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FED SURVEY

October 31, 2017
These survey results represent the opinions of 44 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 October 26-28, 2017. 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 October meeting, the Federal Reserve will:

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

Raise interest
rates 2%

Lower interest
rates 0%

Keep rates
unchanged 98%

Don't know/
unsure 0%

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2. After its upcoming meeting, the Federal Reserve's next
directional move will most likely be:
Raise interest rates Lower interest rates
Move to negative interest rates Launch new quantitative easing
100%
100%
100%
98% 98% 98% 98%
95% 95%
90% 94%
92%
90% Raise interest rates: 98%
88%
80%

70%

60%

50%

40%

30%

20% Lower interest rates: 2%

10% 10% Launch new quantitative easing: 0%
10%
4% 5% 5%
3% 2% 2% 2% 2%
0% 0% 0% 0% 0% 0% 0% 0%
0%
Jan Mar Apr Jun Jul 26 Aug Sep Nov 1 Dec Jan Mar May 2 Jun Jul 25 Sep Oct
27 15 26 14 24 20 13 31 14 13 19 31
Note:

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(For the 98% answering the next move will be to raise rates)

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

Dec 96%

Jan '18 0%

Feb 0%

Mar 5%
Average:
Apr 0%
December
2017
May 0%

Jun 0%

Jul 0%

Aug 0%

Sep 0%

After
Sep 0%

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October 31, 2017

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

2017 hikes 2018 hikes

4.00

3.50

3.16
2.98 3.03
3.00
2.85 2.88
2.78
2.66 2.86
2.50
Average

2.50 2.63

1.97
2.00

1.50

1.00
Nov 1 Dec 13 Jan 31 Mar 14 May 2 Jun 13 Jul 25 Sep 19 Oct 31
Survey Dates

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FED SURVEY
October 31, 2017

4. When do you expect, if at all, the following policies will
be enacted by Congress and signed into law by President
Trump?

Avg. forecast
Mar 14 May 2 June 13 July 25 Sept 19 Oct 31

Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2018
Health care
(4% said (12% said (13% said (31% said (39% said (34% said
reform
“never”) “never”) “never”) “never”) “never”) “never”)

Q1 2018 Q2 2018 Q1 2018 Q3 2018 Q3 2018 Q4 2018
Dodd-Frank
(11% said (19% said (22% said (25% said (34% said (22% said
reform
“never”) “never”) “never”) “never”) “never”) “never”)

Q4 2017 Q4 2017 Q1 2018 Q1 2018 Q1 2018 Q1 2018
(0% said (0% said (5% said (5% said (2% said (5% said
Tax cuts
“never”) “never”) “never”) “never”) “never”) “never”)

Q1 2018 Q1 2018 Q1 2018 Q2 2018 Q2 2018 Q3 2018
Infrastructure
(13% said (14% said (16% said (21% said (10% said (26% said
spending hike
“never”) “never”) “never”) “never”) “never”) “never”)

GSE Q3 2018 Q3 2018 Q4 2018 Q4 2018 Q1 2019 Q1 2019
(Fannie and (33% said (34% said (46% said (41% said (41% said (50% said
Freddie reform) “never”) “never”) “never”) “never”) “never”) “never”)

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5. Do you believe that 20 percent is the right corporate tax
rate?

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

Yes 58%

What do you think
the corporate tax
No, rate should be?
higher 19%
Avg. for those who
said "higher"
26.0%

No, Avg. for those who
lower 12% said "lower"
9.0%

Overall average
No,
leave for all
current 2% respondents
system
unchanged
20.2%

Don't
know/ 9%
unsure

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6. Should tax reform or tax cuts be deficit neutral?

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

Yes 56%

No 44%

Don't
know/ 0%
unsure

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7. Do tax cuts generally pay for themselves?

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

Yes 30%

No 65%

Don't
know/ 5%
unsure

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8. Who would benefit most from corporate tax cuts?

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

Workers,
through
higher 12%
wages

Shareholders
and 54%
executives

Both
about 35%
equally

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9. The stock market's expectations for Trump
administration policy changes are:
Too Realistic Too Don't
optimistic pessimistic know/
unsure
100%

90%

80%

70%
64%
62%
60% Realistic
56% 56%

50% 49%
50%
44%
47%
40% 44%
42% 41%
39% 39%
36% Too optimistic
30%
32% 31%

20%
Don't know/unsure

11% 10%
Too pessimstic
10%
5% 5% 7% 5%
2% 3% 2% 3%
2%
0%
Dec 13 Jan 31 Mar 14 May 2 Jun 13 Jul 25 Sep 19 Oct 31

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10. Do you believe stock market valuations are at a level
where the Fed should be raising rates to cool the
market?

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

Yes 33%

No 62%

Don't
know/ 5%
unsure

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11. How concerned do you believe the average Fed
member is about stock market valuations?

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

Very
concerned 9%

Somewhat
concerned 70%

Not at all
concerned 14%

Don't
know/ 7%
unsure

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12. Relative to your expectations a month or so ago for
tax cuts, are you now...?

Sep 19 Oct 31

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

34%
More optimistic
51%

17%
Less optimistic
7%

49%
About the same
42%

Don't 0%
know/
unsure 0%

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13. Where do you expect the S&P 500 stock index will
be on … ?

December 31, 2017 December 31, 2018

2,800

2708
2,700

2593 2617
2588
2,600 2564

2555
2562 2515

2,500

2453 2493
2480
2427
2442
2,400
2409
2357
2354
2,300 2275
2244
2223
2249 2255
2234 2242
2,200
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 Jul Sep Oct
15 15 26 15 26 14 26 24 20 1 13 31 14 2 13 25 19 31
2016 2017
Survey Dates

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October 31, 2017

14. What do you expect the yield on the 10-year
Treasury note will be on … ?

December 31, 2017 December 31, 2018

4.0%

3.44% 3.43%
3.5%
3.37%

3.22%

3.09% 3.06%
3.05%
2.96%
3.0% 2.88%
3.03%
2.90%
2.95%
2.88%
2.83%
2.54% 2.74% 2.54%
2.5% 2.61%
2.58% 2.59%
2.26%2.28%
2.42%

2.24% 2.25%

2.0%

1.5%

1.0%
Dec Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun Jul Sep Oct
15 26 15 26 14 26 24 20 1 13 31 14 2 13 25 19 31
2016 2017
Survey Dates

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October 31, 2017

15. Where do you expect the fed funds target rate will
be on … ?
Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020

3.0%

2.73%
2020 2.70%
2.70% 2.68%
2.67%
2.56% 2.60%
2.49%
2.5%

2.25% 2.42%
2.17% 2.19%
2.22% 2.15% 2.14%
2.07% 2.10% 2.06%
2.03%

2.0%
1.87%
2.02%
1.81%

1.62%
1.61%
1.61% 1.60% 1.78%
1.69%
1.49%
1.5% 1.43%1.42%
1.39% 1.40%
1.32%
1.43% 1.26%
1.22% 1.37% 1.35%

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 Jul Sep Oct
15 15 26 15 26 14 26 24 20 1 13 31 14 2 13 25 19 31
2016 2017

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October 31, 2017

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%

3.20%
3.17%
3.11%
3.06%
3.16%
2.98% 2.95%
3.0% 3.04% 2.94% 2.94%
2.92%
2.85%
2.91%
2.85%2.79% 2.73% 2.80%
2.65%
2.69%
2.65% 2.64% 2.66%
2.58% 2.48%
2.5% 2.56%

2.42% 2.44%

2.29%

2.0%
Sep 16
Oct 28

Sept 16
Oct 27

Sep 20
Jan 26 '16

Sep 19
Jan 27, '15
Mar 17

Jun 16

Mar 15

Jun 14

Jan 31 '17

Oct 31
Jul 28

Jul 26

Mar 14

Jun 13
Aug 20

Jul 25
Apr 28

Aug 25

Apr 26

Aug 24
Dec 16

Dec 15

Dec 13
Nov 1

May 2

Survey Dates

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October 31, 2017

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

2017 2018 2019
Survey date
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
Jul 25 Q2
Sep 19 Q2
Oct 31 Q3

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October 31, 2017

18. What is your forecast for the year-over-year
percentage change in real U.S. GDP for …?
2017 2018

3.0%

2.8% +2.76%
+2.75%

+2.62% 2.61%

+2.57% 2.60%
2.6%

+2.58%

+2.43% +2.51%
+2.41% +2.45%
2.4% 2.45%
+2.38%
2.30%
+2.28%
+2.26% +2.25%
+2.31%

2.2% +2.25% +2.24% 2.25%
+2.24%
+2.21% 2.21%
+2.16%

2.0%

1.8%
Jan
Dec Mar Apr Jun Aug Sep Dec Jan Mar Jun Sep Oct
26 Jul 26 Nov 1 May 2 Jul 25
15 15 26 14 24 20 13 31 14 13 19 31
'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 2.25% 2.21% 2.30%
2018 +2.76 +2.75 +2.62 +2.58 +2.45 2.45% 2.60% 2.61%

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October 31, 2017

19. What is your forecast for the year-over-year
percentage change in the headline U.S. CPI for …?
2017 2018

2.8%

2.64%

2.6% 2.57%

2.50%

2.44%
2.38%
2.4%
2.36% 2.37%
2.24% 2.28% 2.23%
2.20% 2.23%
2.2% 2.16% 2.15%
2.12%

2.13% 2.14%
2.12% 2.12%
2.09%
2.07%
2.0% 1.97%
2.02% 1.92%

1.88%
1.8%

1.6%
Dec Jan Mar Apr Jun Jul Aug Sep Nov Dec Jan Mar May Jun Jul Sep Oct
15 26 15 26 14 26 24 20 1 13 31 14 2 13 25 19 31
2016 2017
Survey Dates

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October 31, 2017

20. On a scale of -5 (extremely negative) to +5
(extremely positive), what effect will reducing the
balance sheet have on economic growth and stocks?

Jul 25 Sep 19 Oct 31
Extremely negative Neutral Extremely positive
-5.0 -4.0 -3.0 -2.0 -1.0 +0.0 +1.0 +2.0 +3.0 +4.0 +5.0

-0.25

-0.21 Economic growth

-0.33

-0.80

-0.83 Stocks

-0.86

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October 31, 2017

21. What effect will reducing the balance sheet have on
bond yields?

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

Higher yields 77%

Lower yields 0%

Unchanged yields 23%

Don't know/unsure 0%

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October 31, 2017

22. What is the single biggest threat facing the U.S.
economic recovery? (Percentage points)

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 2 3 2 1
‘13 0 1 0 0 2 2 1 0
1 2 2 1
Jun 18 5 8 0 3 3 0 3 0
3 2 1 1
Jul 30 8 0 2 0 2 2 0 4 4
2 2 1
Sep 17 4 7 2 2 0 4 8 7 2
2 2 1
Oct 29 8 9 4 3 3 3 8 3 0
3 2 1
Dec 17 5 2 9 2 0 2 5 2 2
Jan 28 2 3 1 2
'14 7 1 0 2 0 0 2 1 0
1 2 2 1
Mar 18 0 3 6 3 5 0 5 8 0
2 2 1 1
Apr 28 3 6 1 3 5 0 8 8 3 0
1 2 1 1 1 1
Jul 29 2 9 2 6 3 0 2 2 2 3
2 2 1 1
Sep 16 6 6 9 6 3 0 6 1 1 3
3 1 1 1
Oct 28 1 8 5 3 3 0 0 8 8 3
4 1 1 1
Dec 16 0 4 4 3 6 0 3 4 3 0
Jan 27 1 1 4 1
'15 0 3 9 0 0 0 6 6 1 6 6 0

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FED SURVEY
October 31, 2017

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
1 2 1 1
Mar 17 6 4 0 3 6 0 6 8 8 7 4 0
1 1 2 1
April 28 3 1 8 3 0 0 6 1 8 8 9 3
1 1 2 2 1
Jun 16 3 7 3 0 0 0 4 5 2 6 1 0
2 1 2
Jul 28 6 1 9 0 0 0 2 6 9 9 9 0
1 4 1
Sept 16 0 6 2 0 4 0 0 8 5 8 4 2
1 4 1
Oct 27 0 8 5 3 8 0 8 3 1 0 5 0
1 1 4 1
Dec 15 0 0 5 0 0 0 8 0 4 5 3 5 0
Jan 26 1 4 2
'16 0 0 5 0 3 0 0 5 4 8 0 3 3
2 3 2
Mar 15 5 1 3 0 0 0 5 5 3 5 0 3 1 0
2 3 1
Apr 26 0 2 2 2 2 0 0 7 6 9 0 7 1 2
2 2 1 1
Jun 14 0 8 5 3 0 0 3 0 8 8 0 5 3 0 0
2 1 2
Jul 26 2 0 7 2 2 0 2 0 2 7 0 7 7 7 2
1 3 1 1
Aug 24 3 9 3 3 0 0 3 3 1 3 3 6 4 1 0
1 1 3 1
Sep 20 0 6 1 3 0 0 0 3 0 8 5 5 8 1 0
2 3
Nov 1 3 7 8 0 3 0 8 3 2 3 0 0 5 8 0

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October 31, 2017

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
1 2
Dec 13 5 9 2 7 0 0 7 7 9 0 2 7 8 5 2
Jan 31 1 1 5 1
'17 0 5 3 3 0 0 0 3 0 5 0 0 0 1 0 0 0
4 1
Mar 14 0 7 2 2 0 0 0 7 4 7 0 2 4 7 4 3 0
2 2 1
May 2 0 8 3 3 0 0 0 5 4 5 0 0 5 6 8 3 0
2 1 1
Jun 13 0 5 5 5 0 3 0 3 1 8 5 0 0 6 8 0 8 3 0
1 1 2 1
Jul 25 0 5 5 3 3 0 0 0 3 8 5 0 0 0 5 0 8 8 0
1 1 3
Sep 19 0 2 2 0 2 0 5 2 7 0 7 2 0 2 2 0 7 7 0
2 1 1 1
Oct 31 0 7 2 2 0 0 0 5 3 5 0 0 2 9 2 0 4 9 0

Other responses:
• Debt/GDP level • Markets
• Failure to act on taxes, health • Repricing in asset markets due
care, reg reduction (already to shift in investor expectations
happening) regarding future monetary
• Fear itself policy
• Insufficient optimism • Tax cuts
• Lying liberal media

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October 31, 2017

23. 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)
40%

36.1%

This survey:
35%
34.0% 16.7%

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%
20.4% 21.1%
20% 20.3% 18.9%
19.3%

18.2% 18.4% 18.5%
19.1% 17.3% 18.6% 18.1% 18.8%
16.9% 16.9%
17.6% 16.2% 16.4% 17.4%

15.1% 16.7%
16.2% 16.4%
15% 15.1%
15.3% 15.0%
15.2% 15.2%
14.6% 14.7%
13.6%
13.0%

10%
Jan 27 '15
Mar 17

Jun 16
Aug 11, '11

Oct. 31

Mar 16

Mar 19

Jul 28

Jan 15 '16

Mar 15

Jun 14

Jan 31 '17
Mar 14
Jul 31

Jun 18

Jan 28 '14
Mar 18
Jul 30

Jul 29
Sep 16

Jul 26

Jun 13
Dec 16

Dec 15

Sep 20

Jul 25
Dec 13

Sep 19
Jan 23, '12

Sep 12
Dec 11
Jan 29, '13

Dec 17
Sept 19

April 28

Sept 16

Aug 24

May 2
Sep 6
Oct 29

Oct 28

Oct 27

Nov 1

Oct 31
Apr 24

Apr 30

Apr 28

Jan 26

Apr 26

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October 31, 2017

24. What is your primary area of interest?

Other
23%

Currencies
0%
Economics
Fixed Income
50%
14%

Equities
14%

Comments:

Marshall Acuff, Managing Director, Silvercrest Asset
Management: Additional fiscal stimulus in the form of tax cuts and
increased infrastructure could lead to more concern about inflation in
an economy that is already approaching full employment, especially
in the labor sector.

John Augustine, Chief Investment Officer, Huntington Bank:
The ECB just blinked; the Fed is up next.

Jim Bianco, President, Bianco Research: The next Fed chair will
have a hawkish board as Trump will appoint independently-minded
governors that will not be afraid to dissent.

Peter Boockvar, Chief Market Analyst, The Lindsey Group:
Monetary tightening via QT and rate hikes will continue until
something breaks.

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FED SURVEY
October 31, 2017

Robert Brusca, Chief Economist, Fact and Opinion Economics:
New Question: Did the hurricanes make growth stronger in Q3
instead of weaker as auto purchases got back on track so fast?

Bill Dunkelberg, Chief Economist, National Federation of
Independent Business: Wages will be positively impacted by
corporate tax cut, but along with it, more JOBS. It’s not just wages
vs profits, it’s total wages and jobs that will benefit.

Neil Dutta, Head of Economic Research, Renaissance Macro
Research: While the market is primed for a December rate hike, the
outlook for 2018 still looks a little too flat. Stronger global growth
and business investment alongside a recovery in US housing tells us
that the consensus is too conservative on US growth prospects, both
now and over the next few quarters.

Robert Fry, Chief Economist, Robert Fry Economics LLC:
Questions 6, 7, 8 are a little too simple. Tax reform should be
deficit-neutral ON A DYNAMIC BASIS. Repatriation/territorial tax
system will pay for itself. Rates cuts probably won't, but will come
closer in an open economy than they do in closed-economies
models that anti-reform tax policy analysts use. Expensing won't
come close to paying for itself in the short run, but might in the long
run. (Individual tax cuts won't come close to paying for themselves;
they have big revenue effects, but small incentive effects.) As for
who benefits, workers benefit most from expensing, which reduces
taxes on NEW capital. Lower tax rates and repatriation incentives,
which reduce taxes mostly on OLD capital, will primarily benefit
shareholders, but to the extent they affect location decisions, they
could ultimately have substantial benefits for workers, too.

Stuart Hoffman, Senior Economic Advisor, PNC Financial: Tax
cuts give this cat-like expansion another life in 2018-19.

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October 31, 2017

Art Hogan, Chief Market Strategist, Wunderlich Securities:
Being a disrupter in technology is a great thing, and often makes the
world a better place. Nominating a disrupter to Chair the FED in the
middle of a normalization process is not a great thing and would not
be a market positive.

Kurt Karl, Chief Economist, Swiss Re: The current status of the
negotiations on NAFTA are disturbing and if escalated to other trade
agreements could result in a disastrous trade war.

Ed Keon, Portfolio Manager, QMA, a PGIM Company: In the
short run, strong earnings, expectations of pro-growth policies and a
global expansion are likely to keep equity prices trending higher
despite higher than normal valuations. Will tax cut negotiation fail,
or will they succeed and lead to overheating or simply higher levels
of non-inflationary growth? Will Fed policy support higher growth,
stay too easy too long and foster inflation, or become too tough too
soon and lead to a recession? These are important questions for the
next few years, but for now we think an overweight of stocks makes
sense for our dynamic asset allocation portfolios.

Jack Kleinhenz, Chief Economist, National Retail Federation: I
expect the incoming data to continue to point to solid growth and
elevated optimism. Given that the economy is above estimated trend
growth of 2.0%, expect a continuation of the current interest rate
hiking cycle. December rate hike is very likely.

David Kotok, Chairman and Chief Investment Officer,
Cumberland Advisors: Trump comments remain an unconstrained
and damaging element that is not measurable.

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October 31, 2017

Subodh Kumar, President, Subodh Kumar & Associates:
Currently, capital markets in aggregate appear at minimum to be
momentum oriented while oozing with confidence both about easy
monetary conditions and economic growth. The price of everything
seems in vogue now but value is a time-honored consideration,
especially when contradictions are ironed out. The fixed-income
markets appear to reflect enough economic stability to service large
increases in debt with central banks constrained in raising
administered interest rates. By contrast, in equity markets,
expectations would appear for economies and earnings strong
enough to sustain above- average valuation. We expect volatility to
rise, led by currency markets. It is likely to be partly due to twists
after massive quantitative ease and due to stressful politics,
including over trade. As interest rates rise amid increased leverage,
with more selectivity likely to be required, our anticipated
environment would be less conducive to momentum and close
geographical correlation than consensus appears to incorporate. We
favor quality in operations and in financial structure across
investment asset classes.

Guy LeBas, Chief Fixed Income Strategist, Janney
Montgomery Scott: In rates land, the tax cut/reform debate has
been replaced by reality show-esque headlines about the next Fed
Chair. Said headlines seem to hold a lot of sway over the Treasury
markets, and apparently, given how sensitive equities are to rates,
also over the risk asset markets.

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October 31, 2017

Drew T. Matus, Chief Market Strategist, MetLife Investment
Management: We believe the US economic cycle has room to
extend further, which suggests that valuations, while rich, may not
be unreasonable. Globally, central banks all seem to be moving in
the same direction, a development that should allow US yields to
move higher over time. Today's GDP print could have been higher.
Spending on services, which is typically less volatile than spending
on goods, slowed by a more significant amount and lowered the
overall rate of consumption. At the same time, inventories
contributed to growth, suggesting that the modest slowing in goods
consumption might also be temporary. This combination suggests
growth could hold at this level, a development that could see
productivity rise and which supports our outlook for rising yields.

Rob Morgan, Chief Investment Officer, Sethi: As I write this,
news is breaking that President Trump is rumored to be leaning
toward appointing Jay Powell as the next Fed Chair. Powell is a
current governor and would more than likely continue the Yellen-era
approach to gradually increasing rates.

Joel Naroff, President, Naroff Economic Advisors: We are likely
to get tax cuts, not tax reform, and that could be bad news for the
economy as it will only cause a surge in activity, not a longer-term
expansion.

Lynn Reaser, Chief Economist, Point Loma Nazarene
University: Stocks and bonds are finally parting ways. Rising
profits, synchronized global growth, and tax cut hopes are boosting
stocks. Worries about an ultimate spillover into inflation and Fed
policy are punishing bonds.

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FED SURVEY
October 31, 2017

John Roberts, Director of Research, Hilliard Lyons: Continuing
strong earnings numbers, combined with solid economic statistics,
have made us more assured that the Fed will continue its tightening
campaign, although any change in the makeup of the Fed is likely to
be instrumental in determining the velocity of that tightening.

John Ryding, Chief Economist, RDQ Economics: I am more
encouraged on the cyclical outlook with the pickup in capital
spending and the partial recovery in profit margins. However, much
hinges on the successful completion of corporate tax reform and
relations with Congress are a wildcard in that process.

Allen Sinai, Chief Global Economist and Strategist, Decision
Economics: There is a "new" normal -- 3% growth coming vs. 2%.

Hank Smith, Co-Chief Investment Officer, Haverford Trust
Company: The stock market is in a happy zone where it is focusing
on the things that actually matter: low interest rates, benign
inflation, improving GDP (here and globally) and rising profits (and
sales). Happily it's ignoring everything else!

Stephen Stanley, Chief Economist, Amherst Pierpont: On
question 7, tax cuts usually do not entirely pay for themselves, but
some can recapture a high percentage of lost revenue. On question
10, financial conditions are too easy and the Fed needs to be
normalizing its policy stance more aggressively, but the Fed should
never "target" stock prices.

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October 31, 2017

Scott Wren, Senior Global Equity Strategist, Wells Fargo
Investment Institute: Yesterday's market action shows how
sensitive the stock and bond markets are to what the Fed will do
with rates in 2018. The market does not believe the Fed will hike
rates 3 times next year. When data like the biz capital spending
gauge (non-defense orders for capital goods excluding aircraft) and
new home sales crush expectations and recent data has been better
than expected then investors rightfully should be concerned the Fed
is going to make a mistake and hike rates too many times next year.
Three or more hikes next year is a headwind for stocks no matter
what happens with tax cuts. The cycle isn't over but Fed mistakes
could cause the end to come sooner.

Clare Zempel, Principal, Zempel Strategic: Monetary policy,
properly construed, is not just about interest rates.

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