CNBC Fed Survey – August 20, 2014

Page 1 of 15
FED SURVEY
August 20, 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 August 14-18, 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. Relative to your current belief about the outlook for
monetary policy, in her speech at Jackson Hole Fed Chair
Janet Yellen will strike a:


0%
6%
63%
31%
0% 0%
0%
10%
20%
30%
40%
50%
60%
70%
Much more
hawkish tone
Somewhat
more hawkish
tone
Neutral tone Somewhat
more dovish
tone
Much more
dovish tone
Don't
know/unsure


CNBC Fed Survey – August 20, 2014
Page 2 of 15
FED SURVEY
August 20, 2014

2. Relative to your current belief about the outlook for
monetary policy, do you expect the general outlook for
monetary policy from research papers, media coverage,
and other sources from Jackson Hole will strike a:


0%
26%
46%
26%
0%
3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much more
hawkish tone
Somewhat
more hawkish
tone
Neutral tone Somewhat
more dovish
tone
Much more
dovish tone
Don't
know/unsure


CNBC Fed Survey – August 20, 2014
Page 3 of 15
FED SURVEY
August 20, 2014

3. The Federal Reserve should:


29%
27%
37%
19%
24%
19%
10%
11%
8%
0%
50%
59%
53%
72%
74%
2%
5%
0% 0%
3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
January 28 March 18 April 28 July 29 Aug 20
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 – August 20, 2014
Page 4 of 15
FED SURVEY
August 20, 2014

4. How would you characterize the Fed's current monetary
policy?


28%
43%
17%
13%
49%
43%
6%
3%
46%
49%
3% 3%
0%
10%
20%
30%
40%
50%
60%
Too accommodative Just right Too restrictive Don't know/unsure
July 31, 2012 July 29, 2014 Aug 20


CNBC Fed Survey – August 20, 2014
Page 5 of 15
FED SURVEY
August 20, 2014

5. 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%
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
July 29 August 20


CNBC Fed Survey – August 20, 2014
Page 6 of 15
FED SURVEY
August 20, 2014

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%
0%
10%
20%
30%
40%
50%
60%
70%
Considerably
more slack
now
Modestly
more slack
now
No differenceModestly less
slack now
Considerably
less slack
now
Don't
know/unsure
July 29 August 20


CNBC Fed Survey – August 20, 2014
Page 7 of 15
FED SURVEY
August 20, 2014

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



0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
April 28 Jun 4 Jun 29 Aug 20
Averages:
April 28 survey:
July 2015

June 4 survey:
August 2015

July 29 survey:
August 2015

Aug 20 survey:
July 2015



CNBC Fed Survey – August 20, 2014
Page 8 of 15
FED SURVEY
August 20, 2014

7. 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
Aug
20
Dec 31, 2014 0.28% 0.21% 0.21% 0.20% 0.19% 0.15% 0.27% 0.17% 0.21% 0.16%
Jun 30, 2015 0.50% 0.39%
Dec 31, 2015 0.97% 0.92% 0.82% 0.70% 0.72% 0.83% 0.99% 0.68% 1.05% 0.89%
Jun 30, 2016 1.53%
Dec 30, 2016 1.99%
0.28%
0.21% 0.21%
0.20%
0.19%
0.15%
0.27%
0.17%
0.21%
0.16%
0.50%
0.39%
0.97%
0.92%
0.82%
0.70%
0.72%
0.83%
0.99%
0.68%
1.05%
0.89%
Dec 2016
1.99%
Jun 2016
1.53%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%


CNBC Fed Survey – August 20, 2014
Page 9 of 15
FED SURVEY
August 20, 2014

8. At what fed funds level WILL/SHOULD the Federal Reserve
stop hiking rates in the current cycle? That is, what
will/should be the terminal rate?


3.16%
3.44%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Will Should


CNBC Fed Survey – August 20, 2014
Page 10 of 15
FED SURVEY
August 20, 2014

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



0%
5%
10%
15%
20%
25%
Average:

Q4 2017



CNBC Fed Survey – August 20, 2014
Page 11 of 15
FED SURVEY
August 20, 2014

10. What is your primary area of interest?


Comments:

Tony Crescenzi, PIMCO: Mrs. Yellen is now the Sandman, having
taking over the duties of Sandman from Ben Bernanke in February.
Save for her “six months” comment in March, which appeared to
indicate the Fed might raise interest rates six months after
completing its bond buying program in November, Mrs. Sandman
has been masterful at keeping investors in their dream state.
Whether Janet Yellen has enough magic sand to keep investors calm
– to suppress interest rate volatility and keep financial markets
stable more generally – remains to be seen, however. It will become
more difficult the closer unemployment and inflation move toward
the Fed’s targets. Yet it won’t be that difficult, because in PIMCO’s
New Neutral thesis the Fed won’t raise interest rates as much as it
has historically. We believe the neutral policy rate is today 2%
instead of the old 4%.


Economics
34%
Equities
14%
Fixed Income
23%
Currencies
3%
Other
26%


CNBC Fed Survey – August 20, 2014
Page 12 of 15
FED SURVEY
August 20, 2014

John Donaldson, Haverford Trust Co.: The Fed is stuck in a very
difficult place. All of the cyclical factors that respond to monetary
policy have improved. The secular factors such as long-term
unemployment are proving to be intractable and likely not able to be
solved by monetary policy tools. It is hard for monetary officials to
say "this ball is in your court" to those in charge of fiscal policy.

Mike Englund, Action Economics: If the Fed was more aggressive
now in right-sizing short-term Treasury yields and the fed funds rate
to the rest of the yield curve so "policy control" of market rates was
established earlier in the cycle there would be less need for
aggressive or disruptive tightening later in the cycle. Over-
accommodation now risks the need for an overly-restrictive policy
later.

Kevin Giddis, Raymond James/Morgan Keegan: The experts
and some Fed members want to tighten soon, and the Fed Chair
appears to want to wait a bit longer. Based on where the U.S. and its
global counterparts economies are heading...advantage Yellen!

Stuart Hoffman, PNC Financial Services Group: Lower gasoline
prices, replenished savings, more jobs and income and greater
confidence will lift consumer back-to-school purchases after flat July
retail sales. Strong earnings, reasonable valuations and dovish talk
by Chair Yellen and other Fed policymakers will underpin a rising
stock market.

Hugh Johnson, Hugh Johnson Advisors: There is one important
and, as of now, unanswered question which may be answered in part
at Jackson Hole. That is "Exit strategy.” How technically can the
Federal Reserve begin to reduce the size of its balance sheet and
effectively exert upward pressure on the federal funds rate when the
level of excess reserves is so large? (Technically: how can this be
accomplished?) I am not confident there is a way without causing
some disruption in the financial markets. Secondly, it is virtually


CNBC Fed Survey – August 20, 2014
Page 13 of 15
FED SURVEY
August 20, 2014

impossible to calculate a "terminal" federal funds rate. Underlying
economic, financial market, and inflation conditions will determine
the level at which the Federal Reserve needs to stop raising short-
term interest rates.

John Kattar, Ardent Asset Advisors: Markets are behaving as
expected at this inflection point in monetary policy...lots of
crosscurrents and conflicting signals. QE is ending. But I expect
Jackson Hole to hammer home the point that, despite improvement,
labor markets are still not where the Fed would like them to be, and
rates will remain on hold for an extended period.

Alan Kral, Trevor Stewart Burton & Jacobsen: Politics still
dominates.

Subodh Kumar, Subodh Kumar & Associates: It is popular, not
least in central banks, to talk up a "new era." Still, taking away the
"punch bowl" is as important as ever and, due to imperfect
knowledge, needs grit as has always been the case.

Guy LeBas, Janney Montgomery Scott: If the recent evolution of
inflation expectations in the Eurozone are any evidence, there
remains significant risk to tightening monetary policy.

John Lonski, Moody's: The muted response by consumer spending
and home sales to recent improvements in the labor market is
striking. If home sales do not firm soon enough, home prices are
likely to soften. Supposedly, median sales price of homes sold in
northern New Jersey dipped by -0.1% yearly in Q2-2014, while
home prices in Westchester County rose by merely 0.8% on a
comparable basis. (See article by Josh Barbanel in WSJ, 8/12/2014,
p. A15).

Drew Matus, UBS Investment Research: The exit from QE/move
to tighten will be messy and, hence, will increase volatility.


CNBC Fed Survey – August 20, 2014
Page 14 of 15
FED SURVEY
August 20, 2014

Ward McCarthy, Jefferies: The Fed will not raise rates until
inflation forces policymakers to do so. Consequently, lift-off is likely
to be later than is currently anticipated by the market but be more
rapid once it is underway than is now anticipated.

Rob Morgan, Fulcrum Securities: The economy has seen 6
straight job reports over 200k (first time since 1997) and job
openings reported this week were the highest since 2001. The job
market seems to be hitting the proverbial 'virtuous' cycle that will
allow the Fed to raise rates sooner than the market expects.

James Paulsen, Wells Capital Management: What worries me
the most about current Fed policy is how much the current fed funds
rate is "below" the current rate of core consumer inflation. Since
1960, there has been only one time (in the late-1976) when the
funds rate was significantly below the rate of core inflation when the
Fed began tightening. Then, it was only about 1% below the
inflation rate and once the Fed began tightening they ultimately had
to raise the rate from about 5% to 20%! All others times, the funds
rate was either equal to or above the rate of core inflation when the
Fed first began tightening. By comparison, today the core rate of
inflation at 1.9% is almost 2% “above” the current effective funds
rate.....wow! When they do finally begin raising the funds rate, they
will need to add 200 basis points just to reach the point they
generally have started tightening cycles in the past.

Lynn Reaser, Point Loma Nazarene University: The economy
appears to gaining momentum, but we have been fooled before.
Confidence is vital and developments in Ukraine and the Middle East
cannot be ignored.

John Roberts, Hilliard Lyons: Signs of revenue growth in the Q2
numbers make us a little more sanguine on the equity markets,
although valuations still create some concern, especially as markets
begin to anticipate a rise in rates. As a result, we continue to


CNBC Fed Survey – August 20, 2014
Page 15 of 15
FED SURVEY
August 20, 2014

suggest that investors lean defensive on equity holdings.

John Ryding, RDQ Economics: The question about the terminal
fund rate needs a when as well as a what. A stitch in time saves
nine and the sooner the Fed begins to hike, the lower the terminal
funds rate will be. It is likely that the Fed will have to overshoot the
long-run funds rate and then ultimately ease policy.

Diane Swonk, Mesirow Financial: Hawks hoping to influence
policy before they lose their voting rights on the FOMC have little
time to express their views. This sets the stage for an amplified
debate on when to raise rates between Jackson Hole and the end of
the year. Next year's voting members of the FOMC, however, are
more closely aligned with Yellen. This will matter more than dissents
this year when it comes to the timing of rate hikes

Peter Tanous, Lynx Investment Advisory: Inflation is now
bubbling up in food prices, real estate, and some commodities.
Demand for U.S. bonds continues to be fueled by political concerns
and investors seeking safety. "Take my money...please! No interest
necessary...just keep it safe."

Scott Wren, Wells Fargo Advisors: The Fed is going to move very
slowly. The Street's expectations for economic growth were way too
high coming into the year. (Why is a mystery to me). This modest
growth/modest inflation environment is unlikely to change any time
soon. Some are focused on wage growth but I do not look for
average hourly earnings to move much from the approximate 2.0%
year-over-year pace we have seen for some time.