FED SURVEY

July 21, 2011

These survey results represent the opinions of 79 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 between July 14 and July 19, 2011. Except for an opportunity to write comments at the end of the survey, participants were told their answers would be reported only in the aggregate unless CNBC requested and received permission to publicly reveal specific responses. Participants were not required to answer every question. 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 easing program in the next year (12 months)? 80% 70% 68.4% 60% 50% 40% 30% 20% 19.0% 10% 0% 12.7%

Yes

No

Don't Know/Unsure

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 not include reinvestment of maturing securities. Average 376.67

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3. How would you characterize the Fed's current monetary policy? 60% 50% 40% 30% 20% 10%
2.5%

51.9%

40.5%

0%

5.1%
Dont know/Unsure

Too accommodative

Just right

Too restrictive

4. Where do you expect the S&P 500 stock index will be on ? 1,440 1,420 1,400 1,380 1,360 1,340 1,320 1,300 1,280 1,260 July 20 Actual Close December 31, 2011 June 30, 2012 1325.84 1363.91 1420.58

+4.2%

+2.9%

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5. What do you expect the yield on the 10-year Treasury note will be on ? 0 0 0 0 0 0 0 0 0 July 20 Actual Close December 31, 2011 June 30, 2012 2.93% 3.41% 3.75%

6. What is your forecast for the year-over-year percentage change in real U.S. GDP? 3.0% +2.85% 2.5% +2.47% 2.0% 1.5% 1.0% 0.5% 0.0% 2011 2012

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7. Where do you expect the Fed Funds target rate will be on ? 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.06% 0.0% July 20 Actual December 31, 2011 June 30, 2012 December 31, 2012 0.5%

1.0%

0.2%

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8. Thinking about the Fed's exit strategy, when do you think the Fed will ... 0% 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014 or later 0% 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014 or later 5% 10% 15% 20% 25% 30% 35%

6.4% 16.7% 30.8% 21.8% 8.9% 7.7% 1.3% 2.6% 0.0% 0.0% 3.9%
5% 10% 15% 20% 25% 30% 35% End its extended period language?

1.3% 6.3% 17.7% 21.5% 22.8%

11.4%
8.9% 2.5% 1.3% 1.3% 5.1%
... First Raise the Fed Funds rate?

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0% 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014 or later 0% 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014 or later 5% 10% 5% 10% 15% 20% 25% 30% 35%

0.0% 3.8% 15.2% 13.9% 11.4% 13.9% 11.4% 10.1% 7.6% 0.0% 12.7%
15% 20% 25% 30% 35% Begin to reduce the size of its balance sheet through asset sales?

1.3% 20.3% 27.9% 15.2% 11.4% 8.9% 2.5% 1.3% 1.3% 1.3% 8.9%
End its reinvestment policy?

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7. What grade would you Fed Chairman Ben Bernanke? F 2.5% Don't Know/Unsure 3.8%

D 5.1%

C 19.0%

A 21.5%

B 48.1%

8. What is the probability, in your opinion, that each of the following countries will default on its debt in the next three years? (0%=No chance of default, 100%=Certainty of default) 0% Portugal Ireland Italy Greece Spain United States 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

52.5% 47.6% 23.9% 83.2% 28.2% 4.0%

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11.What is your outlook for the European Monetary Union five years from now? Dont Know/Unsure 5.1%

Some countries will be ejected or leave 52.6%

No countries will be ejected or leave 42.3%

It will be largely dissolved and most European countries will have their own currency 0.0%

12.How do you believe stocks would be affected by a deal, or no deal, to raise the U.S. debt ceiling by the August 2 deadline?

No Deal
90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Deal

65% 16%

22%
9%

34% 18% 16% 6%

Deal No Deal

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13.What is your primary area of interest?

Currencies 1.3%

Other 12.7%

Fixed Income 12.7%

Economics 45.6%

Equities 27.9%

Comments:
David Kotok, Cumberland Advisors: Washington is populated by elected fools in both political parties. Tom Porcelli, RBC: Just remember, that Aug 2 debt ceiling deadline is actually a soft deadline - it can probably go as far as Aug 15th. So our expectation for market reaction is based on this fact. If Aug 15 rolls around and there is no deal, we would expect an extreme reaction and not necessarily just from a market perspective. The worst possible outcome from this would be recession, period. Subodh Kumar, Subodh Kumar & Associates: Risk Stratification is back due to concerns about sovereign solvency and deficit flaccidity. By contrast, 1980s vigilante behavior was over inflation. Effect is of higher long bond yields, no equity valuation expansion and earnings expansion below consensus into 2012. Chad Morganlander, Stifel Nicolaus: We can no longer be surprised by the frailties of our financial system. Over indebted companies and distressed sovereigns should be allowed to reorganize their obligations. Not allowing the system to cleanse itself creates a debilitating environment. Joel Naroff, Naroff Economic Advisers: Obviously, if the debt limit is not raised anything forecasted is useless. But two hurdles face the economy: short term cuts in government spending that come as part of any debt ceiling agreement and the continued high levels of CNBCs Fed Survey July 21, 2011 Page 9 of 12

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gasoline. If these two restraints are not eased, the potential for growth is limited and that raises real questions about the ability of the economy to shift gears. Robert Brusca, Fact and Opinion Economics: Bernanke's real grade is a B+. There was no spot for this response but U.S. monetary policy is still TOO TIGHT. While U.S. will not default, I expect a trap vote scenario where a deal is struck and fails to pass; markets collapse and put the fear of God into God-fearing Republicans who then come-around and vote for nearly the same plan. John Augustine, Fifth Third Asset Management: Fed is not the economic enemy, as many characterize. Congress is not equipped to handle economy's management. Best situation is that both the Fed and Congress/White House move back out of the economic headlines. Diane Swonk, Mesirow Financial: We are a country based on the basic freedom to choose, and the path for our future is still a matter of choice. Why would we give up that privilege to foreigners making those choices for us? We must be better than that. Guy LeBas, Janney Montgomery Scott: The outgrowths of a Treasury default are very unpredictable. My biggest concern is the functioning of repo markets, which could seize up and create liquidity risks for banks, which borrow trillions via repo. Rob Morgan, Fulcrum Securities: If the economy reaccelerates in the 2nd half of the year the way Bernanke expects, then the stock market could show a repeat of 2010 with a big second half move to the positive. Alan Kral, Trevor Stewart Burton & Jacobsen: Fed is still in mode to reelect president with all moves geared in that direction. Mike Dueker, Russell Investments: I expect the Fed to make a lot of noise along these lines: > Policy on hold in the face of gradually improving economic conditions = more accommodative policy. > The Fed does not need QE3 to make policy more accommodative than it is now. As Fed "asset sales," I would include the reverse repurchase program. Brian Gendreau, Financial Network: With sluggish growth, high unemployment, and fiscal tightening on the table it is hard to envisage a tightening of monetary policy any time soon. Larry McMillan, McMillan Analysis: As long as the Fed thinks Keynesian economics is working, they won't abandon it. Lynn Reaser, Point Loma Nazarene University: The U.S. debt issue has shifted from (a) concerns over default (the U.S. is likely to continue to pay interest and principal) to (b) concerns about whether the debt ceiling will be raised (highly likely) to (c) concerns whether a deficit reduction plan will be "credible" (now the credit agencies' focus). A 10-year deficit reduction plan may be approved but its implementation or lack thereof will depend on who occupies seats in Congress and the White House over the next decade. Further Fed ease at this point (such as through more quantitative easing) could have fewer real effects than a year ago as businesses and investors anticipate another round of commodity price increases and adjust prices and inflationary expectations more quickly. CNBCs Fed Survey July 21, 2011 Page 10 of 12

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Lee Hoskins, Pacific Research Institute: Fed needs to stop responding to short term fluctuations in real GDP and employment and focus on the one thing it can achieve - price stability. It needs an explicit inflation target now. Dean Baker, Center for Economic and Policy Research: The debate over the debt ceiling is a tragic distraction at a time when our political leaders should be focused on creating jobs. Donald Luskin, Trend Macrolytics: Be not afraid. Stanley Nabi, Silvercrest Asset Management: Corporate balance sheets, stock valuations and sociopolitical stability provide reliable support to the market. Barry Knapp, Barclays PLC: Any rally or correction in equities is a function of the form of the debt limit extension. A McConnell/Reid type solution would be negative, the $2.4 trillion deal that the Administration balked at would be neutral and a $4 trillion deal that avoided the S&P downgrade a positive. Any reaction seems likely to be limited by the lack of a negative reaction thus far and the European situation that has now gone systemic and requires an expansion of the mandate and size of the EFSF to stem the risk, not clarification of private sector involvement of latest Greek package (the German position). John Kattar, Eastern Investment Advisors: I think there is some chance we may see a resumption of something like QE in the U.S., the Eurozone, and Japan around the end of the year, coupled with the end of tightening in China. If so, it has the potential to be very bullish for stocks. Chris Rupky, Bank of Tokyo-Mitsubishi: Investors are too busy fighting old battles and looking out for what will go wrong. As a result this is one of the most fragile recoveries from recession on record. Since the Global funding crisis in 2007 there has been a steady stream of bad news, and that's what we are all too busy trying to look out for. We see so many risks out there that it is making us more cautious about spending. Our best guess is all these headwinds, or at least Europe, debt ceiling, Libya, will get resolved shortly and the economy will pick up speed as fear and uncertainty will get turned back down a notch. Richard Sichel, Philadelphia Trust Co.: Strong corporate earnings will drive the market higher in spite of debt, housing and job concerns. Companies will get more active with their very high levels of cash currently earning very little interest. Kevin Ferry, Cronus Futures Management: The Fed no longer targets the funds rate. Richard Steinberg, Steinberg Global Asset Management: It is now time to get the major players' mothers or oldest living relative in a room with the politicians and tell them to start to behave like adults! Constance Hunter, Aladdin Capital: I only see additional QE, (LSAP or some other mode) in the event a European default causes a liquidity seizure. If by some miracle a Greek default can be orderly, then the Fed's powers to create liquidity may not be needed.

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John Silvia, Wells Fargo: Issue is more than the debt ceiling--are they really going to alter the path of spending/deficits going forward? If not, then the debt ceiling is simply a phony issue. Scott Wren, Wells Fargo Advisors: Three things keep me up at night: housing, unemployment and Euro sovereign debt issues. Unfortunately, none are moving in the right direction right now. It will be tough to move out of a slow growth GDP environment if these issues do not at the very least stabilize and show modest improvement. Mark Vitner, Wells Fargo: Not only is getting an agreement to raise the debt ceiling important but Congress must establish a credible framework to reduce the deficit. Clare Zempel, Zempel Strategic: Domestic political uncertainties/fears continue to restrain economic recovery. Markets continue to discount the worst. Any positive economic/political news -- roll back regulations, curb spending -- would be powerfully bullish for stocks (but not bonds). Marc Pado, Cantor Fitzgerald: The U. of Mich. Consumer Sentiment says it all: Americans are aware and are nervous that a U.S. default could unravel the economic recovery, shallow though it may be.

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