slack

Considerably less slack

Considerably more slack



3. What is your measure of full employment in the U.S.?

0%

5%

10%

15%

20%

25%

30%

35%

Unemployment rate

Apr 28 Jun 16

Averages:

Apr 28: 4.8%

Jun 16: 4.8%



4. At what level of year-over-year wage growth would you become concerned that inflationary pressures are building?

15% chose Theres little connection between wages and overall price inflation.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% 1% 2% 3% 4% 5% 6% 7%

Wage growth

Average:

3.6%



5. At the current level of wage growth, are you ...?

10%

5%

62%

21%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Concernedabout inflation

Concernedabout deflation

Believe therisks areneutral

Theres little connection

between wages and overall

price inflation

Don'tknow/unsure



6. How do you view the recent productivity slowdown?

23%

31%

36%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

A temporarydevelopment

without much long-term consequence

A more permanentdevelopment that

creates concern forlong-term growth

The statistics do notcorrectly capturingreal productivity

growth in theeconomy

Don't know/unsure



7. How do you think the productivity slowdown will affect Fed policy?

17%

14%

69%

29%

38%

33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Hike sooner Hike later No effect ontiming

Hike faster Hike slower No effect onspeed

Timing Speed



8. What is most responsible for the slowdown in productivity?

Government tax and regulatory policy

Lack of capital deepening Lack of capital deepening Lower productive returns to technology Mis-measurement of the data on GDP

More services jobs in the economy Reluctance to spend on PP&E that would increase productivity Temporary issues that should have limited impact on longer term

growth

Unclear Underinvestment by businesses Bad statistical analysis

Demographics and technology Incorrect output measuring Lack of strong capital spending Low wages and fewer skilled workers available

Lower rates may have overstated prior productivity; more picky labor force e.g. on life quality

Near full level of productivity and lack of skilled workers Output growth

Slack aggregate demand + rising inventory/sales ratio Temporary factors Weak demand and weak labor markets cause companies to be less

concerned about economizing on labor. Therefore we get weak

productivity growth. The current wave of technological innovation appears to be benefiting

consumers more than businesses We are likely over stating inflation due the vast improvements in the

quality of long-standing goods and service as well as new goods and services that improve utility and satisfaction.

Lower long-term fixed capital investment by corporations, which is in



turn cause by economic and policy uncertainty Demographics, old people on fixed incomes buy less, and there are

more of them; Fed, state & local government spending is less

In rank order, measurement error, soft business investment particularly in info processing equipment, slowing in pace of innovation.

Output continues to be constrained by excesses (primarily debt

levels) built during 2000-2006 both domestically and internationally. Some of it is the legacy of weak investment during the recovery;

dominant factor is measurement problems regarding impact of sharing economy and tech change

Weak capital spending plus turnover in labor as boomers retire and replaced by double the number of rookies

The methodology of the payroll survey was changed in 2012 and it

now overstates payroll growth (aggregate labor)



9. Should the New York Federal Reserve president be approved by the Senate?

10. Should the FOMC, not the Board of Governors, control the rate of interest on excess reserves?

11. Should the Fed release FOMC transcripts three years after the meeting instead of five?

27%

68%

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

Yes

No

50%

18%

29%

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

Yes

No

Doesn't matter

71%

18%

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

Yes

No



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

2075

2149

2111

2194 2187

2128

2156 2159

2311 2296

2247 2259

2293

1,800

1,900

2,000

2,100

2,200

2,300

2,400

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27'15

Mar 17 Apr 282 Jun 16

Survey Dates

December 31, 2015 December 31, 2016



13. What do you expect the yield on the 10-year Treasury note will be on ?

3.43% 3.45%

3.19%

2.96%

2.54%

2.57%

2.33%

2.64%

3.52%

3.04%

3.14%

2.89%

3.24%

2.0%

2.5%

3.0%

3.5%

4.0%

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27'15

Mar 17 April 28 Jul 16

Survey Dates

December 31, 2015 December 31, 2016



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

Jan 28,

'14Mar 18 Apr 28 Jun 4 Jul 29 Sep 16 Oct 28 Dec 16

Jan 27,

'15Mar 17

April

28Jun 16

2015 +2.90% +3.02% +3.00% +2.81% +2.75% +2.90% +2.90% +3.02% +2.99% +2.69% +2.70% +2.25%

2016 +2.88% +2.80% +2.84% +2.81% +2.78%

+2.90%

+3.02% +3.00%

+2.81%

+2.75%

+2.90% +2.90%

+3.02% +2.99%

+2.69% +2.70%

+2.25%

+2.88%

+2.80%

+2.84% +2.81%

+2.78%

2.0%

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%

3.4%

2015 2016



15. What is your forecast for the year-over-year percentage change in the headline U.S. CPI for ?

2.02%

2.29% 2.27%

2.01%

1.74%

1.17%

1.01% 1.00%

1.17%

2.17%

2.07% 2.08%

1.96%

2.29%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Jun 4 Jul 29 Sep 16 Oct 28 Dec 16 Jan 27,'15

Mar 17 April 28 Jun 16

Survey Dates

2015 2016



16. When do you expect the Fed to hike the fed funds rate

and allow its balance sheet to decline?

Survey Date Fed Funds Hike

Average Forecast

Balance Sheet

Average Forecast

April 28, 2014 survey July 2015 October 2015

June 4 survey August 2015 March 2016

July 29 survey August 2015 December 2015

August 20 survey July 2015 Not asked

September 16 survey June 2015 December 2015

October 28 survey July 2015 January 2016

December 16 survey July 2015 February 2016

Jan. 27, 2015 survey September 2015 April 2016

March 17 survey August 2015 April 2016

April 28 survey October 2015 May 2016

June 16 survey October 2015 July 2016



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

28%

49%

46%

49%

44%

39%

50%

54%

50%

60%

43%

43%

49%

43%

49% 50%

47%

32%

44%

35%

17%

6%

3% 3% 3%

6% 5%

3%

13%

3%

3%

6% 5% 6%

3%

8%

6%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Jul 31,'12

Jul 29,'14

Aug 20 Sep 16 Oct 28 Dec 16 Jan 27,'15


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

Too accomodative

Don't know/unsure

Too restrictive

Just right



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

Jul

30

Sep

17

Oct

29

Dec

17

Jan

28

'14

Mar

18

Apr

28Jun 4

Jul

29

Aug

20

Sep

16

Oct

28

Dec

16

Jan

27,

'15

Mar

17

April

28

Jun

16

Dec 31, 2015 0.97%0.92%0.82%0.70%0.72%0.83%0.99%0.68%1.05%0.89%0.98%0.89%0.83%0.73%0.71%0.54%0.53%

Dec 31, 2016 1.99%2.13%2.04%1.93%1.75%1.84%1.46%1.56%

0.97% 0.92%

0.82%

0.70% 0.72%

0.83%

0.99%

0.68%

1.05%

0.89%

0.98%

0.89%

0.83%

0.73% 0.71%

0.54% 0.53%

1.99%

2.13%

2.04%

1.93%

1.75%

1.84%

1.46%

1.56%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Dec 2016

Dec 2015



19. At what fed funds level will the Federal Reserve stop hiking rates in the current cycle? That is, what will be the terminal rate?

3.16% 3.20%

3.30%

3.17% 3.11%

3.04%

2.85%

3.06%

2.0%

2.5%

3.0%

3.5%

4.0%

Aug 20 Sep 16 Oct 28 Dec 16 Jan 27,

'15


Survey Dates



20. When do you believe fed funds will reach its terminal rate?

Survey Date Forecast

August 20 survey Q4 2017

September 16 survey Q3 2017

October 28 survey Q4 2017

December 16 survey Q1 2018

Jan. 27, 2015 survey Q1 2018

March 17 survey Q4 2017

April 28 survey Q1 2018

June 16 survey Q1 2018



21. What is the percentage chance each of the following countries will leave the euro zone in the next 3 years? (0%=No chance of leaving, 100%=Certainty of leaving):

41%

13%

12%

9%

8%

3%

39%

11%

8%

7%

5%

3%

5%

50%

12%

10%

8%

5%

2%

3%

0% 10% 20% 30% 40% 50% 60%

Greece

Portugal

Spain

Italy

Ireland

Germany

France




22. Has the U.S. stock market already discounted a fed funds rate hike by the Federal Reserve this year?

56%

36%

8%

53%

38%

9%

53%

47%

0%

47%

50%

3%

61%

39%

0%

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

Yes

No

Don't know/unsure

Dec 16 Jan 27 Mar 17 Apr 28 Jun 16



Has the U.S. bond market already discounted a fed funds rate hike by the Federal Reserve this year?

42%

56%

3%

67%

33%

0%

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

Yes

No

Don't know/unsure

Apr 28 Jun 16



23. What is the single biggest threat facing the U.S. economic recovery?

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

European recession/financial crisis

Tax/regulatory policies

Slow job growth

Inflation

Deflation

Debt ceiling

Rise in interest rates

Geopolitical risks

Global economic weakness

Slow wage growth

Other

Don't know/unsure

Europeanrecession/financial

crisis

Tax/regulatory

policies

Slow jobgrowth

InflationDeflationDebt

ceiling

Rise ininterest

rates

Geopolitical risks

Globaleconomicweakness

Slow wagegrowth

OtherDon't

know/unsure

Apr 30 20%31%20%0%2%2%11%0%

Jun 18 15%28%20%3%3%0%13%0%

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

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

Oct 29 8%29%24%3%3%3%8%13%0%

Dec 17 5%32%29%2%0%2%15%2%2%

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

Mar 18 10%23%26%3%5%0%5%18%0%

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

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

Sep 16 6%26%29%6%3%0%6%11%11%3%

Oct 28 31%18%15%3%3%0%10%8%8%3%

Dec 16 40%14%14%3%6%0%3%14%3%0%

Jan 27 '15 0%13%9%0%0%0%6%16%41%6%16%0%

Mar 17 6%14%0%3%6%0%6%8%28%17%14%0%

April 28 3%11%8%3%0%0%6%11%28%8%19%3%

Jun 16 3%17%3%0%0%0%14%25%22%6%11%0%

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

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27 '15 Mar 17 April 28 Jun 16



FED SURVEY April 30,

24. 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,

'11

Sep19

Oct31

Jan23,

'12

Mar16

Apr24

Jul31

Sep12

Dec11

Jan29,

'13

Mar19

Apr30

Jun18

Jul30

Sep6

Oct29

Dec17

Jan28

'14

Mar18

Apr28

Jul29

Sep16

Oct28

Dec16

Jan27

'15

Mar17

April28

Jun16

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 16.2 15.0 15.1 13.6 13.0 16.4 14.7 15.1

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%

15.0%

15.1%

13.6% 13.0%

16.4%

14.7%

15.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates




25. What is your primary area of interest?

Comments: Marshall Acuff, Silvercrest Asset Management: The bond market is leading the Federal Reserve. A hike in short-term rates is

already priced into markets. Language from the Fed about future rate hikes, especially their pace of increase, will become more important to markets than their most immediate action to increase the Fed Funds rate.

Dean Baker, Center for Economic and Policy Research: The trade deficit is the major drag on growth at present. It is remarkable more people are not talking about the need for a lower-valued dollar.

Jim Bianco, Bianco Research: The Fed will not hike rates unless/until it is priced in. They do not want a repeat of 1994 (hike when not priced in, the bond market collapsed). Since the (fed fund

futures) market is pricing in a December hike, not September as generally forecasted, this matters.

Economics

47%

Equities 19%

Fixed Income 17%

Currencies 0%

Other 17%




Thomas Costerg, Standard Chartered Bank: We think the 16-17 June FOMC meeting will be all about preparing the ground for a post-summer rate hike. This should support our scenario that the first rate hike will be in September. A July rate hike remains unlikely,

however, as the Fed probably wants to see more evidence of a Q2 GDP rebound, and more wage data. The Fed may also gauge market reaction over the summer. We think current low core PCE inflation may be dismissed given the likely belief that inflation will grind

higher in coming months. We think some underlying concerns about financial stability are emerging; Yellen might claim these remain secondary in the Feds thought process about the hike; still they do matter, in our view.

John Donaldson, Haverford Trust Co.: There has been much commentary that the Fed will be embarking down a path with no prior experience (raising rates from zero). We believe this is a good

reason to get started early; sooner and gradual moves will leave time and policy room to adjust to unexpected consequences. The absolute last thing the FOMC wants is to feel like they are behind the curve and need to move quickly and in bigger increments.

Neil Dutta, Renaissance Macro Research: The Fed's reasonable confidence threshold is being achieved. Labor market slack has dried

up enough to pressure wages. Inflation expectations have stabilized in the market and remain stable among households. The dollar has declined and oil prices have advanced.

Mark Elenowitz, TriPoint Global Equities: It is no secret that the Fed will raise rates in the near future. We believe that the markets will be resilient and continue to grow, despite being 6 years into a bull market cycle. While many people continue to draw comparisons

between todays market and the markets leading up to the tech crash and 2008 recession, we trust that the underlying fundamentals of today are stronger.




Kevin Giddis, Raymond James/Morgan Keegan: The bond market appears to be challenging the Fed to "prove it" with their desire to raise rates. Almost all of the shifts in the yield curve have happened on the long end of the curve, which is more about Europe

than it is about a rate hike and the Fed. During all of this, the short end of the curve has barely budged. This bears the question: who is running this thing?

Stuart Hoffman, PNC Financial Services Group: What weak consumer spending?? Real PCE up just over 2% in 1Q and close to 3% in 2Q. Savings rate headed back to near 5%. GDP revisions on July 30 will cause a significant upward revision to market consensus

forecast for real GDP growth in 2015. This will be the final piece of data to give the FOMC needed "confidence" to raise funds rate by 25 bps at its Sept. meeting.

Art Hogan, Wunderlich Securities: More than 35% of active market participants have never seen an increase in the fed funds rate. That is why there is so much trepidation. It will be much less of an issue once we start the normalization process. It's the

anticipation that causes so much dislocation. Constance Hunter, KPMG LLP: Despite an abundance of guidance

to the market that the Fed will leave ZIRP and get to a more normal accommodative policy stance, the bond market has been slow to believe the economy can take it. As always the impact of central bank action depends on if said bank is acting from a position of

strength or weakness. By acting in September, the Fed will be acting from a position of strength. Hugh Johnson, Hugh Johnson Advisors: I anticipate (guess) the

Fed will begin to raise rates in September but it remains far from certain and data dependent. The justification for raising rates before inflation rates reach/approach target is, as Chairperson Yellen says, Fed policy needs to be "forward looking." Hence, the Fed has given




itself considerable flexibility in the timing of a move toward restraint. That is as it should be. John Kattar, Ardent Asset Advisors: The Yellen Fed has been

consistent and clear in signaling its intentions. I expect the strongest indication yet that a rate hike is likely late this year, as early as September.

Subodh Kumar, Subodh Kumar & Associates: Changing the signpost does not change the distance to be travelled, in real nor financial endeavors. Geopolitics simmer. Greece trials and tribulations reflect worldwide tendencies for politicians to

procrastinate and to use easily availed money not to restructure but instead to ingrain munificence. In quantitative ease reliance, central banks may have underestimated such procrastination. On potential volatility in markets, complacency about present minuscule rates

could be a mirror image of complacency back in 1981, when high fixed income yield risk premiums and low equity P/E ratios showed similar conviction, misplaced then about high inflation being stubborn. Institutional memory of such may be lost. Currency

volatility as harbinger, liquidity in fixed income credit following the money management adage of sell what you can and resistance to valuation expansion in equities indicate change. We favor tangible

quality of delivery and of restructuring. Joseph LaVorgna, Deutsche Bank: As the economic slack rapidly dissipates, the Fed should be forward-looking.

Guy LeBas, Janney Montgomery Scott: In the short term, the biggest threat to economic growth is the dollar--one need look no further than 1Q 2015 to get an idea of how the dollar can impact

economic output. Longer term, we're in the midst of secular stagnation, marked by lower income-earning population growth and reduced productivity growth. Perhaps 2.5% GDP growth is as good as we can expect for the next several decades.




Ward McCarthy, Jefferies: The timing of Liftoff will be opportunistically data dependent. The FOMC wants to end ZIRP with as little disruption to financial markets as possible.

Rob Morgan, Sethi Financial Group: The minutes from the last FOMC meeting said rates wouldn't rise until participants saw labor market improvement and were confident inflation would hit 2 percent in the medium term. I don't think we're there yet.

James Paulsen, Wells Capital Management: By waiting so long to start raising the funds rate, the Fed has increased the difficulty of the exit plan. Normally, the Fed begins tightening much sooner in

the recovery cycle when profits and margins are still expanding strongly after the previous recession. Today, the profit cycle is already mature and the Fed will be raising interest rates against relatively slow-growing corporate earnings and with weak

productivity. Consequently, the impact on the financial markets may be more extreme than most seem to appreciate. Lynn Reaser, Point Loma Nazarene University: If a September

rate hike depends on the data, that data is arriving. It will take more than El Nio to keep the Fed on hold.

Chris Rupkey, Bank of Tokyo-Mitsubishi: Waiting for unemployment to fall a little further so the Fed can liftoff, which would be a "celebration" in some policymakers minds, celebrating that the US economy has shaken off all the headwinds from the

Great Recession. The Great Recession the Fed caused by letting Lehman go under. John Ryding, RDQ Economics: The economy is close to full

employment and there are no signs that lower oil prices have produced broader deflation pressures. Banks are well-capitalized and the stock market has been hitting record highs. Fed policy has overstayed its welcome at zero rates but, alas, will likely continue to




do so for the next three months. Allen Sinai, Decision Economics: The next big thing is Fed Policy rate hike -- the second and beyond.

Hank Smith, Haverford Investments: If the next presidential administration enacts pro-growth tax reform and regulatory relief, we may be in the middle innings of this economic expansion and

equity bull market Diane Swonk, Mesirow Financial: When the history on liftoff is written, the Fed is likely to be judged more on the trajectory of rates

after liftoff, not the act itself. The next decisions that the Fed makes could very well be more important than the month it times liftoff. Robert Tipp, Prudential Fixed Income: We still see value in

bonds. At this point, the bond market has gone a long way towards pricing in the Fed's likely path of rate hikes, and we view spreads on select issuers in the non-government sectors, such as high yield and investment grade corporates, structured products and emerging

markets are attractive. As a result, we continue to expect fixed income to add value and provide ballast to investors' portfolios. While modest compared to decades past, we nonetheless expect that

over the intermediate to long term fixed income, especially the higher yielding sectors, will continue to post respectable returns. Mark Zandi, Moody's Analytics: The U.S. economy has reached

escape velocity. It would take a sizable shock to derail it. Odds are high the economy will be back to full-employment by this time next year. All the pieces are in place for the Fed to steadily normalize interest rates.

Documents

CNBC Fed Survey, June 16, 2015