CNBC Fed Survey Results, April 28, 2014

CNBC Fed Survey – April 28, 2014 Page 1 of 28

FED SURVEY April 28, 2014

These survey results represent the opinions of 40 of the nation’s top money managers, investment strategists, and professional economists. They responded to CNBC’s invitation to participate in our online survey. Their responses were collected

on April 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 who did accept our invitation.

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

98%

2% 0%

95%

3% 3%

0%

20%

40%

60%

80%

100%

120%

Increase Reduce Keep same

March 18 April 28



2-6. Do you believe the Federal Reserve will, on net, increase the size of its balance sheet, reduce it, or keep it the same in 2015:

Average Expected Change in Balance Sheet Size:

2%

39%

59%

15%

50%

35%

0%

10%

20%

30%

40%

50%

60%

70%

Increase Reduce Keep same

March 18 April 28

$408

$(104)

$416

$(146) -$200

-$100

$0

$100

$200

$300

$400

$500

2014 2015

Bill

ion

s

March 18 April 28



7. When do you believe the Fed will begin reducing the size of its balance sheet?

0%

2%

4%

6%

8%

10%

12%

Nov

Dec

Jan

'1

5

Feb

Mar

Apr

May

Ju

n

Ju

l

Aug

Sep

Oct

Nov

Dec

Jan

'1

6

Feb

Mar

Apr

May

Ju

n

Ju

l

Aug

Sep

Oct

Nov

Dec

Jan

'1

7

Aft

er J

an…

Average:

September 2015



8. Do you expect the Federal Reserve to taper its purchases of assets at its April meeting?

95%

5%

0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Don't know/unsure



By how much do you expect the Federal Reserve to taper at its April meeting? (Only asked of those who said ‘yes’ to Q8.)

0%

20%

40%

60%

80%

100%

120%

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

than$50

Billions

Average:

$11.1 billion



What mix of Treasuries vs. mortgage-backed securities do you expect in the Federal Reserve's taper? (Only asked of those who said

‘yes’ to Q8.)

Treasuries 53.4%

MBS 46.62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



9. Do you expect the Federal Reserve to reduce its purchases at each of its post-January/March/April meetings this year?

72%

28%

0%

81%

20%

0%

85%

15%

0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Yes No Don't know/unsure

January 28 March 18 April 28



What is the average amount of tapering you expect at each meeting? (Only asked of those who said ‘yes’ to Q9.)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

Billions


Averages:

Jan 28: $10.65B Mar 18: $10.61B Apr 28: $11.62B



10. The Federal Reserve should:

29%

19%

50%

2%

27%

10%

59%

5%

37%

11%

53%

0% 0%

10%

20%

30%

40%

50%

60%

70%

Taper faster Taper slower Taper at the samepace

Don't know/unsure




11. Given the following 2015 year-end economic scenario, what do you estimate the fed funds rate would be?

Real GDP 3.10%

Unemployment Rate 5.75% PCE Inflation 1.75% Core PCE Inflation 1.85%

Average Response 1.02%



12. Overall, how do you rate the clarity and credibility of Fed communications?

5% 7% 7% 7%

10%

55% 54%

56%

61%

54%

21%

24% 26%

17%

8%

18%

15% 12%

15%

28%

0%

10%

20%

30%

40%

50%

60%

70%

Oct 29 Dec 17 Jan 28 Mar 18 Apr 28

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

Very clear and credible

Somewhat not clear and credible



13. The Fed's current monetary policy statement is:

60%

30%

10%

62%

36%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Clear Unclear Don't know/unsure

Mar 18 survey Apr 28 survey



14. Please tell us your early views on how Janet Yellen is doing as

Fed chair compared to Ben Bernanke by rating their

performances in the following areas on a scale of 1 to 5, with a

higher number representing better performance.

Bernanke Yellen

Leadership 3.95 3.27

Transparency 3.65 3.60

Communication 3.38 3.06

Economic Forecasting 2.95 3.27

Overall Monetary Policy 3.47 3.08

15. What grade would you give Janet Yellen as Fed chair so far?

Numerical average based on A=4, B=3, C=2, D=1, F=0

10%

51%

23%

3% 3%

27%

46%

22%

5%

0% 0%

10%

20%

30%

40%

50%

60%

A B C D F

Yellen Bernanke (Dec 17, 2013)

Averages:

Yellen

B- (2.71)

Bernanke

B (2.95)



16. Which of these is the bigger risk to your forecasts for Fed policy in 2014 and 2015?

51%

21%

28%

0%

49%

39%

13%

0% 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



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

1723

1751

1709

1752

1816 1814

1844 1866

1883 1857

1913 1924

1937

2017

1,550

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

2,000

2,050

Jun 18'13

Jul 30 Sep 6 Sep 30 Oct 29 Dec 17 Jan 28'14

Mar 18 Apr 28

Survey Dates

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



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

2.80%

3.10%

3.33% 3.39%

3.00%

3.18%

3.08%

2.95% 2.89%

3.44%

3.37% 3.32%

3.21%

3.54%

2.0%

2.5%

3.0%

3.5%

4.0%

Jun 18'13

Jul 30 Sep 6 Sep 30 Oct 29 Dec 17 Jan 28'14

Mar 18 Apr 28

Survey Dates

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



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

Jan29,'13

Mar19

Apr30

Jun18

Jul 30Sep17

Oct29

Dec17

Jan28,'14

Mar18

Apr28

2014 +2.6% +2.6% +2.6% +2.6% +2.5% +2.6% +2.5% +2.6% +2.8% +2.8% +2.7%

2015 +2.9% +3.0% +3.0%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

3.0%

3.1%

2014 2015



20. When do you think the FOMC will first increase the fed funds rate?

0%

5%

10%

15%

20%

25%

Average:

July 2015



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

Jul 31 Jun 18 Jul 30 Sep 6Sep17

Oct 29Dec17

Jan 28'14

Mar18

Apr 28

June 30, 2014 0.20% 0.18% 0.16% 0.14% 0.13% 0.14% 0.16% 0.13% 0.17%

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

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

0.20%

0.18% 0.16%

0.14% 0.13% 0.14%

0.16%

0.13%

0.17%

0.28%

0.21% 0.21% 0.20%

0.19%

0.15%

0.27%

0.97%

0.92%

0.82%

0.70% 0.72%

0.83%

0.99%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%



25. Which of the following best describes your view on the effect of China’s economic slowdown and the Russian conflict with Ukraine on U.S. growth?

0%

64%

33%

3% 3%

30%

68%

0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

It will have a

substantial effect

It will have a

modest impact

It will have almost

no impact

Don't

know/unsure

China Ukraine



26. How much concern do you have that trouble …

…in China’s banking system could cause global systemic risk?

…between Russia and Ukraine could create wider global risks?

1= Not concerned at all

10= Highest level of concern

0%

21%

21%

11%

16%

11%

8%

5%

8%

0%

3%

14%

27%

14%

3%

11%

8%

19%

3%

0%

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

1

2

3

4

5

6

7

8

9

10

China Ukraine

Averages:

China: 4.6 Ukraine: 4.8



27. 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)

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%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates



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

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

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

Europeanrecession/financial

crisis

Tax/regulatory

policies

Slow jobgrowth

Highgasoline

prices

Overallinflation

DeflationDebt

ceiling

Too littlebudgetdeficit

reduction

Toomuch

budgetdeficit

reduction

Rise ininterest

rates

Geopolitical risks

OtherDon't

know/unsure

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

Jun 18 15%28%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 10%23%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%

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



FED SURVEY April 30,

29. What is your primary area of interest?

Comments:

Bob Baur, Principal Global Investors: We believe the U.S. economy is returning to normal, not a new normal, but the old normal. Pent-up demand is becoming evident as both businesses and

households are finally shedding their fear of a double-dip or continuing financial crisis. Confidence is returning, C&I loans are surging, jobless claims are at seven-year lows and the Fed is eyeing its exit. Normalization is occurring.

Robert Brusca, Fact and Opinion Economics: The Fed is obsessive about making its traditional mistake in recovery (letting inflation rise too much). But the world has changed. Clearly, slow

growth and no inflation are the hallmarks of this age. With banks being crimped by more regulation and higher capital requirements the prospect for excessive lending to unleash the cobbled "money multiplier" to empower all that high-powered money to create

Economics 50%

Equities 21%

Fixed Income

11%

Currencies

0%

Other 18%




inflation is remote. Also the Fed NEEDS to make its inflation target a real PROMISE. It must commit to it, not just refer to it. Cohabitation is not marriage. Saying you like the 2% level of inflation for the economy is not the same as committing to make it happen over any

horizon. The Fed needs to get serious about its inflation target. IF - IF- it does that it will naturally see that the main enemy NOW is deflation.

John Donaldson, Haverford Trust Co.: The improvement in the federal budget remains an underappreciated story. The reduced deficit makes the Fed's taper a lot easier.

Mark Elenowitz, TriPoint Global Equities: There is an illusion by the public that since there is a bull stock market all is well, when in reality with over regulation of the banks, banks have not increased lending to small business and Main Street is still suffering. Until

banks loosen lending, true recovery will be slow. Kevin Giddis, Raymond James/Morgan Keegan: Being that the "experts" have accurately predicted 6 of the last 2 rate increases, I

believe that the Fed will not raise interest rates until late into the year 2015, mainly because economic growth, including jobs, will be too choppy in the months ahead to give the Fed the confidence to

push rates higher before the 4th quarter of 2015. Stuart Hoffman, PNC Financial Services Group: It is "cut the rug time" for the U.S. economy to start quick stepping this spring after

the winter waltz! I believe our economy has the talent and energy to step-up its pace the rest of this year. Hugh Johnson, Hugh Johnson Advisors: The more recent

message (performance) of the financial markets has become mixed/ambiguous. Either the performance needs to improve (become unambiguously positive) or equity prices need to decline to levels that are "meaningfully" undervalued with widespread




pessimism (unlikely right now). If neither happens, investors should maintain a modestly bullish portfolio structure and should not increase it (i.e. raise equity allocation). Hold the line for the time being and watch financial market "tea leaves" and

monetary/economic "tea leaves" carefully before changing from modestly positive strategy/allocation. Subodh Kumar, Subodh Kumar & Associates: Easy money

driving momentum investing seems to be petering out but has built up systemic risks. Not a simple stretching for return is called for but instead we espouse a barbell of cash and diversified investments.

Guy LeBas, Janney Montgomery Scott: Going forward the Fed needs to articulate a "what-if" strategy: what do we do if economic growth beats expectations? What do we do if it falls short? What's a neutral level of the Fed funds rate? Yellen answering those three

questions would be far more valuable than her guessing about when the first rate hike might be. Drew Matus, UBS Investment Research: We believe zero interest

rate policy is restraining economic activity. The closer we get to policy normalization, the closer we will get to normal levels of investment.

Joel Naroff, Naroff Economic Advisors: The economy is shifting gears and while businesses may be thinking that wage pressures will not build, they are likely to do so by the fall. The biggest risk to

businesses is they do nothing about worker retention before they start facing real retention issues. James Paulsen, Wells Capital Management: The impact of

tapering has thus far been far less problematic for the pace of economic growth, bond yields and stock prices. I think this is because tapering has not hurt fundamental economic growth near as much as most anticipated while at the same time the show of




confidence in the future of the economic recovery illustrated by the Fed by tapering has boosted private sector economic and financial market confidence. That is, paradoxically monetary policy may be more stimulative to the economy and the financial markets since the

Fed has finally begun tapering. Lynn Reaser, Point Loma Nazarene University: The challenges of returning to a more "normal" monetary policy may be even larger

than those deployed during the financial crisis. The "exit" strategy could be more difficult than the "fix-it" strategy. John Roberts, Hilliard Lyons: We remain worried about a potential

shortfall in earnings versus expectations later this year or early in 2015 as abnormally high profit margins revert to more normal levels. John Ryding, RDQ Economics: The Fed is unlikely to provide much

additional clarity in the next FOMC statement (no new forecasts, no press conference). The Fed should be tapering more quickly and should begin raising rates in 2014 since most policy rules point to a liftoff in rates around the present time. The Fed has no credible story

why the funds rate should be at only 2-1/4% when the economy is back to full employment and it thinks the long-run funds rate is around 4%.

Diane Swonk, Mesirow Financial: Yellen represents continuity with Bernanke and, as a result, has given us little to judge by other than the tenor of her speeches which have shifted to be more

accessible to the broader public than those who preceded her. That also represents a move that Bernanke advocated for. Scott Wren, Wells Fargo Advisors: The modest growth/modest

inflation economy we have been living with for the last 3+ years is not going away any time soon. Stocks can do well in this kind of environment and this cyclical bull market probably has at least another 3 years to run. Returns will be more modest but total return




compounded over the 2014 thru 2016 period will be attractive. If that is the case, retail investors need to be in this market and not sitting with overweight positions in cash that yield virtually zero.

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CNBC Fed Survey Results, April 28, 2014

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