CNBC Fed Survey – July 29, 2014

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FED SURVEY
July 29, 2014
These survey results represent the opinions of 36 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 July 24-25, 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
and in 2015:


100%
0% 0%
20%
14%
66%
0%
20%
40%
60%
80%
100%
120%
Increase Reduce Keep same
2014 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
2. Average Expected Change in Balance Sheet Size:



$408
$(104)
$416
$(146)
$480
$24
-$200
-$100
$0
$100
$200
$300
$400
$500
$600
2014 2015
B
i
l
l
i
o
n
s

March 18 April 28 July 29



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
3. Do you expect the Federal Reserve to taper its purchases of
assets at its July meeting?



97%
0%
3%
0%
20%
40%
60%
80%
100%
120%
Yes No Don't know/unsure



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
By how much do you expect the Federal Reserve to taper at its
July meeting? (Only asked of those who said ‘yes’ to Q3.)


0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$5 $10 $15 $20 $25 $30 $35 $40 $45 $50 More
than
$50
Billions

Average:

$10.42
billion



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
4. The Federal Reserve should:


29%
27%
37%
19%
19%
10%
11%
8%
50%
59%
53%
72%
2%
5%
0% 0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
January 28 March 18 April 28 July 29
Taper faster Taper slower Taper at the same pace Don't know/unsure
Taper slower
Taper at same pace

Don't know/unsure
Taper faster



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
5. How would you characterize the Fed's current monetary policy?



28%
43%
17%
13%
49%
43%
6%
3%
0%
10%
20%
30%
40%
50%
60%
Too accommodative Just right Too restrictive Don't know/unsure
July 31, 2012 July 29, 2014



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
6. Overall, how do you rate the clarity and credibility of Fed
communications?


5%
7%
7%
7%
10%
11%
55%
54%
56%
61%
54%
51%
21%
24%
26%
17%
8%
29%
18%
15%
12%
15%
28%
6%
0%
10%
20%
30%
40%
50%
60%
70%
Oct 29 Dec 17 Jan 28 Mar 18 Apr 28 Jul 29
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



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
7. Which of these is the bigger risk to your forecasts for Fed policy
in 2014 and 2015?


26% 26%
40%
9%
49%
34%
14%
3%
0%
10%
20%
30%
40%
50%
60%
Fed will be more
dovish than I
expect
Fed will be more
hawkish than I
expect
Risks are balanced Don't know/unsure
2014 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
8. 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 and for production capacity?


48%
36%
4%
8%
4%
0%
12%
56%
8%
16%
4% 4%
0%
10%
20%
30%
40%
50%
60%
Considerably
more slack
now
Modestly
more slack
now
No differenceModestly less
slack now
Considerably
less slack
now
Don't
know/unsure
Labor Production Capacity



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FED SURVEY
July 29, 2014
9. What best describes your view of the most likely outcome from
the current period of extraordinary monetary policy?


34% 34%
26%
6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
It will end badly
with one or more of
the following: a
stock market crash,
high inflation,
recession
The Fed will
navigate a smooth
transition to more
normal policy
Odds are evenly split
between either
outcome
Don't know/unsure



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
Where do you expect the S&P 500 stock index will be on … ?


1857
1913
1924
1937
1956
2000
2017
2029
2053
2075
1,800
1,850
1,900
1,950
2,000
2,050
2,100
2,150
Dec 17 Jan 28 '14 Mar 18 Apr 28 Jun 4 July 29
Survey Dates
December 31, 2014 June 30, 2015 December 31, 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
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%
3.54%
3.24%
3.15%
3.43%
2.0%
2.5%
3.0%
3.5%
4.0%
Dec 17 Jan 28 '14 Mar 18 Apr 28 Jun 4 Jul 29
Survey Dates
December 31, 2014 June 30, 2015 December 31, 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
What is your forecast for the year-over-year percentage change in
real U.S. GDP for …?



Jan
29,
'13
Mar
19
Apr 30 Jun 18 Jul 30
Sep
17
Oct 29
Dec
17
Jan
28,
'14
Mar
18
Apr 28 Jun 4 Jul 29
2014 +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
2015 +2.90 +3.02 +3.00 +2.81 +2.75
+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%
+2.90%
+3.02%
+3.00%
+2.81%
+2.75%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2014 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
10. What is your forecast for the year-over-year percentage
change in the headline U.S. CPI for …?


1.78%
2.02% 2.02%
2.29%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2.2%
2.4%
Jun 4 Jul 29
Survey Dates
2014 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
12. 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 begin
reducing the size of its balance sheet?”
0%
5%
10%
15%
20%
25%
30%
O
c
t
N
o
v
D
e
c
J
a
n

'
1
5
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
J
a
n

'
1
6
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
J
a
n

'
1
7
A
f
t
e
r

J
a
n

Apr 28 Jun 4 Jul 29
Averages:
April 28 survey:
October 2015

June 4 survey:
March 2016

June 29 survey:
December 2015



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
13. When do you think the FOMC will first increase the fed funds
rate?



0%
5%
10%
15%
20%
25%
30%
April 28 Jun 4 Jun 29
Averages:
April 28 survey:
July 2015

June 4 survey:
August 2015

July 29 survey:
August 2015




CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
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 28 Jun 4 Jul 29
Dec 31, 2014 0.28% 0.21% 0.21% 0.20% 0.19% 0.15% 0.27% 0.17% 0.21%
Jun 30, 2015 0.50%
Dec 31, 2015 0.97% 0.92% 0.82% 0.70% 0.72% 0.83% 0.99% 0.68% 1.05%
0.28%
0.21%
0.21%
0.20%
0.19%
0.15%
0.27%
0.17%
0.21%
0.50%
0.97%
0.92%
0.82%
0.70%
0.72%
0.83%
0.99%
0.68%
1.05%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
14. Which of the following best describes your view on the effect
of the Russian conflict with Ukraine on U.S. growth?


3%
30%
68%
0%
3%
18%
79%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
It will have a
substantial effect
It will have a
modest impact
It will have almost
no impact
Don't
know/unsure
Apr 28 Jul 29



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
How much concern do you have that trouble between Russia and
Ukraine could create wider global risks?


1= Not concerned at all
10= Highest level of concern

3%
14%
27%
14%
3%
11%
8%
19%
3%
0%
0%
15%
24%
12%
12%
9%
18%
9%
3%
0%
0% 5% 10% 15% 20% 25% 30%
1
2
3
4
5
6
7
8
9
10
Apr 28 Jul 29
Averages:

April 28 survey: 4.8

July 29 survey: 4.8




CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
15. Which of the following best describes your view on the effect
of the Israeli conflict with Palestinians on U.S. growth?


0%
18%
82%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
It will have a
substantial effect
It will have a
modest impact
It will have almost
no impact
Don't
know/unsure



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
How much concern do you have that the Israeli conflict with
Palestinians could create wider global risks?


1= Not concerned at all
10= Highest level of concern

6%
32%
12%
9%
12%
9%
6%
9%
6%
0%
0% 5% 10% 15% 20% 25% 30% 35%
1
2
3
4
5
6
7
8
9
10
Jul 29
Average:

4.2





CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
16. 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)


Aug
11,
2011
Sep
19
Oct
31
Jan
23,
2012
Mar
16
Apr
24
Jul
31
Sep
12
Dec
11
Jan
29,
2013
Mar
19
Apr
30
Jun
18
Jul
30
Sep
6
Oct
29
Dec
17
Jan
28
2014
Mar
18
Apr
28
Jul
29
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
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%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Survey Dates



CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014
17. 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
European
recession
/financial
crisis
Tax/regul
atory
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
Geopoliti
cal risks
Other
Don't
know/un
sure
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%
Jul 29 12% 29% 12% 0% 6% 3% 0% 0% 0% 12% 12% 12% 3%
Apr 30 Jun 18 Jul 30 Sep 17 Oct 29 Dec 17 Jan 28 '14 Mar 18 Apr 28 Jul 29


CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014


18. What is your primary area of interest?


Comments:

Robert Brusca, Fact and Opinion Economics: Fed is lagging
ASSUMING inflation pressures will drop. It seems to be getting
behind the inflation eight-ball. Economic models work too badly to
ignore contrary real events especially when they involve inflation.
Fed needs to look harder at reality and less hard at its own forecasts.

John Donaldson, Haverford Trust Co.: Regarding criticism of
Janet Yellen's comments on asset valuation: she is in a "no win"
position. If she says nothing, the Fed is tone deaf and not in touch. If
she does comment, that is inappropriate and not her job.

Kevin Giddis, Raymond James/Morgan Keegan: We continue to
grow, but at a slower pace, and not very even. What is lacking is a
true wealth creator like a technology or housing boom that we have
experienced in the past. Think slowly. Think deliberately. Think low
Economics
43%
Equities
20%
Fixed Income
17%
Currencies
0%
Other
20%


CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014

interest rates with limited inflation. Over time, we will work our way
through this phase and I believe that the Fed is well positioned to
react to this and, when that occurs, they will have the correct
response.

Stuart Hoffman, PNC Financial Services Group: Either American
workers have suddenly become highly unproductive or real GDP
growth is much better than estimated in 1H 2014. Part-time, low
wage jobs are all the private sector is creating is an "Urban Myth."

Hugh Johnson, Hugh Johnson Advisors: An absolute decline in
the level of financial assets on the balance sheet of the Federal
Reserve is quite unusual (3 in 56 rolling one-year periods.) Reserve
growth is unlikely, under current circumstances, to lead to an
acceleration in loan growth and monetary growth (and inflation
expectations). If an acceleration occurs, it is quite manageable
through (a) interest payments on excess reserves and (b) reverse
repos. But, importantly, there is not now, nor is it likely, that we will
experience "acceleration" in the growth rate of lending and monetary
growth that would lead to late 1970s levels of monetary growth and
inflation. In addition, a detailed outline of the Fed's exit strategy,
which should be managed "over time," would be interesting although
not entirely necessary. Concerns about the ability of the Fed to
manage the process (exit strategy) are significantly overdone.

John Kattar, Ardent Asset Advisors: The current pace of
improvement in labor markets and subdued inflation suggest the Fed
should be raising rates by late this year. But the risks are to the
downside and the Fed will stay dovish through 2015. Tighter
monetary policy coincident with any signs of economic weakening
would be the nightmare scenario for stocks.

David Kotok, Cumberland Advisors: Geopolitical risk premiums
cannot be measured, only estimated. They seem to be rising.
Observe the widening between SKEW and VIX.


CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014

Subodh Kumar, Subodh Kumar & Associates: There is plenty of
grit plus grist for the investment mill. From the mix of new issues to
cash, from bonds to equities, markets remain focused on central
banks. However, geopolitical risks and the ability of companies to
deliver depend on real events. Equity valuation appears to assume
well above historical earnings growth and sovereign bonds little risk,
inflation or otherwise. We favor quality and maintaining some cash
reserves.

Guy LeBas, Janney Montgomery Scott: The fact that the
"business spending" story failed to emerge in 2014 is very telling.
CEOs are very concerned about long term prospects for the U.S.
economy and aren't making long-term investments as a result. That
fact points to a "secular stagnation-lite" situation for the U.S.

John Lonski, Moody's: The dullest U.S. economic recovery since
WWII and subpar growth outside the U.S. limit the upsides for
inflation and bond yields. A nearly 2.5% 10-year U.S. Treasury yield
looks juicy versus comparably-dated government bonds of 0.6%
from Japan, 1.17% from Germany, 1.47% from France, and 2.15%
from Canada.

Drew Matus, UBS Investment Research: We argued in 2012 that
"the Fed will find it far more difficult to exit than they have found it
to enter given the limitations of the exit tools."

Rob Morgan, Fulcrum Securities: The Fed recently commented
that valuations in the social media and biotech sectors are stretched.
Although I agree with that appraisal, I believe the comment is
outside the Fed dual mandate of keeping full employment and
inflation within an acceptable band.

Joel Naroff, Naroff Economic Advisors: By year's end, labor
shortages will be appearing, wage gains will be accelerating and all
the conditions for a Fed tightening will be in place. It will just be a


CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014

matter of how quickly Yellen pulls the trigger.

Lynn Reaser, Point Loma Nazarene University: The Fed
continues to feed risk-taking in financial markets, but little is spilling
over into more spending on plant and equipment. Inflation, job
gains, and unemployment are firmer than anticipated, but lackluster
wage gains suggest that labor market slack remains. It is too early
to slam on the brakes.

Hank Smith, Haverford Investments: The key to a successful
unwind of the extraordinary accommodative monetary policy is the
implementation of pro-growth fiscal policy with regulatory reform.
That is unlikey for a couple of years

Diane Swonk, Mesirow Financial: The taper tantrum had an
impact on the Fed and they want to make sure markets are prepared
and strong enough to raise rates

Peter Tanous, Lynx Investment Advisory: "Calm before the
storm." While the world is moving dangerously closer to irreversible
deadly conflagrations that threaten civilization on multiple fronts, the
stock market continues on its giddy path of insouciance and
obliviousness. Can this possibly end well for investors?

Scott Wren, Wells Fargo Advisors: Stocks are no longer cheap
but in the modest growth/modest inflation environment we envision
looking ahead, equities can do fine. For 2015 & 2016 a 6% to 9%
total return for the S&P 500 seems likely. This cyclical bull market
has more room to run. Volatility is your friend, not your enemy. Add
to stocks on pullbacks. I think we will get some opportunities to buy
stocks at lower levels.

Mark Zandi, Moody's Analytics: U.S. economic growth prospects
are good and getting better, and the risks to this optimism appear
increasingly less risky.


CNBC Fed Survey – July 29, 2014
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FED SURVEY
July 29, 2014

Clare Zempel, Zempel Strategic: Focus should be more on
nominal GDP growth, and less on the Fed's balance sheet and
interest rate levels.