FED SURVEY

April 28, 2015
These survey results represent the opinions of 38 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, 2015. 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 the Federal Reserve raise the federal funds rate in 2015?
90%

84%

80%

70%

60%

50%

40%

30%

20%

11%
10%

5%

0%
Yes

CNBC Fed Survey – April 28, 2015
Page 1 of 33

No

Don't know/unsure

FED SURVEY
April 28, 2015
2. Which of the following statements best describes your view of
the recent weakness in the economic data?
70%

66%

60%

50%

40%

32%
30%

20%

10%

3%
0%
It's a sign of a real
It's a temporary
weakening in the
slowdown and the
economy that will
economy will
persist for at least a bounce back in the
few quarters
second or third
quarter

CNBC Fed Survey – April 28, 2015
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0%
It's a combination Don't know/unsure
of temporary and
more permanent
factors

FED SURVEY
April 28, 2015
3. For U.S. economic growth and corporate earnings, the
strength of the dollar is:
Mar 17

Apr 28

90%

80%

76%

78%

70%

60%

50%

40%

30%

20%

13%

11%

11%

11%

10%

0%
Positive

CNBC Fed Survey – April 28, 2015
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Negative

Don't know/unsure

FED SURVEY
April 28, 2015
4. What effect does strength of the dollar have on your GDP
growth/core inflation forecast for 2015?
Mar 17

Apr 28

1.00

0.80

0.60

0.40

Pct. points

0.20

0.00

-0.20

-0.22

-0.22

-0.24

-0.30

-0.40

-0.60

-0.80

-1.00
GDP

CNBC Fed Survey – April 28, 2015
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Inflation

FED SURVEY
April 28, 2015

5. As a result of the strength of the U.S. dollar, Fed policy will
be:
Mar 17

Apr 28

70%

61%
60%

49%

50%

41%
40%

32%
30%

20%

10%

5%

5%
3%

3%

3%

0%
Easier than
originally
forecast

The same as
originally
forecast

CNBC Fed Survey – April 28, 2015
Page 5 of 33

Tighter than
originally
forecast

Could go either
way

Don't
know/unsure

FED SURVEY
April 28, 2015
6. 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?
Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now
80%

69%

70%

63%

64%

60%
60%

55%
50%

48%

50%

Modestly more slack

40%
40%

36%

34%
Considerably more slack

30%

Modestly less slack

24%
20%
20%

11%
8%

10%

4%

4%

9%

9%
6%

16%

16%
13%

3%

CNBC Fed Survey – April 28, 2015

9%

8%

11%

8%

5%

6%

July 29 August 20 Sep 16

Page 6 of 33

19%

18%

Considerably less slack

No difference

0%

22%

5%
0%
Oct 28

6%
0%
Dec 16

Jan 27

3%

Mar 17

6%
0%
Apr 28

FED SURVEY
April 28, 2015
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?
Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now
70%
64%

64%

60%
60%

56%

59%
Modestly more slack

57%

57%

No difference

19%

55%

50%

40%

30%

Modestly less slack

24%
Considerably more slack

20%

19%
13%

10%
8%

13%
9%

14%
11%

5%

11%
8%

5%

Considerably less slack

0%
July 29 August 20 Sep 16

CNBC Fed Survey – April 28, 2015
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Oct 28

Dec 16

Jan 27

Mar 17

Apr 28

FED SURVEY
April 28, 2015
7. What is your measure of full employment in the U.S.?
35%

30%

Average:
4.8%

25%

20%

15%

10%

5%

0%

CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015
8. Where do you expect the S&P 500 stock index will be on … ?
December 31, 2015

December 31, 2016

2,400

2311

2296

2,300

2259

2247
2194

2,200

2187
2156

2149
2111
2,100

2128

2075

2,000

1,900

1,800
July 29

Sep 16

Oct 28

Dec 16
Survey Dates

CNBC Fed Survey – April 28, 2015
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Jan 27

Mar 17

April 28

FED SURVEY
April 28, 2015
9. What do you expect the yield on the 10-year Treasury note
will be on … ?
December 31, 2015

December 31, 2016

4.0%

3.52%
3.5%

3.43%

3.45%

3.19%

3.14%
3.04%
2.96%

3.0%

2.89%

2.54%

2.57%

2.5%
2.33%

2.0%
Jul 29

Sep 16

Oct 28

Dec 16
Survey Dates

CNBC Fed Survey – April 28, 2015
Page 10 of 33

Jan 27

Mar 17

April 28

FED SURVEY
April 28, 2015
10.
What is your forecast for the year-over-year percentage
change in real U.S. GDP for …?
2015

2016

3.5%

3.3%

3.1%
+3.02%

+3.02%

+3.00%

+2.99%

+2.90%

+2.90%

+2.90%

2.9%
+2.81%

+2.88%
+2.84%

+2.75%

+2.81%

+2.80%

2.7%
+2.69%

2.5%

Jan 28,
Mar 18 Apr 28
'14

Jun 4

Jul 29

Sep 16 Oct 28 Dec 16

Jan 27,
Mar 17
'15

+2.70%

April
28

2015 +2.90% +3.02% +3.00% +2.81% +2.75% +2.90% +2.90% +3.02% +2.99% +2.69% +2.70%
2016

CNBC Fed Survey – April 28, 2015
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+2.88% +2.80% +2.84% +2.81%

FED SURVEY
April 28, 2015
11.
What is your forecast for the year-over-year percentage
change in the headline U.S. CPI for …?
2015

2.4%

2.29%

2016

2.27%
2.17%

2.2%

2.07%
2.0%

2.08%
1.96%

2.02%

2.01%

1.8%

1.74%
1.6%

1.4%

1.2%

1.17%
1.0%

1.01%

1.00%

Mar 17

April 28

0.8%
Jun 4

Jul 29

Sep 16

Oct 28

Dec 16

Survey Dates

CNBC Fed Survey – April 28, 2015
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Jan 27,
'15

FED SURVEY
April 28, 2015

12.
When do you expect the Fed to hike the fed funds rate
and allow its balance sheet to decline?
Survey Date

Fed Funds Hike
Average Forecast

Balance Sheet
Average Forecast

April 28, 2014 survey

July 2015

October 2015

June 4 survey

August 2015

March 2016

July 29 survey

August 2015

December 2015

August 20 survey

July 2015

Not asked

September 16 survey

June 2015

December 2015

October 28 survey

July 2015

January 2016

December 16 survey

July 2015

February 2016

Jan. 27, 2015 survey

September 2015

April 2016

March 17 survey

August 2015

April 2016

April 28 survey

October 2015

May 2016

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FED SURVEY
April 28, 2015
14.
How would you characterize the Fed's current monetary
policy?
Too accommodative

Just right

Too restrictive

Don't know/unsure

60%
Too accomodative54%

49%

50%
43%

49%

49%

50%

50%

50%

47%

46%
43%

40%

49%

43%

44%

44%
39%
Just right

30%

32%

28%

20%

10%

17%

Don't know/unsure

13%

8%
6%

6%

5%

3%
0%

Jul 31,
'12

6%

3%

3%

3%

3%

Jul 29,
'14

Aug 20

Sep 16

Oct 28

CNBC Fed Survey – April 28, 2015
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6%

6%
3%

5%

Too restrictive

Dec 16

Jan 27,
'15

Mar 17

Apr
28
0%

FED SURVEY
April 28, 2015
15.
Where do you expect the fed funds target rate will be on
…?
2.5%

2.13%

Dec 2016
2.04%

1.99%

2.0%

1.93%
1.84%
1.75%

1.5%
1.46%

1.05%

1.0%

0.97%

0.99%

0.98%

0.92%

0.89%

0.89%

0.83%

0.82%

0.73% 0.71%

0.83%
0.70% 0.72%

Dec 2015

0.68%

0.5%

0.54%

0.0%
Jul 30

Sep
17

Oct
29

Dec
Jan
Mar
17 28 '14 18

Apr
28

Jun 4 Jul 29

Aug
20

Sep
16

Oct
28

Dec
16

Jan
27,
'15

Mar
17

April
28

Dec 31, 2015 0.97% 0.92% 0.82% 0.70% 0.72% 0.83% 0.99% 0.68% 1.05% 0.89% 0.98% 0.89% 0.83% 0.73% 0.71% 0.54%
Dec 31, 2016

CNBC Fed Survey – April 28, 2015
Page 15 of 33

1.99% 2.13% 2.04% 1.93% 1.75% 1.84% 1.46%

FED SURVEY
April 28, 2015
16.
At what fed funds level will the Federal Reserve stop
hiking rates in the current cycle? That is, what will be the
terminal rate?
4.0%

3.5%
3.30%

3.16%

3.20%

3.17%

3.11%
3.04%

3.0%
2.85%

2.5%

2.0%
Aug 20

Sep 16

Oct 28

Dec 16
Survey Dates

CNBC Fed Survey – April 28, 2015
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Jan 27, '15

Mar 17

Apr 28

FED SURVEY
April 28, 2015
17.
When do you believe fed funds will reach its terminal
rate?

Survey Date

Forecast

August 20 survey

Q4 2017

September 16 survey

Q3 2017

October 28 survey

Q4 2017

December 16 survey

Q1 2018

Jan. 27, 2015 survey

Q1 2018

March 17 survey

Q4 2017

April 28 survey

Q1 2018

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FED SURVEY
April 28, 2015
18.
What grade would you give Janet Yellen as Fed chair so
far?
Bernanke (Dec 17, 2013)

Yellen (April 28, 2014)

Yellen (April 28, 2015)

60%

Averages:

51%
50%

50%

Bernanke Dec '13

46%

B (2.95)

Yellen Apr '14

40%

B- (2.71)

36%

Yellen Apr '15
30%

B+ (3.17)

27%
23%
22%

20%

11%

10%
10%

5%

3% 3%

3%
0%

0%
A

B

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

CNBC Fed Survey – April 28, 2015
Page 18 of 33

C

D

0%
F

FED SURVEY
April 28, 2015
19.
Please rate Janet Yellen and Ben Bernanke on their
performances in the following areas on a scale of 0 to 5. (A
higher number represents better performance.).
April 2014

April 2015

Bernanke

Yellen

Bernanke

Yellen

Leadership

3.95

3.27

4.25

3.89

Transparency

3.65

3.60

4.00

3.91

Communication

3.38

3.06

3.69

3.83

Economic
Forecasting

2.95

3.27

2.94

3.39

Overall
Monetary Policy

3.47

3.08

3.92

3.78

CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015

20.
What is your forecast for WTI crude oil's lowest price in
the current downturn?
Jan 27

Mar 17

Apr 28

$50

$45

$42.15
$40

$39.58

$39.95

$35

$30

$25

$20

CNBC Fed Survey – April 28, 2015
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Average Forecast

FED SURVEY
April 28, 2015
21.
What is your forecast for the lowest level of the dollar vs.
the euro in the current downturn??
Mar 17

April 28

$1.10

$1.05

$0.99

$1.00

$0.95
$0.95

$0.90

$0.85

$0.80
Average Forecast

CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015
22.
What is the percentage chance each of the following
countries will leave the euro zone in the next 3 years? (0%=No
chance of leaving, 100%=Certainty of leaving):
Mar 17

Apr 28

45%
41%
39%

40%

35%

30%

25%

20%

15%

13%
11%

12%

10%

8%

9%
7%

8%
5%

5%

3% 3%

5%

0%

Greece

Portugal

Spain

CNBC Fed Survey – April 28, 2015
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Italy

Ireland

Germany

France

FED SURVEY
April 28, 2015
23.
Has the U.S. stock market already discounted a fed funds
rate hike by the Federal Reserve next year?
Dec 16

Jan 27

Mar 17

Apr 28

60%
56%

53% 53%
50%

50%

47%

47%

40%
36%

38%

30%

20%

10%

8%

9%

3%
0%

0%
Yes

CNBC Fed Survey – April 28, 2015
Page 23 of 33

No

Don't know/unsure

FED SURVEY
April 28, 2015
24.
What is the single biggest threat facing the U.S. economic
recovery?
Apr 30

Jun 18

Jul 30

Sep 17

Apr 28

Jul 29

Sep 16

0%

Oct 28

5%

Oct 29

Dec 17

Dec 16

10%

15%

Jan 27 '15

20%

Jan 28 '14

Mar 18

Mar 17

April 28

25%

30%

35%

40%

45%

European recession/financial crisis
Tax/regulatory policies
Slow job growth
Inflation

Deflation
Debt ceiling

Rise in interest rates
Geopolitical risks

Global economic weakness
Slow wage growth
Other
Don't know/unsure
Global
Rise in
Slow wage
Geopolitic
economic
interest
growth
al risks
weakness
rates

European
Tax/regula
recession/
tory
financial
policies
crisis
31%
20%

Don't
know/uns
ure

Other

Apr 30

0%

11%

2%

2%

0%

20%

Jun 18

0%

13%

0%

3%

3%

20%

28%

15%

Jul 30

4%

14%

10%

2%

2%

0%

22%

30%

8%

Sep 17

2%

7%

18%

4%

0%

2%

22%

27%

4%

Oct 29

0%

13%

8%

3%

3%

3%

24%

29%

8%

Dec 17

2%

2%

15%

2%

0%

2%

29%

32%

5%

Jan 28 '14

0%

21%

12%

0%

0%

2%

30%

21%

7%

Mar 18

0%

18%

5%

0%

5%

3%

26%

23%

10%

Apr 28

0%

13%

18%

8%

0%

5%

3%

21%

26%

3%

Jul 29

3%

12%

12%

12%

0%

3%

6%

12%

29%

12%

Sep 16

3%

11%

11%

6%

0%

3%

6%

29%

26%

6%

Oct 28

3%

8%

8%

10%

0%

3%

3%

15%

18%

31%

Dec 16

0%

3%

14%

3%

0%

6%

3%

14%

14%

40%

Jan 27 '15

0%

16%

6%

41%

16%

6%

0%

0%

0%

9%

13%

0%

Mar 17

0%

14%

17%

28%

8%

6%

0%

6%

3%

0%

14%

6%

April 28

3%

19%

8%

28%

11%

6%

0%

0%

3%

8%

11%

3%

CNBC Fed Survey – April 28, 2015
Page 24 of 33

Debt
ceiling

Deflation Inflation

Slow job
growth

FED SURVEY
April 28, 2015
25.
In the next 12 months, what percent probability do
you place
on SURVEY
the U.S. entering recession? (0%=No
FED
chance of
recession,
100%=Certainty of recession)
April
30,
40%
36.1%

35%
34.0%

30%

28.5%

25.9%

25%

26.0%

25.5%

20%

20.3%

20.6%

20.4%

18.4%

18.2%

17.3%

19.1%
17.6%

15%

16.9%

15.1%

16.9%
16.2%
15.3%

15.2%

16.4%

16.2%

14.6%

15.0%

14.7%
13.6%
13.0%

10%

5%

0%

Aug
Jan
Sep Oct
Mar Apr
11,
23,
19 31
16 24
'11
'12

Jan
Jul Sep Dec
Mar Apr Jun
29,
31 12 11
19 30 18
'13

Jan
Jul Sep Oct Dec
Mar Apr
28
30
6
29 17
18 28
'14

Jan
Jul Sep Oct Dec
Mar April
27
29 16 28 16
17 28
'15

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 15.0 15.1 13.6 13.0 16.4 14.7

Survey Dates

CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015
26.

What is your primary area of interest?

FED SURVEY
April 30,
Other
22%
Economics
41%

Currencies
0%
Fixed Income
14%

Equities
24%

Comments:
Thomas Costerg, Standard Chartered Bank: There is a problem
of timing right now. The hit to oil-related business investment is
front loaded while it may take time for consumers to realize how
much they save at the gas pump; meanwhile, a rising US dollar
exacerbates US manufacturing sector’s pain. One should not lose
faith in an acceleration in consumer spending later this year. When it
comes to the Fed, recent weaker data is likely to fuel their prudence.
We still expect a September rate hike, followed by a very gradual
tightening cycle, and a low terminal rate of 2.0%. The main risk is a
lower rather than higher terminal rate.
Tony Crescenzi, PIMCO: The Fed can’t keep its grip on markets
forever, and it doesn’t want to, either. Indeed, the era of
“Yellenomics” rooted in excess labor supply justifying extraordinary
accommodation is slowly coming to an end. That said, when
constructing investment portfolios we suggest investors stay calm
CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015
and focus on the path of the Fed’s policy rate and its ultimate
destination, as well as policy rates abroad, which are likely to stay
FED
SURVEY
low for the rest
of the
decade, compelling investors to keep reaching
April
for higher yields
and30,
returns. Supply-side Yellenomics is (slowly)
losing its grip on markets The recent rally in the U.S. dollar
indicates very clearly that the Federal Reserve’s post-crisis efforts to
influence market prices are giving way to more traditional influences
and in particular economic data and underlying economic
fundamentals. For almost eight years, the Fed, through its bond
buying and zero interest rate policy, has aimed to influence markets
on several fronts:
1. Reduce forward rate expectations
2. Suppress interest rate volatility
3. Compel investors to move outward along the risk spectrum
Now, because of the cumulative progress seen in reducing economic
slack and in particular in getting people back to work, the Fed can no
longer sustainably keep investors from pricing in an eventual rate
hike. For now, this is manifesting itself mainly in the value of the
U.S. dollar, where a divergence in the path of monetary policy in the
U.S. versus that of Europe and Japan has become prominent – while
the Fed is poised to raise interest rates, the European Central Bank
and Bank of Japan are continuing to ease policy and they are years
away from rate hikes of their own. The dollar’s surge suggests that
market participants believe the U.S. economy is inching closer to full
employment, which in the Fed’s eyes will be reached when the
unemployment rate is between 5.0% and 5.2%. In other words,
fundamentals – not the Fed’s words, mind you – are increasingly
driving market prices. The era of the Fed providing substantial
near-term forward guidance is over. It has given way to economic
data, and now every Fed meeting is “live.” Therefore, with the
underutilization of labor resources continuing to diminish, the Federal
Reserve’s ability to control market prices will diminish, too, because
markets will expect the Fed to end its emergency policy rate, and
this will be the major driver of market prices rather than the Fed’s
forward guidance. This is in contrast to recent years when the Fed
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FED SURVEY
April 28, 2015
easily convinced investors it would keep its policy rate at zero using
the argument that wages and thus inflation would be kept down by a
SURVEY
vast supply ofFED
untapped
labor. Now, with the jobless rate at a
relatively low April
5.5%,30,
this argument is becoming less potent a force in
shaping market prices. Yellenomics – in other words, the Yellen-era
policy framework that utilizes the supply argument as a rationale for
maintaining an extraordinarily accommodative stance on monetary
policy – is on the wane, albeit slowly, because the debate over labor
supply is moving from one of obvious abundance to one that is less
obvious. The U.S. jobless rate is the most convincing example,
even if a somewhat flawed indicator. In light of growing indications
of declining excess labor market supply, it can be argued that the
earlier the Fed moves the less it will have to move later. Let me
explain: risk management for the Fed up until now has been to avoid
acting prematurely. Former Fed Chair Ben Bernanke, who
participated in PIMCO’s latest quarterly Cyclical Economic Forum,
noted that no nation had ever escaped the zero bound in the postwar
era. Moving too early is therefore probably a bad idea. Yet, so is
moving late, because market participants may begin to price in an
even larger amount of rate hikes than if the Fed were to move
earlier, causing a greater tightening of financial conditions than is
desirable. This bolsters the case for a shift in the Fed’s risk
management focus to one of guarding against acting too late. The
Fed’s doves may coalesce around this idea and vote for rate hikes in
order to clip the tails on scenarios where markets price in more rate
hikes than they would themselves want to see. A key message the
Fed is likely to convey in the time leading up to rate hikes is that
“tightening is not tightening.” Stanley Fischer, the Fed’s vice chair,
said in the days after the Fed’s March meeting that the Fed’s initial
rate hikes would merely move the Fed’s stance from “ultraexpansionary” to “extremely expansionary.” In remarks at the San
Francisco Fed on March 27, Yellen said that “the economy’s
equilibrium real federal funds rate … is currently quite low by
historical standards” – a comment entirely consistent with PIMCO’s
views about The New Neutral policy rate. The Fed’s policy rate
CNBC Fed Survey – April 28, 2015
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FED SURVEY
April 28, 2015
would remain historically low, especially relative to where the U.S.
jobless rate is, and this will likely be the case for years. Moreover,
FED
SURVEY
the Fed’s $4.45
trillion
balance sheet will continue to provide
April
30,
stimulus for the
U.S.
economy, by helping to keep interest rates
lower than they would otherwise be – because the Fed’s securities
holdings reduce the amount of bonds that traditional investors can
buy, raising their prices and lowering their yields. Investment
implications: Focus on the path of hikes To reiterate our key
investment theme, when constructing portfolios, we suggest
investors stay focused on the potentially (slow) speed and (low)
magnitude of future Fed rate hikes, as well as the outlook for rates
around the world, rather than the timing of the Fed’s initial hike.
Second, we expect “Yellenomics” to lose its grip on market prices, as
has been occurring with the U.S. dollar in recent months, leading to
an increase in market volatility. In addition, we expect markets to
become even more volatile when anxieties inevitably grow in
response to the imminence of a Fed rate hike, creating risks but also
opportunities. We suggest investors be prepared to act when
opportunities inevitably arise. In summary, we suggest investors
invest for the day(s) after the Fed’s first hike(s) and think long-term,
in particular about the low interest rate climate that will likely prevail
for the rest of the decade, compelling investors to continue to reach
for higher yields and returns. We suggest investors position
themselves accordingly, favoring a bias toward overweighting credit
and equity risk, taking advantage of opportunities to add to both if
anxieties creep into markets, as they so often do. Favor also an
underweight to U.S. duration, a bias toward a flatter yield curve, as
well as a stronger U.S. dollar ahead of the Fed’s rate hike cycle.
The Fed is losing its grip – be alert and prepared to catch what
moves!
John Donaldson, Haverford Trust Co.: One benefit of the Fed
moving early and cautiously is that the bond market can adapt over
time. The longer the FOMC waits, the higher the odds that an
eventual move would have to be more abrupt and therefore, more
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FED SURVEY
April 28, 2015
disruptive. This has to enter into their thinking.

FED SURVEY
Neil Dutta, Renaissance
Macro Research: There is considerable
April
uncertainty over
the30,
extent to which financial conditions have
tightened. While the focus is on the dollar, in Q1, the U-3 and U-6
unemployment rates declined as core inflation and hourly earnings
growth picked up. Despite this, nominal yields declined. So, in some
respects, monetary conditions have eased even as the FOMC has
moved closer to its statutory goals. We see the Fed as running the
risk of wedding itself too much to market variables and not enough
to economic ones. Bank lending growth has been quite strong this
year; financial conditions are actually easing to the real economy.
Kevin Giddis, Raymond James/Morgan Keegan: While the Fed
seemingly wants to move off of a near-zero monetary policy, they
have painted themselves into a bit of a corner if they remain "data
dependent," because the current data is working against them. If
they chose to go full steam ahead and tighten, look for heightened
volatility and challenges to the liquidity in the market. If the data
supports it...then do it! The market will likely adjust in a more
orderly fashion.
Stuart Hoffman, PNC Financial Services Group: Watch the ECI
for best measure of worker compensation. It should accelerate
further in 1Q to 2.6% Y/Y showing tightening labor market despite
U6 well above normal. Housing getting its "groove" back with sales,
prices and building/remodeling moving higher this year. Positive sign
for overall economy, esp. for millenials. Fed funds futures market
winning early rounds in its heavyweight fight with the Fed over
timing of first funds rate hike and pace of hikes thereafter. Is 'don't
fight the Fed' passe?
Art Hogan, Wunderlich Securities: Bull markets end with policy
missteps. We will not have one this year

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FED SURVEY
April 28, 2015
Hugh Johnson, Hugh Johnson Advisors: Currently, the case for a
continuation of the stock market-economic-interest rate cycle is very
FED SURVEY
sound. The combination
of a shift in monetary policy toward restraint
30,
and a possibleApril
Congressional-driven
shift in fiscal policy toward
restraint will present a significant challenge to the U.S. economy as
we move into 2016-2017.
David Kotok, Cumberland Advisors: Negative interest rates in
Europe are the largest single factor in asset pricing worldwide. They
should not be underestimated.
Subodh Kumar, Subodh Kumar & Associates: Markets seem
mesmerized by quantitative ease as halo. However, the Federal
Reserve needs to start in 2015 the process of reducing ease
including raising rates irrespective of domestic and global
uncertainties. We expect valuation containment and volatility in
capital markets. Company delivery fundamentals like revenue gain
challenges, the collateral implications of quantitative ease like
hollowing out risk and key world political events like Middle East
turmoil but also China's focus on infrastructure and trade linkages
draw our attention. Across sectors, companies sticking to their
knitting can be distinguished from others– reasons to focus on
quality of delivery and financial statement strength.
Rob Morgan, Sethi Financial Group: Earlier this year I thought
the first Fed rate hike would come by June. Now I think low oil
prices and the strong dollar will keep inflation low enough to push
the hike off to September.
Joel Naroff, Naroff Economic Advisors: Since everyone knows
the Fed is going to increase rates, it should stop playing Hamlet and
get it over with.
James Paulsen, Wells Capital Management: I think the biggest
problems faced today by the U.S. economy are two supply-side
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FED SURVEY
April 28, 2015
constraints -- the slowest growth in the working age population of
the post-war era and the worst productivity performance of any
SURVEYto employ demand-side policies when
recovery. TheFED
Fed continues
April 30,
the economy suffers
from supply-side issues. Policy focus should
shift towards helping to improve productivity (e.g., investment tax
credits or increased government investment spending) and winding
down and normalizing what has become essentially an ineffective
demand-side monetary policy.
Lynn Reaser, Point Loma Nazarene University: Markets are
supplanting the Fed's policy lead. A stronger dollar is tightening
policy, while foreign demand for bonds is easing policy by pressing
long-term interest rates down.
John Roberts, Hilliard Lyons: While we continue to see no
immediate risks to the current upswing in the equity markets, we
remain very concerned about current equity valuations. Should a
downside catalyst arise, a major decline in the equity markets should
not be discounted. The current near-universal bullishness among
investors is especially troubling, although given the lack of negative
catalysts, we remain in the bullish camp for the foreseeable future.
John Ryding, RDQ Economics: The Fed is in a not-impatient
holding pattern and has already signaled that a rate hike is not really
on the table for discussion. The Fed should raise rates in June but
will probably wait until September. Even so, I think the market is
underestimating the path of rate hikes over the next two years as
unemployment is seen falling below 5% by year-end and as inflation
starts to move back up.
Allen Sinai, Decision Economics: The best is yet to come, and
will, for the U.S and global economies.
Diane Swonk, Mesirow Financial: The economy is more sensitive
to rate hikes than further monetary easing when we are operating
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FED SURVEY
April 28, 2015
close to zero on rates; this asymmetry is influencing monetary policy
along with uncertainty over the durability of the expansion. We have
shown we canFED
comeSURVEY
back from a weak quarter; we have not proven
Aprilintermittent
30,
that we can avoid
growth.
Peter Tanous, Lynx Investment Advisory: Interest rates will
eventually turn up, reversing a downward trend that began 35 years
ago. So what happens when a 35-year trend changes? Nobody
knows! But we'd better be prepared for the unexpected.
Mark Vitner, Wells Fargo: The stronger dollar is clearly having a
negative effect on the economy and corporate profits in the near
term but will be a positive for the economy later this year and in
2016. The greatest risk for the economy will be the implementation
of rate hikes by the Fed. They not only need to get the timing, pace,
and magnitude of rate hikes right but must also manage market
expectations so that they avoid a repeat of the taper tantrum.
Scott Wren, Wells Fargo Advisors: The stock market is believing
more and more that the Fed is not going hike rates this year. The
Fed is going to spell out 3 or 4 months in advance of the first hike
almost exactly what they will do and when they will do it. They will
use Fed-speak but there will be no question as to when the initial
hike will occur and what the pace will be. The market will be fully
prepped. Pace and magnitude are much more important than when
the initial hike will occur. I still believe it will take years to normalize
rates....the Fed will move very slowly.
Mark Zandi, Moody's Analytics: The outlook is strong, and the
risks to this outlook are about as less risky as I can remember.

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