CNBC Fed Survey Results: July 31, 2012

7/31/2019 CNBC Fed Survey Results: July 31, 2012

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CNBC Fed Survey July 31, 2012Page 1 of 27

FED SURVEYJuly 31, 2012

These survey results represent the opinions of 50of the nations top money managers,investment strategists, and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses werecollected on July 27-28, 2012, after the U.S. Q2 GDP report was released. 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 there be another Federal Reserve quantitative easingprogram in the next year (12 months)?

19%

68%

13%

46%

37%

17%

34%

59%

7%

48%

46%

7%

48%

44%

8%

33%

63%

4%

33%

56%

12%

58%

32%

10%

78%

18%

4%

Yes

No

Don't know/unsure

July 20, 2011 August 11, 2011 September 19, 2011

October 31, 2011 January 23, 2012 March 16, 2012

April 24, 2012 June 4, 2012 July 31, 2012


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2.For those respondents who replied Yes to question #1:How large do you expect the new quantitative program

will be over the next year (12 months)? Please do notinclude reinvestment of maturing securities.

$377

$628

$527

$457

$567

$448 $456 $451

$532

$0

$100

$200

$300

$400

$500

$600

$700

Average (In Billions)



April 24, 2012 June 4, 2012 July 31, 2012


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3.For those respondents who replied Yes to question #1: Atwhich meeting of the Federal Open Market Committee do you

think the Fed is most likely to announce a new QE program?

The Before June Meeting option has only been offered in the June 4 survey.

3%

33%

22%

28%

8%

6%

0%

0%

18%

45%

9%

9%

9%

9%

0%

0%

65%

18%

6%

6%

6%

0%

3%

42%

47%

8%

0%

0%

0%

26%

56%

3%

5%

10%

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

January 2012

March

April

Before June Meeting

June

July

September

October

December 2012

2013

January 23, 2012 March 16, 2012 April 24, 2012 June 4, 2012 July 31, 2012


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4.If the Fed does additional QE, how do you think it wouldbe executed?

36%

46%

8%10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

As a lump sum In monthly sums

adjusted meeting

by meeting

In monthly sums

tied to specific

economic targets

Don't Know/Unsure


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5.If the Fed does additional QE, what form would it take?(Please answer this question without regard to actions the

Fed is taking in Operation Twist.)

2%

74%

20%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Purchase onlyTreasuries

Purchase a mix ofTreasuries and

mortgage-backed

securities

Purchase onlymortgage-backed

securities

Don't Know/Unsure


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6.If the Federal Reserve announced a $500 billion QEprogram, what effect would it have on the following rates,

in basis points?

12%

5%

7%

2%

2%

5%

23%

14%

23%

5%

0%

0%

2%

0%

5%

3%

0%

11%

3%

11%

16%

16%

16%

11%

8%

3%

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

Up 26 or more

Up 21-25

Up 16-20

Up 11-15

Up 6-10

Up 1-5

No effect

Down 1-5

Down 6-10

Down 11-15

Down 16-20

Down 21-25

Down 26 or more

10-Year Treasury 30-Year Mortgage


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7.If the Federal Reserve announced a $500 billion QEprogram, what effect would it have on the S&P 500 stock

index?

11%

0%

2%

28%

23%

17%

9%

11%

0%

0%

0%

0%

0%

0%

0%

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

Up more than 10%

Up 9-10%

Up 7-8%

Up 5-6%

Up 3-4%

Up 1-2%

Up less than 1%

No Effect

Down less than 1%

Down 1-2%

Down 3-4%

Down 5-6%

Down 7-8%

Down 9-10%

Down 10% or more


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8.Which, if any, of the following additional actions do youthink the Fed will take to drive down long-term yields?

Respondents were able to select more than one response, so percentages total more than 100%

Other responses:

Additional purchase program Open refinancing window wider Reduce IOER by 10 bps

11%

24%

4%

51%

11%

31%

18%

7%

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

Reduce the interest rate paid on excessreserves by half

Reduce the interest rate paid on excessreserves to zero

Offer a negative interest rate on excess

reserves

Forecast that rates will remainexceptionally low through late-2015

Open a discount window program for smallbusiness loans (similar to what the Bank

of England recently announced):

Forecast that it will keep rates

exceptionally low until specific economic

targets are met

None

Other


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10.How would you characterize the Fed's current monetarypolicy?

Too

accommodativeJust right Too restrictive

Dont

know/Unsure

July 20, 2011 41% 52% 3% 5%

August 11, 2011 26% 52% 12% 10%

September 19, 2011 39% 40% 12% 9%

October 31, 2011 34% 48% 10% 8%

January 23, 2012 37% 45% 12% 5%

March 16, 2012 53% 38% 6% 4%

April 24, 2012 36% 51% 8% 6%

June 4, 2012 33% 52% 10% 5%

July 31, 2012 28% 43% 17% 13%

0%

10%

20%

30%

40%

50%

60%


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

This is the first survey in which we asked for a June 30, 2013 forecast.

1387

1436

14001396

1451

December 31, 2012 June 30, 2013


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12.What do you expect the yield on the 10-year Treasurynote will be on ?

This is the third survey in which we asked for a December 31, 2012 forecast.

2.52%2.59%

2.40%

1.69%

1.98%

December 31, 2012 June 30, 2013

January 23, 2012 March 16, 2012 April 24, 2012 July 31, 2013


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13.What is your forecast for the year-over-year percentagechange in real U.S. GDP?

+2.85%

+2.47%

+2.24%+2.37%

+2.45%

+2.59%

+2.46%

+2.74%

+2.39%

+2.55%

+1.93%

+2.26%

2012

2013



April 24, 2012 July 31, 2012


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14.When do you think the FOMC will first increase the fedfunds rate?

Note: In the July 31 survey, the choice of 2015 or later was replacedwith choices for each quarter and 2016 or later was added.

2012

- Q1Q2 Q3 Q4

2013

- Q1Q2 Q3 Q4

2014

- Q1Q2 Q3 Q4

2015

or

later

2015

- Q1

2015

- Q2

2015

- Q3

2015

- Q4

2016

or

later

April 24, 2012 0% 0% 4% 4% 9% 11% 9% 13% 9% 15% 8% 13%

July 31, 2012 0% 0% 2% 2% 13% 4% 4% 9% 4% 11% 13% 15% 7% 2% 11%

0%

2%

4%

6%

8%

10%

12%

14%

16%

April 24, 2012 July 31, 2012


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15.When do you think the FOMC will make its first planned

decrease in the size of its balance sheet?

Note: In the July 31 survey, the choice of 2015 or later was replacedwith choices for each quarter and 2016 or later was added.

2012

- Q1Q2 Q3 Q4

2013

- Q1Q2 Q3 Q4

2014

- Q1Q2 Q3 Q4

2015

or

later

2015

- Q1

2015

- Q2

2015

- Q3

2015

- Q4

2016

or

later

April 24, 2012 0% 0% 4% 4% 9% 11% 9% 13% 9% 15% 8% 13%

July 31, 2012 0% 0% 2% 4% 11% 9% 16% 4% 2% 16% 4% 7% 2% 4% 16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

April 24, 2012 July 31, 2012


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17.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)

34.0%36.1%

25.5%

20.3%19.1%

20.6%

25.9%

August 11, 2011 September 19, 2011 October 31, 2011

January 23, 2012 March 16, 2012 April 24, 2012

July 31, 2012


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18.What is the single biggest threat facing the U.S.

economic recovery?

This is the first survey in which deflation and fiscal cliff have been offered as choices.

Other response:

Emerging world recession

17%

36%

4%

26%

4%

2%

11%

37%

27%

8%

8%

4%

0%

17%

30%

16%

7%

0%

0%

5%

41%

0%

2%

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

European recession/financial crisis

Tax/regulatory policies

Slow job growth

High gasoline prices

Overall inflation

Deflation

"Fiscal Cliff"

Don't know/unsure

Other:

March 16, 2012 April 24, 2012 July 31, 2012


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19.When it comes to the "Fiscal Cliff," do you believe that:

78%

18%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

It is already havinga negative effect on

business and theeconomy

It will have aneffect later this year

It will have noeffect

Don't know/unsure


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20.Which, if any, of the following actions do you believe theEuropean Central Bank will take in the next six months?

(You may check more than one box.)

Respondents were able to select more than one response, so percentages total more than 100%

Other responses:

Begin to fund ESM More explicitly guarantee debt of crisis countries

66%

14%

43%

89%

0%

5%

2%

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

Undertake another long-term repo

operation

Offer a negative interest rate on deposits

Cut its main refinancing rate

Purchase additional sovereign debt

Take no additional action

Other

Don't know/unsure


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22.What is your outlook for the European Monetary Unionfive years from now?

42%

53%

0%

5%

47%

52%

2%

0%

24%

63%

6%

8%

29%

69%

0%

2%

11%

82%

5%

2%

0% 20% 40% 60% 80% 100%

No countries will be ejected or leave

Some countries will be ejected or leave

It will be largely dissolved and mostEuropean countries will have their own

currency

Don't know/unsure

July 21, 2011 October 31, 2011 January 23, 2012 March 16, 2012 July 31, 2012


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23.What is the probability, in your opinion, that each of thefollowing countries will default on its debt in the next

three years? (0%=No chance of default, 100%=Certaintyof default)

Germany, France, and United Kingdom were not included in the July 20, 2011 survey.For Greece, respondents to the March 16 and July 31, 2012 surveys were asked for the

probability of a second default beyond the March creditevent.

Portugal Ireland Italy Greece Spain Germany FranceUnited

States

United

Kingdom

July 20, 2011 52% 48% 24% 83% 28% 4%

August 11, 2011 45% 37% 23% 70% 25% 2% 3% 2% 2%

September 19, 2011 41% 34% 23% 82% 24% 2% 4% 1% 2%

October 31, 2011 47% 33% 28% 84% 26% 2% 4% 2% 3%

January 23, 2012 49% 33% 28% 88% 30% 2% 6% 1% 2%

March 16, 2012 53% 31% 25% 72% 29% 2% 5% 3% 3%

July 31, 2012 39% 23% 25% 79% 38% 1% 5% 2% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


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What is your primary area of interest?

Comments:

John Augustine, Fifth Third Asset Management: Wwe need

three things: 1) sane US fiscal policy, 2) Fed using its balance sheetto help get as many US mortgages down near 3% as possible; 3)ECB buys sovereign debt in near-term; funds ESM next year.

Richard Bernstein, Richard Bernstein Advisors: The Feddoesn't have to do further QE because the problems in Europe andthe emerging markets are doing it for them. After all, the 10-year isbelow 1.5% courtesy of Greece and Spain.

Mike Dueker, Russell Investments: The Fed needs to meet itsimplicit nominal GDP growth target of 4.5 percent. July's GDP reportrevised the numbers back to 2009 Q1. They show that at no time inthis recovery has nominal GDP growth reached 4.5 percent on afour-quarter rolling basis. Thus, the basic rationale for a third roundof Quantitative Easing is that it appears inescapable to conclude that

Economics

50%

Equities20%

Fixed

Income11%

Currencies

4%

Other15%


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the Fed needs to do more to do its part and end this period of sub-par nominal GDP growth.

Kevin Ferry, Cronus Futures Management: The sun will comeup tomorrow.

Dennis Gartman, The Gartman Letter: The biggest test facingthe U.S. economy is that we shall do something truly stupid: raisetaxes and cut spending aggressively, doing immeasurable damage tothe economy in the process. We should be flattening and cuttingtaxes... aggressively, while cutting spending marginally. But we

won't; we'll do something truly stupid, along the lines of AndrewMellon in the middle 1930s, who cut spending/raised taxes and gaveus the Depression.

Lee Hoskins, Pacific Research Institute: The Ffed has doneQE1, QE2, Twist 1, and Twist 2. Each time it expects to stimulateeconomic growth and each time its actions have failed to do so.Doing QE3 and expecting a different outcome borders on theirrational.

Hugh Johnson, Hugh Johnson Advisors: The level of concernabout the impact of the contraction in Europe or higher U.S. taxesscheduled to begin on January 1st is so high and the level of stockmarket optimism is so low that the outlook (near term) has shiftedtoward positive for U.S. equities. Do equity prices "climb a wall ofworry?" We are about to find out. It is unlikely that the contraction inthe European economy or the "fiscal cliff" (which should beeffectively postponed) is likely to directly cause the end of the

current stock market-economic-interest rate cycle. That may be "themessage" of the financial markets collectively since June 1.

John Kattar, Eastern Investment Advisors: Although I thinkmore QE is coming, it will not be this year. The economy is not weakenough, the stock market is doing well, and interest rates are low


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enough. The Fed is on hold until 2013, or at least should be. Also ofnote is the fact that excess reserves have decreased by $100 billion

y/y. The Fed has chosen to replace this with other liabilities so asnot to shrink its balance sheet.

Barry Knapp, Barclays PLC: Financial conditions have nottightened sufficiently such that stimulus via the portfolio balancechannel can loosen conditions. In other words, the policy will haveno macroeconomic impact, it will spark a rally in fixed incomespreads but pass through to grow will be close to zero. It will makeexiting the stimulus more difficult and as a result the costs of any

additional stimulus outweigh the benefits.

Alan Kral, Trevor Stewart Burton & Jacobsen: The Fed will doall it can to cause noticeable market and/or economic changebetween now and the election.

Guy LeBas, Janney Montgomery Scott: We've entered into theultimate "muddling along" period when it comes to the markets.

Given the fiscal constraints, there's simply no reliable way to juicedomestic economic activity, save for waiting for conditions to slowlyimprove. That means we're talking about low growth through 2015,perhaps longer.

John Lonski, Moody's: The outcome of the November electionsmay give considerable shape to the resolution of the "fiscal cliff."

Larry McMillan, McMillan Analysis: Once you go Keynesian, you

never go back.

Rob Morgan, Fulcrum Securities: On Thursday ECB head MarioDraghi said the ECB is 'ready to do whatever it takes to preserve theEuro.' It is time to translate that statement into action.


25/27



Joel Naroff, Naroff Economic Advisors: With theTheater of theTotally Absurdcontinuing to play in Washington, the slow recovery

will continue. No matter who is elected, it will continue anyway.

Michael Painchaud, Market Profile Theorems: 2013 - 2014could well be the worst economic environment for the U.S. andglobally since 2008-2009.

James Paulsen, Wells Capital Management: The U.S. FederalReserve has become increasingly irrelevant surrounding any furthereasing efforts but has also become increasingly important as to how

and when they will tighten monetary conditions. The financialmarkets will likely respond less and less to Fed discussionssurrounding additional easing efforts but may become increasinglysensitive to any discussions/i.e., Fedspeak as to monetarytightening.

Lynn Reaser, Point Loma Nazarene University: The Fed nowfaces the possibility of trying to offset policy errors not only in theEurozone but also mistakes in its own backyard on Capitol Hill.

David Resler, Nomura: The question of biggest threat is a closecall between the crisis in Europe (already underway) and the "fiscalcliff." While I judge it (only marginally) more likely than not thatsome sort of stop-gap measure is adopted, the odds that we reachthe "cliff" with no action taken is rising.

John Roberts, Hilliard Lyons: We currently perceive downsiderisk to both the economy and equity markets and are very worried

that investors are in particular ignoring valuations and risk, and to alesser degree fundamentals, when purchasing many income-orientedsecurities in the same way they ignored business fundamentalsduring the tech bubble.

Hank Smith, Haverford Investments: Comprehensive tax reform


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that lowers rates and eliminates many deductions along withreducing regulations is the key spurring U.S. GDP growth and is the

key to allowing the Fed to start taking its foot off the pedal.

Diane Swonk, Mesirow Financial: Timing additional easing iscomplicated by the need to leverage what the Fed has left to itsfullest. It doesnt want to pull the trigger until it can get its bestshots in. Feels a little like the Alamo at the moment, although theFed has a few more gunners.

Peter Tanous, Lynx Investment Advisory: The Draghi rally this

week (week ending July 27) should be followed by the Bernanke rallynext week. Gold will rise as the world realizes that what is happeningis ultimately inflationary. Here's the simple reality: There is moredebt in the world than can ever be repaid. There are only two waysto solve this problem: devaluation or inflation. For most countries,especially ours, the answer will be inflation. It is simply the onlyway out.

Robert Tipp, Prudential Fixed Income: European policy makers

have arrived at their next key decision point. Undoubtedly themarket stress to date has damaged economic prospects in Europe.To prevent more serious international spill-over, though, it is criticalthat European policy makers take steps to bring down peripheralyields over the near term. Overall, the highly uncertain environmentcontinues to stimulate flows into the fixed income market, and isultimately very positive for the fixed income markets. We believethe best absolute return opportunities are in high yield and emergingmarkets. Additionally, prospects for outperformance relative to

Treasuries remain favorable for structured products and investmentgrade corporates, especially financials. Lastly, the large swings inmarket sentiment are creating excellent tactical opportunities in boththe U.S. Treasury market, as well as in foreign currencies.

Scott Wren, Wells Fargo Advisors: We are going to be in a


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CNBC Fed Survey Results: July 31, 2012