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FED FLASH SURVEY

April 8, 2019

These survey results represent the opinions of 47 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 5-7, 2019. 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.

Contents (Click on a question to go directly to the results)


1. If President Trump nominates STEPHEN For those answering “no”: Why not?
MOORE to the Federal Reserve, WILL he be
5. In light of President Trump's critical
confirmed by the Senate? comments about the Fed and his planned
For those answering “no”: Why not? nominations of Moore and Cain, the

2. If President Trump nominates STEPHEN president is:

MOORE to the Federal Reserve, SHOULD he 6. President Trump's critical comments


be confirmed by the Senate? about the Federal Reserve:

For those answering “no”: Why not? 9. Over the course of the rest of the year,

3. If President Trump nominates HERMAN the Fed should:

CAIN to the Federal Reserve, WILL he be 10. The Fed has indicated it will stop
confirmed by the Senate? reducing its balance sheet in September. Do

For those answering “no”: Why not? you …?

4. If President Trump nominates HERMAN 11. What is your primary area of interest?

CAIN to the Federal Reserve, SHOULD he be


confirmed by the Senate?

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
April 8, 2019

1. If President Trump nominates STEPHEN MOORE to the


Federal Reserve, WILL he be confirmed by the Senate?

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

Yes 51%

No 19%
Don't
know/ 30%
unsure

For those answering “no”: Why not?


(Respondents could select more than one answer)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Not
78%
qualified

15% of all respondents

Personal
67%
issues

13% of all respondents

Too
political,
threatening 78%
Fed's
independence 15% of all respondents

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
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2. If President Trump nominates STEPHEN MOORE to the


Federal Reserve, SHOULD he be confirmed by the
Senate?

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

Yes 34%

No 60%
Don't
know/ 6%
unsure

For those answering “no”: Why not?


(Respondents could select more than one answer)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Not
71%
qualified
43% of all respondents

Personal
46%
issues
28% of all respondents

Too
political,
threatening 79%
Fed's
independence 47% of all respondents

Other 7%

4% of all respondents

“Other” responses: Other people are more qualified; Past misrepresentation of facts

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
April 8, 2019

3. If President Trump nominates HERMAN CAIN to the


Federal Reserve, WILL he be confirmed by the Senate?

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

Yes 49%

No 28%
Don't
know/ 23%
unsure

For those answering “no”: Why not?


(Respondents could select more than one answer)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Not
77%
qualified
21% of all respondents

Personal
54%
issues
15% of all respondents

Too
political,
threatening 62%
Fed's
independence 17% of all respondents

Other 8%

2% of all respondents

“Other” response: Allegations of misconduct

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
April 8, 2019

4. If President Trump nominates HERMAN CAIN to the


Federal Reserve, SHOULD he be confirmed by the
Senate?

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

Yes 40%

No 53%
Don't
know/ 6%
unsure

For those answering “no”: Why not?


(Respondents could select more than one answer)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Not
76%
qualified
40% of all respondents

Personal
56%
issues
30% of all respondents

Too
political,
72%
threatening
Fed's… 38% of all respondents

Other 4%

2% of all respondents

“Other” response: Allegations of misconduct

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
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5. In light of President Trump's critical comments about the


Fed and his planned nominations of Moore and Cain, the
president is:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Reducing the
Fed's independence 47%

Increasing the
Fed's independence 4%

Having no effect
on the Fed's 45%
independence

Don't know/
unsure 4%

CNBC Flash Fed Survey – April 8, 2019


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FED FLASH SURVEY
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6. President Trump's critical comments about the Federal


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

Reduce the
Fed's credibility 48%

Have no effect
on the Fed's 39%
credibility

Enhance the
Fed's credibility 9%

Don't know/
unsure 4%

CNBC Flash Fed Survey – April 8, 2019


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7. How do you feel about President Trump's comments


about the Federal Reserve?

Jul 31 Apr 8
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

It's inappropriate 83%


for a president
to comment on
Fed policy 61%

It's acceptable 15%


for a president
to comment on
Fed policy 39%

2%
Don't know/
unsure
0%

CNBC Flash Fed Survey – April 8, 2019


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8. How will President Trump's criticism of the Federal


Reserve affect monetary policy?

Jul 31 Nov 7 Apr 8


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

8%
Makes rate hikes
3%
more likely
9%

15%
Makes rate hikes
14%
less likely
22%

78%
Has no effect
83%
on rate hikes
65%

0%
Don't know/
0%
unsure
4%

CNBC Flash Fed Survey – April 8, 2019


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9. Over the course of the rest of the year, the Fed should:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cut rates 9%

Remain on hold 63%

Raise rates 22%

Don't know/unsure 7%

CNBC Flash Fed Survey – April 8, 2019


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10. The Fed has indicated it will stop reducing its


balance sheet in September. Do you …?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Agree with
the decision 62%

Believe the Fed


should continue
reducing its balance 33%
sheet beyond September

Believe the Fed


should launch
another round 0%
of quantitative easing

Don't know/
unsure 4%

CNBC Flash Fed Survey – April 8, 2019


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11. What is your primary area of interest?

Currencies Other
0% 15%

Fixed
Income
11%

Economics
54%
Equities
20%

Comments:

Marshall Acuff, Managing Director, Silvercrest Asset


Management: Don't try to fix something (the Fed) that isn't broken.

Steven Blitz, Chief US Economist, TS Lombard: Trump is not the


first president to stack the board to get the vote he wants; Reagan
did it towards the end of Volcker's term. Difference is that by being
so public and blatant he makes the Fed look more political to the
public and that ultimately undercuts the Fed. This is not to say the
Fed is beyond reproach; their first mission is always to serve the
large banks, their depositors. But there is effective criticism that can
garner change and there is blaring politics that serves no purpose
other than to undercut authority.

Peter Boockvar, Chief Investment Officer, Bleakley Advisory


Group: Crying for a 50 bps rate cut? The Treasury market has
already delivered a 75 cut. Want more QE? Rates went UP after the
Fed did QE.

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Kathy Bostjancic, Chief US Financial Market Economist,


Oxford Economics: Both Moore and Cain are highly unconventional
and politically-biased choices and, if confirmed to the board, would
be very disruptive at a time when monetary policy is at an important
crossroads. The FOMC is not only deliberating whether additional
rate hikes are warranted for this business cycle, but it has also just
embarked upon a major revaluation of its policy framework. This is
not the time for instability among the FOMC.

Robert Brusca, Chief Economist, Fact and Opinion Economics:


The president has the right to speak out on Fed policy. But you did
not allow the answer I wanted to give, which is, “Yes he does but it's
dumb.” The Fed will probably resist his pressure even if it begins to
look like the president's advice is good advice. The Fed may wait too
long to do what the president wants it to do to avoid the appearance
of being bullied successfully. In my opinion, that already happened in
December. I think without Trump pressure the Fed may have paused
in December. Many things point to this including the Fed chair's own
halting and poor performance at his press conference. As for Cain,
his issues are personal and they may be his undoing. But you can
make an argument for a business person to be on the board. He has
already been on the KC Board (a very different animal). I'll take
pepperoni over ideology any day! In fact, the only 'Moore' I want is
'more' topping! While these two appointments would give Trump his
fourth and fifth governor appointments, these two are nothing like
the previous three (Powell, Quarles, and Clarida). Too bad
Goodfriend is out. He is a fine economist but you can see the politics
of getting approved in play there. Too many did not like his
academics. Handicapping approval of nominees is hard to do. But I
can see the approval process ... raising Cain.

John Donaldson, Director of Fixed Income, Haverford Trust


Co.: The fastest way to prove that the equity market is not merely a
product of easy money would be for Moore and Cain to be approved
and force an immediate rate cut.

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Bill Dunkelberg, Chief Economist, National Federation of


Independent Business: The Fed is too focused on financial
markets; 25bp matters big time for traders, not so much for people
making REAL investment decisions. The Fed still needs to run away
from zero. Full employment with the real risk-free return under
1%?? Hoarding trillions of risk-free assets keeps the ten-year
Treasury low as the demand for risk-free assets grows. Sell 3 trillion
in bonds back to the public and see where rates go.

Neil Dutta, Head of Economic Research, Renaissance Macro


Research: Thought I would share some combined thoughts we had
around Trump’s Fed nominations. The main econ point: this is a
long-run concern over the Fed’s independence, and we will see it in
inflation expectations should it arrive. In the short run, policy is not
changing. The main policy point: nominating two people in the same
mold makes confirmation of both less likely. Trump can have one,
but not both. Until recently, President Trump had won widespread
praise for his Fed picks. Both Chair Powell and Vice-Chair Clarida
were both considered centrist, technocratic picks. Other nominees
like Marvin Goodfriend of Carnegie Mellon and Nellie Liang of the
Brookings Institute were of a similar mold. Of course, these
nominations have been torpedoed and replaced with those seen in a
more partisan light: Stephen Moore of the Heritage Foundation and
Herman Cain, formerly of the Kansas City Fed, turned one-time
presidential candidate. In the near term, we do not view these picks
as changing the outlook should they be confirmed. Clarida and
Powell have enough support on the FOMC to push through the
monetary policy they want. Moore and Cain would have to win over a
consensus, and given their reputation for partisanship, it would likely
be difficult for the pair to build a consensus in a technocratic
institution like the Fed. In our view, the Fed is not blameless here.
They hiked in December, the markets rendered their judgement on
the move, and they have since walked it back. In Trump's eyes, the
"geniuses" made a mistake, so why bother taking the advice of
Mnuchin and other "establishment types" in making Fed picks? Over

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the longer run, overtly political picks like this will raise questions for
the political independence of the Fed. We do not want folks that are
hawkish when one party is in the White House and dovish when
another party is. If the Fed and the nomination process for
governors goes the way of the Supreme Court, it would not be a
pleasant outcome for the economic outlook. (After all, if the court
wasn't this way, why do judges wait for a president from their party
to come in before resigning?) Again, this is a longer-run worry, not a
near-term concern. But, if we see this concern show up in the
markets, you'll see it in longer-run inflation expectations. It is not
unprecedented for a president to look to challenge the leadership of
the Fed and influence monetary policy through the appointment
process. Recall that President Reagan reappointed Paul Volcker as
Fed chair but later packed the board with governors who outvoted
him in 1986 to force a rate cut. Neither Moore nor Cain has been
formally nominated, as both are undergoing background checks.
Names are often floated in the press to assess odds of confirmation,
so the White House is waiting to see if Cain has the votes to be
confirmed. Republicans hold a 53-47 seat advantage and could
afford to lose three votes with Vice President Mike Pence needed to
break a tie. Recall that Cain withdrew from the 2012 presidential
race after allegations of sexual harassment when he led the National
Restaurant Association. In the #MeToo era this would not help his
Senate confirmation prospects. Nominating Cain likely hurts Moore's
confirmation chances in the Senate since it signals a pattern of
Trump looking to politicize the Fed and will energize Moore
detractors. It will be difficult to support one and not the other.
Voting for both candidates exposes them to the risk of being
attacked for supporting the politicization of the Fed. Removing both
nominees from consideration would not be a good look for the White
House, so if McConnell makes Trump choose, Moore could be easier
to confirm than Cain. If you want to be politically cynical, you might
think Trump is nominating both knowing that one or both won't be
approved. That way Trump can continue to blame the Fed for the
economy not growing faster, which he'll pivot to when 2020

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Democrats criticize his handling of the economy. His whole argument


for being re-elected is the economy, and this would give him a
scapegoat.

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


Moore said the Fed shouldn't have raised rates in either September
or December. He was right about December but wrong about
September. As of the September meeting, PCE inflation was above
the Fed's target and rising, the S&P 500 was within 1% of its all-time
high, and the most recently available GDP growth rate was 4.2%.
Any reasonable central banker would have raised rates given that
data. In December, inflation was below target and falling, bond
yields were falling, and the stock market was down significantly from
its high. Either the Fed raised rates because they were trying to
assert their independence or (more likely) they were so invested in
their forward guidance that they had a hard time doing something
other than what they had said they would do. I think they know
they made a mistake, but they won't undo the rate hike because
they think it would spook the markets. Fortunately, the economy is
very resilient and is already bouncing back from a brief (December
through February) slowdown. It will grow into the rate hike by the
end of the year. Eventually, the Fed's December rate hike will seem
more early than wrong.

Kevin Giddis, Head of Fixed Income Capital Markets, Raymond


James Financial: The fixed income market sees this as an inflation-
reliant market. Rates are likely to rise or fall as wages and prices
move up or down. The lack of inflation has dogged the Fed for years
now and as long as we keep it as a focus, rates are likely going lower
... again. President Trump may be right, but likely for the wrong
reasons.

Art Hogan, Chief Market Strategist, National Securities: It feels


like the Fed is at the right place being neutral. The more we hear
calls for easing policy, juxtaposed against stories about how strong

CNBC Flash Fed Survey – April 8, 2019


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the economy is from the administration, the more we should


discount that message.

Constance Hunter, Chief Economist, KPMG: There are adverse


economic consequences of politicizing a country's central bank.
These consequences may not be felt immediately, but they will be
felt and repairing the damage can take a long time.

Ron Insana, Financial Journalist, CNBC Contributor: President


Trump is endangering the independence and decision-making
process of an important quasi-governmental institution that is critical
to the nation's economic health.

John Kattar, Chief Investment Officer, Ardent Asset


Management: Trump may be pushing the envelope a little too far
with his nominees, but in general, I think the Fed may benefit from
nominating high-quality people with non-traditional backgrounds, i.e.
people without an economics Ph.D.

Barry C. Knapp, Managing Partner, Ironsides


Macroeconomics: Large-scale asset purchases impaired creative
destruction and productivity growth. During the 2010-2013 non-
crisis period of QE, the equity risk premium of economically sensitive
cyclical sectors increased sharply, underscoring how the portfolio
balance channel failed to increase business confidence and capital
investment. All it did was create a reach for yield in fixed income
securities allowing zombie companies to stay alive. The academic
support evaporated at the 2013 KC Fed economic symposium,
underscoring how much politics lags economics and the markets by
an even greater degree.

David Kotok, Chairman and Chief Investment Officer,


Cumberland Advisors: Cain is a businessman. Nothing wrong
there. Moore crosses the line editorializing as a presumptive
nominee. Moore’s tax scofflaw allegation needs Senate committee

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vetting.

Joseph LaVorgna, Chief Economist, Natixis CIB Americas: The


Fed will be cutting rates because growth is likely to slow to a below-
trend rate at the same time inflation continues to undershoot the
Fed's 2% target.

Donald Luskin, Chief Investment Officer, Trend Macrolytics: 1)


Fed independence is a double-edged sword. You want independence
but you don't want unaccountability. Trump is holding the Fed
accountable, and as the man who appoints Fed governors, that is
entirely appropriate. 2) The real issue on the Fed's asset holdings
isn't the amount of them, it is the average maturity of them.
Average maturity has been coming down since early 2013, when
"quantitative tightening" really began. As MBS mature, the Fed
should reinvest them in long-term Treasuries, to maintain the
present maturity structure of the portfolio. Nobody at the Fed (or on
CNBC) understands that, but that is the true lever that moves the
world.

Rob Morgan, Chief Investment Officer, Sethi: Strong job growth


for March reported Friday will not change the Fed's plan to leave
rates unchanged for the remainder of 2019.

Joel L. Naroff, President, Naroff Economic Advisors: The


attempts to politicize the Fed need to be taken seriously, even if they
fail this time. Without major pushback, all future presidents and
politicians will feel empowered to attack the Fed, reducing its image
and independence.

James Paulsen, Chief Investment Strategist, The Leuthold


Group: Federal Reserve members regularly receive criticism from
many different sources, including politicians, from Wall Street, the
media, and on social media outlets. I think, and certainly hope, they
are tough skinned enough to make independent judgements about

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monetary policy despite these constant criticisms and I certainly


believe they also can handle disparaging comments from the
president.

Lindsey Piegza, Chief Economist, Stifel: With the economy


showing signs of weakness, the Fed was correct to halt further rate
hikes. Now, depending on how pronounced the weakness becomes,
the Fed will have to transition from neutral to a defensive policy
stance – and sooner than later given the reduced level of
ammunition the committee has this time around to combat an
eventual recession.

Lynn Reaser, Chief Economist, Point Loma Nazarene


University: Even if they survive confirmation, the two
representatives of the president's views are unlikely to change the
thrust of more conventional Fed thinking.

Chris Rupkey, Chief Financial Economist, MUFG: This is a very


different president who is very unconventional. The old way of
looking at the Fed and monetary policy doesn't apply. Trump's
jawboning is keeping rates lower than they would have been and
increased the speed at which the Fed moved to the sidelines
between the December and March meetings. At least the president
cares about the stock market and is aware of the role the Fed plays.
Anyway, criticizing the president for his comments on the Fed will
not work. These are very different times and I don't believe this
challenge to the Fed's independence will continue after Trump leaves
office after one or two terms.

Robert Shapiro, Chairman, Sonecon; Senior Policy Fellow,


Georgetown Business School: The Moore and Cain nominations
extend the president's attacks on the values and integrity of our
national institutions from national security and law enforcement and
adjudication to economic stewardship.

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Richard I Sichel, Senior Investment Strategist, The


Philadelphia Trust Company: I believe an occasional comment on
Fed policy by the president is acceptable. The emphasis is on
occasional.

Hank Smith, Co-Chief Investment Officer, Haverford Trust


Company: I have never seen the media so obsessed with every
statement the president utters. Of course, we have never had a
president like Donald Trump!!

Richard D. Steinberg, CFA, Chief Investment Officer,


Steinberg Global Asset Management: Both potential new
additions to the Fed understand the sanctity of the Fed's
independence. Once approved, they will respect that independence.

Diane Swonk, Chief Economist, Grant Thornton: Too often


correlation is mistaken for causality and stacking the Fed with
partisan hacks would alter how the market views the Fed's decisions
even if two appointments don't change the Fed's decision making.
Over time, the loss in credibility will mount and could be justified if
one of those appointees were to become the chairman of the Fed.

Peter Tanous, Chairman, Lynx Investment Advisory: If the Fed


decides that it may be time to lower rates, might it hesitate to do so
lest it appear they are giving in to the president's whiplashing?
Hmmm.

Mark Vitner, Managing Director & Senior Economist, Wells


Fargo Securities: By pushing for a 50-basis point cut in the federal
funds rate, President Trump may actually make it more difficult for
the Fed to cut interest rates if they need to later this year. We feel
the suggestion that the Fed should cut rates was made to provide
the administration cover if the economy stumbles, and thus carries
little weight at the Fed. My preference would be for presidents to
keep comments about monetary policy to a minimum but that seems

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unrealistic today give that President Trump is so outspoken about


just about everything.

Scott Wren, Senior Global Equity Strategist, Wells Fargo


Investment Institute: The Fed is, and will remain, independent.
The president's comments did not influence Chairman Powell's
decision to stop hiking rates. Interpretation/analysis of the
economic fundamentals and the outlook determined the decision by
the voting members of the FOMC.

Mark Zandi, Chief Economist, Moody's Analytics: President


Trump's assault on the independence of the Fed is an assault on one
of the pillars of a well-functioning economy.

Clare Zempel, Principal, Zempel Strategic: On paper, Bernanke


was the ideal Fed chair, but in practice, monetary policy was unduly
restrictive in the extreme under his leadership in 2008. Still, deep
knowledge about the Fed's powerful role in macroeconomic policy
should be expected from governors. The two latest nominees seem
to lack that.

CNBC Flash Fed Survey – April 8, 2019


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