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FED SURVEY

June 13, 2017


These survey results represent the opinions of 39 of the nations top money managers,
investment strategists, and professional economists.

FED SURVEY
They responded to CNBCs invitation to participate in our online survey. Their responses were
collected on June 8-10, 2017, after former FBI Director James Comey finished his testimony to
April 30,
the Senate Intelligence Committee. 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. At its June meeting, the Federal Reserve will:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Raise interest
rates 100%

Lower interest
rates 0%

Keep rates
unchanged 0%

Don't know/
unsure 0%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

2. After its upcoming meeting, the Federal Reserve's next


directional move will most likely be:
FED SURVEY
Raise interest rates Lower interest rates
April 30,
Move to negative interest rates Launch new quantitative easing
100%
100% 100% 100% 100% 100% 100%
98%
90% 94% 95% 95%
92%
90%
88% Raise interest rates
80%

70%

60%

50%

40%

30%

20%
Launch new quantitative easing
10% 10% Lower interest rates
10%
4% 5% 5%
3% 2%
0% 0% 0% 0% 0%
0%
Jan 27 Mar 15 Apr 26 Jun 14 Jul 26 Aug 24 Sep 20 Nov 1 Dec 13 Jan 31 Mar 14 May 2 Jun 13

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

(For the 100% answering the next move will be to raise rates)

When will FED SURVEY


the Federal Reserve take this action?
0% April
10% 30,
20% 30% 40% 50% 60% 70% 80% 90% 100%

Jul 3%

Aug 0%

Sep 54%

Oct 3% Average:

November
Nov 5%
2017
Dec 21%

Jan '18 0%

Feb 5%

Mar 10%

Apr 0%

May 0%

After
May '18
0%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

3. How many times in total will the Federal Reserve hike


rates in 2017?
FED SURVEY
5.00 April 30,

4.50

4.00

3.50
3.16
2.98 3.03
3.00
2.78
2.50
Average

2.50

1.97
2.00

1.50

1.00

0.50

0.00
Nov 1 Dec 13 Jan 31 Mar 14 May 2 Jun 13
Survey Dates

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

4. In general, do you approve or disapprove of the job


Donald Trump is doing as president?
FED SURVEY
April10%30, 20%
0% 30% 40% 50% 60% 70% 80% 90% 100%

Approve 27%

Disapprove 49%

Don't know/
unsure
24%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

Do you generally approve or disapprove of the job Donald


Trump is doing handling the economy?
FED SURVEY
0% April
10% 30,20% 30% 40% 50% 60% 70% 80% 90% 100%

Approve 50%

Disapprove 26%

Don't
know/ 24%
unsure

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

5. Is the investigation surrounding Russias involvement in


the U.S. election a threat to the Trump presidency?
FED SURVEY
0% April 20%
10% 30, 30% 40% 50% 60% 70% 80% 90% 100%

Yes 32%

No 47%

Don't
know/ 21%
unsure

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FED SURVEY
June 13, 2017

6. Does the investigation surrounding Russias involvement


in the U.S. election reduce the chance of President
TrumpsFED SURVEY
economic policies becoming law?
April 30,
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes 55%

No 26%

Don't
know/ 18%
unsure

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

7. Do you believe Donald Trump will complete his four-year


term as president?
FED SURVEY
0% April 20%
10% 30, 30% 40% 50% 60% 70% 80% 90% 100%

Yes 71%

No 5%

Don't
know/ 24%
unsure

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

8. When do you expect, if at all, the following policies will


be enacted by Congress and signed into law by President
Trump? FED SURVEY
April 30,

Avg. forecast
Mar 14 survey May 2 survey June 13 survey

Q3 2017 Q4 2017 Q1 2018


Health care reform (4% said (12% said (13% said
never) never) never)

Q1 2018 Q2 2018 Q1 2018


Dodd-Frank reform (11% said (19% said (22% said
never) never) never)

Q4 2017
Q4 2017 Q1 2018
(0% said
Tax cuts (0% said never) (5% said never)
never)

Q1 2018 Q1 2018 Q1 2018


Infrastructure spending hike (13% said (14% said (16% said
never) never) never)

Q3 2018 Q3 2018 Q4 2018


GSE
(33% said (34% said (46% said
Fannie and Freddie reform
never) never) never)

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

9. Please rate President Trump's economic policies on a


scale of +2 (very positive) to -2 (very negative) in the
FED
following SURVEY
areas?
April 30,
Very +2.00
positive
Plans to reduce business regulation
Business tax cuts
+1.53
+1.44 +1.46
+1.50 +1.38 +1.36

+1.40
+1.33 +1.18
+1.21 +1.24
Somewhat +1.00
positive
+0.94
+0.87 +0.87
+0.76
+0.50 Individual tax cuts +0.62

+0.21
Average

Health care
Neutral +0.00

-0.24

-0.50

-0.81
-0.89
-0.96 -0.96
Somewhat
-1.00
negative
-1.23 Trade policies

-1.50

Very
negative -2.00
Dec 13 Jan 31 Mar 14 May 2 Jun 13
Survey dates

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FED SURVEY
June 13, 2017

10. Do you believe the decision by President Trump to


leave the Paris Climate Accords will boost U.S. growth
and GDP?FED SURVEY
April 30,
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes 29%

No 58%

Don't
know/ 13%
unsure

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

11. What effect do you believe the decision by President


Trump to leave the Paris Climate Accords will have on the
FED SURVEY
environment?
April 30,
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Helpful 3%

Harmful 34%

No effect 63%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

12. Recent stock market gains appears to be mostly


driven by:
100%
FED SURVEY
April 30,

90%

82%
80% Solid economic fundamentals,
including a better corporate
profit outlook
72%
70%

63%
62%
60%

50% 50%
48%

40%

36%

30%
29%
26%
Expectations for policy changes
20% from the new administration
18%

10%
Don't know/unsure 8%

3% 2% 2%
0%
0%
Dec 13 Jan 31 Mar 14 May 2 Jun 13

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FED SURVEY
June 13, 2017

13. The stock market's expectations for Trump


administration policy changes are:
FED
Too
SURVEYRealistic Too Don't
April 30,
optimistic pessimistic know/
unsure
100%

90%

80%

Too optimistic
70%
64%
62%
60% 56%
56%

50%
47%

40% 39%
42% Realistic
39%
30%
32% 31%

20%
Don't know/unsure

Too pessimstic
10% 11%
5%
2% 3% 2%
3%
0%
Dec 13 Jan 31 Mar 14 May 2 Jun 13

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FED SURVEY
June 13, 2017

14. The recent decline in long-term bond yields signals:


(Respondents could select more than one response, so total is
FED SURVEY
above 100%)
April 30,
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Less belief
in coming
fiscal
50%
stimulus

A lower
inflation 45%
outlook

A lower
growth 37%
outlook

Other 11%

Concern
Fed officials
could make
8%
a policy

Other responses:
Financial repression policies in the system awash in excess liquidity
U.S. as well as ECB and BOJ channeled into government securities
monetary and bank regulatory due to regulatory and monetary
policies. Additional factors include policy.
Asian currency intervention and Happenstance
stabilization of Petrodollar recycling. Political uncertainty
While there has been some softening Low international bond yields
of the growth and inflation outlook,
these are secondary factors in a

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

15. Where do you expect the S&P 500 stock index will
be on ?
FED SURVEY
April 30,
December 31, 2017 December 31, 2018

2,700

2,600 2564
2555
2562
2,500

2453
2442
2480
2427
2,400
2409
2357
2354
2,300 2275
2244
2223
2249 2255
2,200 2234 2242
2200
2158
2,100
2107

2,000

1,900

1,800
Dec Jan Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun
15 15 26 15 26 14 26 24 20 1 13 31 14 2 13
2016 2017
Survey Dates

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

16. What do you expect the yield on the 10-year


Treasury note will be on ?
FED SURVEY
April 30, December 31, 2017 December 31, 2018
4.0%

3.44% 3.43%
3.5%
3.37%

3.22%

3.09%
2.96%
3.0% 2.88% 3.05%
2.90%
2.88%
2.83%
2.54% 2.74%
2.5% 2.58% 2.61%

2.26%2.28%

2.24% 2.25%

2.0%

1.5%

1.0%
Dec Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun
15 26 15 26 14 26 24 20 1 13 31 14 2 13
2016 2017
Survey Dates

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FED SURVEY
June 13, 2017

17. Where do you expect the fed funds target rate will
be on ?
FED SURVEY
Dec 31, 2017 Dec 31, 2018 Dec 31, 2019
April 30,
3.0%

2.73%
2.67%2.70% 2.68%

2.5% 2.56%

2.25%
2.17% 2.19%
2.22% 2.15%
2.07% 2.10%

2.0% 2.06%
1.87%
1.81%

1.61%1.61%1.62%1.60% 1.78%
1.69%
1.49%
1.5% 1.43%1.42%

1.32%
1.43% 1.26%
1.22% 1.37%

1.18% 1.16%
1.0% 1.09%

0.5%

0.0%
Dec Jan Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun
15 15 26 15 26 14 26 24 20 1 13 31 14 2 13
2016 2017

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

18. At what fed funds level will the Federal Reserve stop
hiking rates in the current cycle? That is, what will be the
terminalFED
rate?SURVEY
April 30,
4.0%

3.5%

3.30%
3.20%
3.17%
3.11%
3.06%
3.16%
2.98% 2.95% 2.94%
3.0% 3.04%
2.92%
2.91%
2.85%2.79% 2.73%
2.80%
2.65%
2.69%
2.65% 2.64%
2.58% 2.48%
2.5% 2.56%

2.42% 2.44%

2.29%

2.0%
Sep 16

Sept 16

Sep 20
Oct 28

Mar 17

Jul 26

Jun 13
Jun 16

Mar 15
Jul 28

Oct 27

Jun 14

Mar 14
Aug 25
Apr 28

Apr 26
Aug 20

Aug 24
Dec 16

Dec 15

Nov 1
Dec 13
Jan 27, '15

Jan 26 '16

Jan 31 '17

May 2

Survey Dates

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

19. When do you believe fed funds will reach its


terminal rate?
FED SURVEY
Survey date April 30,
2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Aug 20, 2014 Q4
Sept 16 Q3
Oct 28 Q4
Dec 16 Q1
Jan 27, 2015 Q1
Mar 17 Q4
Apr 28 Q1
June 16 Q1
July 28 Q2
Aug 25 Q3
Sept 16 Q1
Oct 27 Q3
Dec 15 Q1
Jan 26, 2016 Q2
Mar 15 Q3
Apr 26 Q4
Jun 14 Q4
Jul 26 Q4
Aug 24 Q4
Sept 20 Q4
Nov 1 Q1
Dec 13 Q2
Jan 31, 2017 Q2
Mar 14 Q2
May 2 Q2
June 13 Q2

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

20. What is your forecast for the year-over-year


percentage change in real U.S. GDP for ?
FED SURVEY 2017 2018
April 30,
3.0%

2.8% +2.76%
+2.75%

+2.62%

2.6% +2.57%

+2.58%

+2.43% +2.51%
+2.41%
2.4% +2.45%
+2.38%

+2.28%
+2.26%
+2.31%

2.2% +2.25% +2.24%+2.25%


+2.24%
+2.21%
+2.16%

2.0%

1.8%
Jan 26
Dec 15 Mar 15 Apr 26 Jun 14 Jul 26 Aug 24 Sep 20 Nov 1 Dec 13 Jan 31 Mar 14 May 2 Jun 13
'16
2017 +2.43% +2.31% +2.41% +2.21% +2.25% +2.26% +2.24% +2.28% +2.16% +2.57% +2.51% +2.38% +2.24% +2.25%
2018 +2.76% +2.75% +2.62% +2.58% +2.45%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

21. Since Trump's election, by how many percentage


FEDyou
points have SURVEY
changed your GDP forecasts for... ?
April 30, Jan 31 Mar 14 May 2 Jun 13
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

+0.24

+0.20
2017
+0.12

+0.05

+0.39

+0.39
2018
+0.35

+0.20

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

22. What is your forecast for the year-over-year


percentage change in the headline U.S. CPI for ?
FED SURVEY 2017 2018
April 30,
2.8%

2.64%

2.6% 2.57%

2.50%

2.44%
2.38%
2.4%
2.36% 2.37%
2.24%
2.20% 2.28%
2.2% 2.16% 2.23%
2.12%

2.12% 2.13% 2.12%


2.09%
2.07%
2.0%
2.02%

1.8%

1.6%
Dec Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun
15 26 15 26 14 26 24 20 1 13 31 14 2 13
2016 2017
Survey Dates

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

23. When do you expect the Fed to allow its balance


sheet to decline?
FED
0% SURVEY
5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

April
Jul 30, 5%

Aug 0%

Sep 5%

Oct 5%

Nov 3%

Dec 46%

Jan '18 21%

Feb 0%

Mar 5%

Apr 3%

May 0%
Average:
Jun 3% November '17
Jul 0%
May 2 Survey:
Aug 0% January 2018
Sep 0%

Oct 0%

Nov 3%

Dec 0%

Jan '19 0%

Feb 0%

Mar 0%

Apr 0%

May '19 or later 0%

Never 3%

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FED SURVEY
June 13, 2017

24. What target size for its balance do you believe the
Federal Reserve will adopt?
0% FED
10% SURVEY
20% 30% 40% 50% 60% 70% 80% 90% 100%

April 30,
0.50 0%

0.75 0%

1.00 8%

1.25 0%

1.50 0% Average:
1.75 11%
$2.4
2.00 14% trillion
2.25 3%

2.50 36%
Trillions of dollars

2.75 6%

3.00 17%

3.25 0%

3.50 3%

3.75 0%

4.00 0%

4.25 0%

4.50 3%

4.75 0%

5.00 0%
More
than 5 0%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

25. Roughly how many years will the Fed take to reach
this goal?
0% FED
10% SURVEY
20% 30% 40% 50% 60% 70% 80% 90% 100%

April 30,
1 3%

2 3%

3 19%
Average:

4 19% 4.6 years

5 33%

6 14%

7 6%

8 0%

9 0%

10 3%

More
than 0%
10
Fed will
not reach 0%
goal

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

26. Should the balance sheet be reduced at all?

0% FED 20%
10% SURVEY
30% 40% 50% 60% 70% 80% 90% 100%
April 30,

Yes 79%

No 8%

Don't
know/ 13%
unsure

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

27. The recent slowdown in payroll employment


primarily signals:
FED SURVEY
0%April
10%30,20% 30% 40% 50% 60% 70% 80% 90% 100%

Statistical
noise from
seasonal
37%
adjustment

Difficulty
finding 34%
workers

Slowdown
in economic 18%
growth

Other 11%

Don't
know/ 0%
unsure

Other responses:

Fake news Nearing full employment and


Maturing B-cycle and slowing demographics
growth Uncertainty over whether
policy changes will happen

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

28. Will Mr. Trump reappoint Fed Chair Janet Yellen?

FED SURVEY
Dec 13 Jan 31 Jun 13
0% April 20%
10% 30, 30% 40% 50% 60% 70% 80% 90% 100%

11%

Yes 5%

11%

82%

No 74%

68%

7%
Don't
know/ 21%
unsure
21%

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

29. If Ms. Yellen is not reappointed, who will Mr. Trump


nominate to replace her:
FED SURVEY
Dec 13 Jan 31 Jun 13
April 30,
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

14%
Kevin Warsh 17%
24%
38%
John Taylor 33%
20%
22%
Don't know 19%
20%

Gary Cohn
20%
3%
Glen Hubbard 8%
8%
3%
Jerome Powell 4%
4%
3%
John Allison
4%
3%
Larry Lindsey 4%

3%
Non-academic 4%

William Dudley 4%

Friedrich Hayek
4%
(1899-1992)

Larry Kudlow 4%

3%
Donald Trump Jr.

3%
Jared Kushner

Knut Wicksell 3%
(1851-1926)
3%
Richard Fischer

Someone 3%
unqualified

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

30. What is the single biggest threat facing the U.S.


economic recovery? (Percentage points)
FED SURVEY
April 30,

Outcome of US presidential election


European recession/financial crisis

Terrorist attacks in the U.S.

Protectionist trade policies


Tax/regulatory policies

Trump's temperament
Global econ weakness
Rise in interest rates

Don't know/unsure
European elections
Immigration policy

Fed policy mistake


Slow wage growth
Geopolitical risks
Slow job growth

Debt ceiling
Deflation
Inflation

Deficits

Other
Survey
Date
Apr 30 20 31 20 0 2 2 11 0
Jun 18 15 28 20 3 3 0 13 0
Jul 30 8 30 22 0 2 2 10 14 4
Sep 17 4 27 22 2 0 4 18 7 2
Oct 29 8 29 24 3 3 3 8 13 0
Dec 17 5 32 29 2 0 2 15 2 2
Jan 28
'14 7 21 30 2 0 0 12 21 0
Mar 18 10 23 26 3 5 0 5 18 0
Apr 28 3 26 21 3 5 0 8 18 13 0
Jul 29 12 29 12 6 3 0 12 12 12 3
Sep 16 6 26 29 6 3 0 6 11 11 3
Oct 28 31 18 15 3 3 0 10 8 8 3
Dec 16 40 14 14 3 6 0 3 14 3 0
Jan 27
'15 0 13 9 0 0 0 6 16 41 6 16 0
Mar 17 6 14 0 3 6 0 6 8 28 17 14 0
April 28 3 11 8 3 0 0 6 11 28 8 19 3
Jun 16 3 17 3 0 0 0 14 25 22 6 11 0
Jul 28 6 21 9 0 0 0 12 6 29 9 9 0
Sept 16 0 16 2 0 4 0 0 8 45 8 14 2
Oct 27 0 8 5 3 8 0 8 13 41 10 5 0

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FED SURVEY
June 13, 2017

FED SURVEY

Outcome of US presidential election


European recession/financial crisis

April 30,

Terrorist attacks in the U.S.

Protectionist trade policies


Tax/regulatory policies

Trump's temperament
Global econ weakness
Rise in interest rates

Don't know/unsure
European elections
Immigration policy

Fed policy mistake


Slow wage growth
Geopolitical risks
Slow job growth

Debt ceiling
Deflation
Inflation

Deficits

Other
Survey
Date
Dec 15 0 10 5 0 0 0 8 10 44 5 3 15 0
Jan 26
'16 0 10 5 0 3 0 0 5 44 8 0 23 3
Mar 15 5 21 3 0 0 0 5 5 33 5 0 3 21 0
Apr 26 0 22 2 2 2 0 0 7 36 9 0 7 11 2
Jun 14 0 28 5 3 0 0 3 0 28 8 0 5 13 10 0
Jul 26 2 20 7 2 2 0 2 10 22 7 0 7 7 7 2
Aug 24 3 19 3 3 0 0 3 3 31 3 3 6 14 11 0
Sep 20 0 16 11 3 0 0 0 3 30 8 5 5 8 11 0
Nov 1 3 27 8 0 3 0 8 3 32 3 0 0 5 8 0
Dec 13 5 9 2 7 0 0 7 7 19 0 2 7 28 5 2
Jan 31
'17 0 5 3 3 0 0 0 3 10 15 0 0 0 51 10 0 0
Mar 14 0 7 2 2 0 0 0 7 4 7 0 2 4 47 4 13 0
May 2 0 8 3 3 0 0 0 5 24 5 0 0 5 26 8 13 0
Jun 13 0 5 5 5 0 3 0 3 21 8 5 0 0 16 8 0 8 13 0

Other responses:
Domestic political uncertainty combined with Fed policy mistake
Fear itself
Economic entropy
Shift in investor expectations regarding future U.S. monetary policy
Unsustainable debt (public and private)

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

31. In the next 12 months, what percent probability do


you place on the U.S. entering recession? (0=No chance
FED SURVEY
of recession, 100=Certainty of recession)
40% April 30,

36.1%

35%
34.0%

30%
28.5% 28.8%

26.0%
25.9%
25.3%
25.5%
25% 24.4%
23.5%
22.9% 24.1%
23.2%
22.1%
22.2%
20.6% 21.6%
20.3% 20.4% 21.1%
20%
18.9%
18.2% 18.4% 18.5%
19.1% 17.3% 18.6% 18.1%
16.9% 16.9%
17.6% 16.2% 16.4% 17.4% 16.4%

15.1%
16.2%
15% 15.1%
15.3% 15.0%
15.2% 15.2%
14.6% 14.7%
13.6%
13.0%

10%
Mar 16

Mar 19

Mar 18

Mar 17

Mar 15

Jan 31 '17
Mar 14
Jan 28 '14

Jan 27 '15

April 28

Jan 15 '16
Jan 23, '12

Jan 29, '13

Oct 28

Oct 27
Oct 31

Oct 29
Dec 11

Dec 17

Dec 16

Dec 15

Nov 1
Dec 13
Aug 24
Sept 16

May 2
Sep 6

Jun 14
Jul 31
Aug 11, '11

Jun 18
Jul 30

Jul 29

Jun 16
Jul 28

Jul 26

Jun 13
Sep 19

Sep 12

Sep 16

Sep 20
Apr 24

Apr 30

Apr 28

Jan 26

Apr 26

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

32. What is your primary area of interest?

FED SURVEY
April 30,

Other
28%

Economics
49%
Currencies
0% Fixed
Income
10%
Equities
13%

Comments:

Peter Boockvar, Chief Market Analyst, The Lindsey Group:


There is nothing like raising interest rates just as job growth is
slowing, auto sales are rolling over, capital spending is no different
than when it was 10 years ago and the consumer is reluctant to
spend.

CNBC Fed Survey June 13, 2017


Page 35 of 41
FED SURVEY
June 13, 2017

Robert Brusca, Chief Economist, Fact and Opinion Economics:


The Fed continues to make policy by assumption and dogma. Its
FED(one
periodic attempts SURVEY
in early 2016 and one this year) to put a full-
April
blast path back 30,
to 'normalization' in place underscores the extent to
which it is unwilling to reconsider its dogma and recalibrate its
policy. Worldwide, what is scarce are jobs. What is plentiful is
output. That makes inflation and wage inflation unlikely. Fed policy
has not yet admitted this. Instead, the Fed is regularly shocked and
stunned that there is no inflation. But this has been obvious for some
time. Fed policy is being run by an unholy alliance of tight-money
low-rate-hating conservatives and a batch of Keynesians convinced
that the most flawed variable in the U.S. economy (the rate of
unemployment) is going to create inflation. I am in much greater
fear of the impact from the eye of newt and bat wing stew that is
being brewed by policymakers themselves. And it is more likely to
bring recession than inflation.

John Donaldson, Director of Fixed Income, Haverford Trust


Co.: The FOMC should begin reducing the balance sheet now. Does
anyone really believe the bond market could not handle a $20 billion
per month unwind? That rate gives them 5 years to get the balance
down to $3 trillion.

Neil Dutta, Head of Economic Research, Renaissance Macro


Research: The Fed needs to weigh the actual data on core inflation
with the outlook for core inflation. Sure, core PCE has disappointed
but the USD has sold off as the unemployment rate has plunged to
cycle lows. That's inflationary. The Fed should move in June. Does
anyone seriously think that fiscal policy will be a tailwind this year?
No. Any hope has been completely priced out. 2017 is shaping up to
be a year of investigations, not legislation. If Trump can somehow
manage to get beyond the Russia "cloud" and move policy through
DC, the risk appetite will surge.

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

Robert Fry, Chief Economist, Robert Fry Economics LLC: The


decline in bond yields and resulting flattening of the yield curve
suggests that FED SURVEY
this would be a good time for the Fed to start shrinking
Aprilwhich
its balance sheet, 30, would push up bond yields. Raising the fed
funds rate target faster than bond yields rise risks inverting the yield
curve and triggering a recession.

Kevin Giddis, Head of Fixed Income Capital Markets, Raymond


James Financial: The issues haven't really changed all that much,
but the time to fix them has. The longer we go without some real
changes in these pro-growth initiatives like tax reform and
deregulation, the greater the risk of an economic slip.

John Kattar, Chief Investment Officer, Ardent Asset


Management: The Fed has pretty well made up its mind to hike
steadily through 2019. But geopolitical risks and the DC circus will
force the top in rates to be sooner and lower than they would like.
The balance sheet will never decline but will be held steady, which I
think is the correct policy.

Ed Keon, Portfolio Manager, Quantitative Management


Associates: The U.S. economy and markets have been remarkably
resilient. However, absent policy stimulus, I think it is more likely
that GDP growth will break below the 2% trend than above it. At 18x
forward earnings, I don't think stocks are priced for slower economic
growth.

Jack Kleinhenz, Chief Economist, National Retail Federation:


Given the lower probability of any significant fiscal stimulus in 2017,
it is surprising to see that consumer confidence and business
confidence remain elevated. At this point, uncertainty clouds the
outlook. However, if the economy is to accelerate its growth, firms
will need to increase capital spending and will need to address how
they can undertake worker training and education.

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

Subodh Kumar, President, Subodh Kumar & Associates:


Hyperbolic Hyperbole Broadens Risk. The need is strong for
diversification,FED SURVEY
including cash and alternate assets like precious
April
metals. Political 30,
hyperbole risk includes obfuscating in Europe after
the British election, tensions in Asia, as well as expanded policy
muddles in the United States. Focus on the short term among
governments, companies, and not least central banks, is ripe for
reset. Our market hyperbole benchmark is that of late 1980s Japan
when even "afternoon momentum analysis" sessions flourished and
erstwhile fundamental analysis abounded on accounting and
management differences that supposedly justified higher valuation
but whose adverse effects remain to this day. Currently, global
financial market pricing has been rising alongside earnings delivery
and anticipated economic recovery, stoked by quantitative ease. A
decade from the business cycle low, fed funds could move up to
potentially 3.50% by Q1/2019, and balance sheet contraction cycle
need focus as does more classical long-term positioning from central
banks overall. We believe that looking for an ideal time to raise rates
is ephemeral. It raises the potential for procrastination that has long-
term consequences. The PBoC has been moving to tighten. The Bank
of Japan shows the greatest procrastination. Post its June 2017
meeting, the ECB may be waiting but does acknowledge change.

Guy LeBas, Chief Fixed Income Strategist, Janney


Montgomery Scott: The smart money in fixed income has looked
through all of these policy headlines and focused on just two things:
inflation expectations, which peaked early in the first quarter, and
investor willingness to take risk, which seems to still be rising.

John Lonski, Managing Director, Moody's Capital Markets:


Ten-year Treasury yield has dropped from 2.62% on the eve of
March 14's Fed rate hike to its recent 2.2%. If the benchmark
Treasury yield falls under 2.15% following June 14's likely lifting of
fed funds to 1.125%, the upside for fed funds may be more limited
than commonly thought.

CNBC Fed Survey June 13, 2017


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FED SURVEY
June 13, 2017

Thom Melcher, Chief Investment Officer, PNC Asset


Management Group: We believe that the "Trump effect" has been
FED
overstated. The SURVEY
market has moved largely on earnings and
fundamentals.April 30,Trumps economic policies gain traction, we
Should
would expect them to add to growth, but performance to date is
based on core stability in the economy.

Rob Morgan, Chief Investment Officer, Sandy Spring Bank:


The Fed will hike next week, and will hike at least one more time this
year. They will also announce plans at some point this year to
shrink the balance sheet at a meeting where there is no hike -
possibly $20 billion a month over 10 years. That would shrink the
balance sheet from $4.5 trillion to $2 trillion.

Chad Morganlander, Portfolio Manager, Stifel Nicolaus


(Washington Crossing Advisors): Investors should increase their
expectation for the fed funds rate in 2017 & 2018. Expect the yield
curve to flatten as inflation continues to glide below target.

Joel Naroff, President, Naroff Economic Advisors: We are stuck


at trend growth for another year and that is actually good since
given the lack of labor, strong growth would likely trigger rising
inflation that would force the Fed to raise rates faster.

James Paulsen, Investment Strategist: I think the Fed may have


to tighten for some time before the financial markets really notice.
They have raised the funds rate three times already and the real
funds rate is -1.2 percent (hardly restrictive). Likewise, the M2
money supply is about 70% of GDP. Historically, this is 10 to 15
percent above where it has been. With liquidity so ample, will
anyone notice if the Fed reduces its balance sheet? Because Fed
policy is so far out of bounds, I think most are overestimating how
fast and how much Fed tightening will impact both the economy and
the financial markets.

CNBC Fed Survey June 13, 2017


Page 39 of 41
FED SURVEY
June 13, 2017

Lynn Reaser, Chief Economist, Point Loma Nazarene


University: Stocks and bonds seem to be on different planets
regarding the FED SURVEY
economic outlook. The Fed seems positioned between
the two. One April
of the30,
markets will be wrong and the Fed will have to
deal with the consequences.

John Ryding, Chief Economist, RDQ Economics: At the present


time, the Federal Reserve is the grown-up in Washington and must
focus on the long-term stability of the U.S. economy. Unfortunately,
Trump-Comey-Russia baggage is sucking all the air out of the room
in fiscal policy-making circles, pushing back the much-needed cut in
corporate tax rates.

Richard I Sichel, Senior Investment Strategist, The


Philadelphia Trust Company: Trumps ideas and agenda are
excellent drivers for the economy. On the other hand, his
momentum is slipping and I wish he would close his Twitter account.
He would have more credibility to accomplish his strong capitalistic
programs.

Allen Sinai, Chief Global Economist and Strategist, Decision


Economics: The U.S. and global economies are gathering strength
on strong fundamentals.

Hank Smith, Co-Chief Investment Officer, Haverford Trust


Company: We are in a win/win period. If Trump gets some of his
fiscal policy initiatives passed, GDP growth improves, as do corporate
profits. If nothing gets passed, the 2% expansion continues and the
Fed takes longer to raise interest rates. Both scenarios are good for
the stock market.

CNBC Fed Survey June 13, 2017


Page 40 of 41
FED SURVEY
June 13, 2017

Diane Swonk, CEO and Founder, DS Economics: Uncertainty


about how the U.S. will handle itself in the global arena, including
FED
the lifting of the SURVEY
debt ceiling and making good on our obligations, is
April
the single largest 30, to an expansion that has finally become
threat
self-sustaining.

Mark Vitner, Managing Director & Senior Economist, Wells


Fargo Securities: We seem to be entering the peak period for this
business cycle, where the Fed attempts to engineer a soft landing as
the economy approaches full employment. The challenge with a soft
landing is that it leaves the economy more vulnerable to shocks and
policy mistakes.

Mark Zandi, Chief Economist, Moody's Analytics: The good


news is that the U.S. economy has finally made its way back to full
employment. The bad news is that the economy's number one
problem will soon be a serious lack of labor.

CNBC Fed Survey June 13, 2017


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