CNBC Fed Survey, October 28, 2014

8/10/2019 CNBC Fed Survey, October 28, 2014

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CNBC Fed Survey October 28, 2014Page 1 of 31

FED SURVEYOctober 28, 2014

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 collecte

on October 23-24, 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.By how much do you believe the Fed will, on net, increase ordecrease the size of its balance sheet in 2015?

-$104

-$146

$24

$60

-$83

-$54

-$200

-$150

-$100

-$50

$0

$50

$100

Billions

Mar 18 Apr 28 Jul 29 Aug 20 Sep 16 Oct 28


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2.Will the Federal Reserve vote in October to end its QE program

95%

5%

0%

97%

3% 0%0%

20%

40%

60%

80%

100%

120%

Yes No Don't know/unsure

Sep 16 Oct 28


3/31



3.What is the probability the Fed will begin a new QE program in

the 12 months after it concludes the current QE program?(0%=No chance of new QE, 100%=Certainty of new QE)

0%

10%

20%

30%

40%

50%

60%

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

Chance of new QE

Sep 16 Oct 28

Averages:

Sep 16:10.0%

October 28:14.4%


4/31



What is the probability the Fed will begin a new QE program in th

two years after it concludes the current QE program?(0%=No chance of new QE, 100%=Certainty of new QE)

0%

10%

20%

30%

40%

50%

60%

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

Chance of new QE

Sep 16 Oct 28

Averages:

Sep 16:14.0%

Oct 28:18.4%


5/31



4.The Fed will remove the phrase considerable time from its

monetary policy statement in ...

41%

24% 24%

11%

0%

23%

41%

13%

21%

3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

September October December AfterDecember

January After January Don'tknow/unsure

Sep 16 Oct 28


6/31



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

in 2014?

26% 26%

40%

9%

31%

22%

47%

0%

40%

16%

40%

5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Fed will be moredovish than I

expect

Fed will be morehawkish than I

expect

Risks are balanced Don't know/unsure

Jul 29 Sep 16 Oct 28


7/31



Which of these is the bigger risk to your forecasts for Fed policy i

2015?

49%

34%

14%

3%

53%

39%

8%

0%

64%

13%

21%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Fed will be moredovish than I

expect

Fed will be morehawkish than I

expect

Risks are balanced Don't know/unsure

Jul 29 Sep 16 Oct 28


8/31



6.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?

48%

36%

4%

8%

4%

0%

34%

40%

6%

11%

9%

0%

20%

60%

3%

6%

9%

3%

18%

69%

0%

5%

8%

0%

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

Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now

Don't know/unsure

July 29 August 20 Sep 16 Oct 28


9/31



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?

12%

56%

8%

16%

4%

4%

9%

60%

14%

9%

9%

0%

8%

64%

8%

14%

3%

3%

8%

64%

15%

8%

5%

0%

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

Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now

Don't know/unsure

July 29 August 20 Sep 16 Oct 28


10/31



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

1857

19131924 1937

1956

2000

2032

1999

20172029

2053

2109

2066

2075

2149

2111

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

Dec 17 Jan 28

'14

Mar 18 Apr 28 Jun 4 July 29 Sep 16 Oct 28

Survey Dates

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


11/31



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

be on ?

3.44%

3.37% 3.32%

3.21%

2.90%

2.83%

2.76%

2.49%

3.54%

3.24%

3.15% 3.16%

2.90%

3.43% 3.45%

3.19%

2.0%

2.5%

3.0%

3.5%

4.0%

Dec 17 Jan 28

'14

Mar 18 Apr 28 Jun 4 Jul 29 Sep 16 Oct 28

Survey Dates

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


12/31



9.What is your forecast for the year-over-year percentage chang

in real U.S. GDP for ?

Jan29,'13

Mar19

Apr30

Jun18

Jul30

Sep17

Oct29

Dec17

Jan28,'14

Mar18

Apr28

Jun 4Jul29

Sep16

Oct28

2014 +2.5 +2.6 +2.6 +2.5 +2.5 +2.6 +2.5 +2.6 +2.7 +2.7 +2.7 +2.3 +1.8 +2.2 +2.2

2015 +2.9 +3.0 +3.0 +2.8 +2.7 +2.9 +2.9

+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%

+2.26%+2.28%

+2.90%

+3.02%+3.00%

+2.81%

+2.75%

+2.90%+2.90%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2014 2015


13/31



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

change in the headline U.S. CPI for ?

1.78%

2.02% 1.99%

1.77%

2.02%

2.29% 2.27%

2.01%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Jun 4 Jul 29 Sep 16 Oct 28

Survey Dates

2014 2015


14/31



11. 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%

35%

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 Sep 16 Oct 28

Averages:April 28 survey:

October 2015

June 4 survey:

March 2016

June 29 survey:

December 2015

Sept. 16 survey:

December 2015

Oct. 28 survey:

January 2016


15/31



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

rate?

0%

10%

20%

30%

40%

50%

60%

April 28 Jun 4 Jun 29 Aug 20 Sep 16 Oct 28

Averages:April 28 survey:

July 2015

June 4 survey:

August 2015

July 29 survey:

August 2015

Aug 20 survey:

July 2015

Sep 16 survey:

June 2015Oct 28 survey:

July 2015


16/31



13. How would you characterize the Fed's current monetary

policy?

28%

49%

46%

49%

44%43% 43%

49%

43%

49%

17%

6%

3% 3% 3%

13%

3% 3%

6% 5%

0%

10%

20%

30%

40%

50%

60%

July 31, 2012 July 29, 2014 Aug 20 Sep 16 Oct 28

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

Too accomodative

Don't know/unsureToo restrictive

Just right


17/31



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

Jul 30Sep17

Oct29

Dec17

Jan28 '14

Mar18

Apr28

Jun 4 Jul 29Aug20

Sep16

Oct28

Dec 31, 2014 0.28%0.21%0.21%0.20%0.19%0.15%0.27%0.17%0.21%0.16%0.14%0.10%

Jun 30, 2015 0.50%0.39%0.40%0.33%

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%

Jun 30, 2016 1.53% 1.56% 1.48%

Dec 31, 2016 1.99% 2.13% 2.04%

0.28%

0.21% 0.21% 0.20% 0.19%0.15%

0.27%

0.17%0.21%

0.16% 0.14%0.10%

0.50%

0.39% 0.40%

0.33%

0.97%0.92%

0.82%

0.70% 0.72%

0.83%

0.99%

0.68%

1.05%

0.89%

0.98%

0.89%

1.53%1.56%

1.48%

1.99%

2.13%

2.04%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Dec 2016

June 2016

Dec 2015

June 2015

Dec 2014


18/31



15. At what fed funds level WILL/SHOULD the Federal Reserve

stop hiking rates in the current cycle? That is, what will/shouldbe the terminal rate?

3.16%

3.44%

3.20%

3.39%3.30%

3.40%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Will Should

Aug 20 Sep 16 Oct 28


19/31



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

0%

5%

10%

15%

20%

25%

30%

35%

40%

Aug 20 Sep 16 Oct 28

Average:

Aug 20 survey:

Q4 2017

Sep 16 surveyQ3 2017

Oct 28 survey

Q4 2017


20/31



17. How much concern do you have that each of the following

could create wider global risks? (1=Not concerned at all,10=Highest level of concern)

5.4

4.75.0

5.4

4.44.3

3.7

2.7

0

1

2

3

4

5

6

7

8

9

10

Economicweakness in

Europe

Economicweakness in Asia

ISIS insurgencyand the U.S.

response

Trouble betweenRussia and

Ukraine

Spread of Ebola

Sep 16 Oct 28


21/31



18. Will the European Central Bank do outright quantitative

easing?

74%

15%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No Don't know/unsure


22/31



19. When do you believe the ECB will announce its quantitative

easing? (Only asked of those who answered yesto previous question.)

0%

5%

10%

15%

20%

25%

30%

Nov Dec Jan'15

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec AfterDec

'15

Average:

February 2015


23/31



20. 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

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

recess

finan

cris

Tax/regula

tory

policies

Slow job

growthInflationDeflation

Debt

ceiling

Too little

budget

deficit

reduction

Too much

budget

deficit

reduction

Rise in

interest

rates

Geopolitic

al risksOther

Don't

know/uns

ure

Apr 30 20%31%20%0%2%2%2%9%11%0%

Jun 18 15%28%20%3%3%0%2%13%13%0%

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

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

Oct 29 8%29%24%3%3%3%3%5%8%13%0%

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

Jan 28 '14 7%21%30%2%0%0%2%2%12%21%0%Mar 18 10%23%26%3%5%0%0%8%5%18%0%

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

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

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

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

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


24/31



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

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

Aug11,2011

Sep19

Oct31

Jan23,2012

Mar16

Apr24

Jul31

Sep12

Dec11

Jan29,2013

Mar19

Apr30

Jun18

Jul30

Sep6

Oct29

Dec17

Jan282014

Mar18

Apr28

Jul29

Sep16

Oct28

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.

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%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates


25/31



22. What is your primary area of interest?

Comments:

Thomas Costerg, Standard Chartered Bank: The consensus has

tended to overestimate U.S. GDP growth and my worry is thatexpectations for 2015 are starting from a high point; there is a riskof disappointment, once again. The U.S. consumer may be in a morefragile state than expected, especially if wage growth remainssubdued. Global headwinds may affect corporate investment. Alsothe Fed will start hiking. And there could be a return of politicaluncertainty after the midterm elections. The stars are not fullyaligned to reach escape velocity. The good news is that the economyis releveraging; but the question is whether this will be enough to

propel growth.

Tony Crescenzi, PIMCO: The Fed must plan a great escape fromthree things, a liquidity trap weak bank lending, quantitativeeasing, the zero policy rate. Recent events show the difficulty theFed is having. This escape hasnt been and wont be easy. The Fed

Economics

51%

Equities13%

Fixed Income

18%

Currencies3%

Other15%


26/31



must design an escape that avoids upsetting too quickly the threemain objectives it has had ever since it began its extraordinary

monetary accommodation in 2008: lower rate expectations, reduceinterest rate volatility, and prod investors to move outward along therisk spectrum. This means being careful about making its escapetransmit through the five main transmission effects of monetarypolicy:

1)

Stock prices2) Bond yields3)

Credit spreads4)

Bank lending standards

5)

The U.S. dollarNotably, the dollar has strengthened in anticipation of this escape. Inessence this means the Fed is already tightening, mainly through itscommunications and reduction in bond buying. Consider that by notbuying bonds next year it will be akin to tightening, just as thetrillion dollars of bond buying last year was easing. It isunconventional tightening, just as bond buying is unconventionaleasing. PIMCO continues to expect that in the next rate cycle, theFed wont raise rates as much as it did in thepast. We believe the

neutral rate is about 2% rather than the old 4%. Why? These fivereasons noted by the Fed in the March 19th minutes, page 7:

1)

Higher precautionary savings2) Higher global savings3) Demographics4)

Slow credit growth (If the Fed raises rates to rein incredit growth, if there is no credit growth then there isnothing to rein in.)

5)

Lower growth potential owing to lack of investment in

recent yearsMoreover, when the Fed raises rates to 2% it will be similar toraising it to 3% to 4% because the Fed will be combining its rateactions with balance sheet actions, a massive amount of totaltightening.


27/31



John Donaldson, Haverford Trust Co.:Recent volatility has beena useful reminder that the path toward normalization of monetary

policy will be anything but a straight line. The 10-year Treasurytrading below 1.90% last Wednesday looks like a classic capitulationtrade.

Neil Dutta, Renaissance Macro Research:While the marketshave been volatile, the U.S. economy has been remarkably stable.Growth has been at or above 3%, four of the last five quarters.Importantly, nonfarm payrolls have expanded above 200,000 permonth 75% of the time over the last year. That's more than enough

to keep pushing the unemployment rate down. We'll likely be at theFed's 2015 central tendency estimate at least two quarters ahead ofschedule. This supports earlier rate hikes than the forward marketshave currently priced.

Dennis Gartman, The Gartman Letter:All I know is that I'm very,very, very glad I don't have to make these decisions impacting somany people in so many different ways... and especially at the paylevels of those involved!

Kevin Giddis, Raymond James/Morgan Keegan:If they gave anaward for resiliency, the10-year Treasury note would win. Neverhave so many predicted so poorly the yield on this note. Theproblem with 2015's prediction is we won't likely do much better. Atip of the hat to Janet Yellen is overdue.

Constance Hunter, KPMG LLP:If the global situation does notderail the recovery, 2015 could well be the year we finally see a bit

of wage pressure that will lead to higher rates and a Fed thatreduces its balance sheet. The Yellen Fed is likely to be cautious andmay not move a steady 25bp per quarter.

Hugh Johnson, Hugh Johnson Advisors:The geopolitical risks tothe recovery are minimal; the risks associated with higher interest


28/31



rates...in time...are significant. Currently, there are no risks to thecurrent stock market-economic-interest rate cycle that threaten the

end. The most significant impediment to higher stock prices willcontinue to be:

(a) The growth rate of earnings, which will remain single-digitthrough 2015(b) Modestly higher longer-term interest rates which willimpede multiple expansion and(c) Valuation which is a function of the first two.

Based upon valuation alone, it is difficult to make the case forsignificantly higher stock prices...higher yes...significantly higher no.

David Kotok, Cumberland Advisors:U.S. tax policy discouragesgrowth. There is no chance it changes before 2017.

Alan Kral, Trevor Stewart Burton & Jacobsen:If Republicanswin election only then can be a watershed.

Subodh Kumar, Subodh Kumar & Associates:From momentumand into value are likely portfolio change factors as quantitative ease

bifurcates. The urgency arises from geopolitics, the risk profiles incapital markets and the ability of companies to deliver operationalgain instead of financial engineering or business concept thathitherto have driven performance. Current systemic risk also lies innon-bank and fiduciary issues, neither conducive to momentuminvestment. Considerations make diversification dominated bygeographic dispersion to be simplistic. Our favor is to discriminatefor quality.

Guy LeBas, Janney Montgomery Scott: In response to thequestion about ECB QE, by my definition, the ECB has alreadystarted QE with its E800mm covered bond purchase this week. Interms of the Fed meeting, October is likely to be a snoozer, as theFOMC has fallen into the pattern of only taking action or makingmeaningful qualitative statements at their quarterly meetings. ECB


29/31



action--or inaction, really--is the bigger issue. Based on the amountof ABS and corporate bonds outstanding, there is simply no way the

ECB can enact a right-sized, deflation-fighting QE without buyingsovereign debt. And that action is proscribed by their charter, soDraghi has quite the inconvenient situation on his hands. At the endof the day, maintaining the great Eurozone experiment is probablymore important than fighting deflation.

John Lonski, Moody's:Similar to late 1998 and early 1999,problems abroad could push U.S. borrowing costs down to levels thatspark unexpectedly rapid growth by household expenditures, but

today's consumer is much weaker financially than in the late 1990s.Income and wealth inequality could become a major political issue inthe year ahead; note that Yellen addressed this matter in a recentspeech.

Drew Matus, UBS Investment Research:Labor marketimprovement continues apace. Further declines in theunemployed/job openings ratio and/or increases in the quit rate willsupport wage gains in late 2014/early 2015.

Rob Morgan, V2V Associates:What's the rush to reduce the sizeof the Fed's balance sheet? Both Janet Yellen and Ben Bernankehave said the process could take the better part of a decade. Risinginflation could make that decision a poor one, but there are no signsof that on the horizon.

Joel Naroff, Naroff Economic Advisors:Once the Fed recognizesthat the labor markets are indeed tight, the path to higher rates will

be clear and let's not forget that 25 bps each meeting for one year is200 bps.

Phil Orlando, Federated Investors:The potential for a "wave"election in the Senate next month could have favorable fiscal policyimplications in 2015.


30/31



James Paulsen, Wells Capital Management:The clearestmessage coming from the Fed is it will not change its policy until it is

"forced" to do so. Despite improved economic performance, theykeep changing the parameters so they can remain stronglyaccommodative. This tells me that when the Fed does finally beginto exit it will only be because it is forced to do so (i.e., because ofwidening panic it is behind the curve) which is not a comfortablethought for an investor.

Lynn Reaser, Point Loma Nazarene University:While the Feddebates whether the chances of inflation running below 2% have

diminished or not, the more important question may be whether 2%is even the right target. The risks from Ebola and the stock markethave eased, but the Islamic State, Europe, and China could allchallenge the consensus sunnier outlook.

John Roberts, Hilliard Lyons:At this point we see no issues toderail the current upward trend in the equity markets and as long asthe current upward trajectory in earnings continues, equity marketscan move higher, in spite of slightly extended equity valuations.

John Ryding, RDQ Economics:The Federal Reserve has longoverstayed its welcome with zero rates and QE. We are nowentering the phase where monetary policy starts to reposition for thefirst rate hike, which will be driven by labor market developments.The rate at which the Fed ends hiking may be higher than the long-run sustainable rate (as it has overshot in the past).

Allen Sinai, Decision Economics:The U.S. economy, its private

sector, looks the healthiest it has been since the 1990s. Secularstagnation for the U.S. is just not in the cards.

Diane Swonk, Mesirow Financial:The Fed has consistentlymissed its target on inflation; recent cola increases underscore theproblem politically. The Fed will have to more aggressively combat


31/31


slowing inflation going forward; this is yet another reason forgradualism.

Scott Wren, Wells Fargo Advisors:The global economy slowingdown (particularly Europe along with their sovereign debt issues)more than we expect is the biggest risk to financial markets. Thebiggest potential surprise for 2015 (I would have said this a monthago as well) is that the Fed does not hike the target rate allyear....Not my projection....I am betting on a small increase.

Mark Zandi, Moody's Analytics:The Federal Reserve's script for

normalizing monetary policy over the next 3 years is firmly in placeand the bar is high for policymakers to change it.

Documents

CNBC Fed Survey, October 28, 2014