FED SURVEY

January 23, 2012
These survey results represent the opinions of 75 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 January 18 and January 19, 2012. 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 there be another Federal Reserve quantitative easing program in the next year (12 months)?
July 20 Survey October 31 Survey August 11 Survey January 23 Survey September 19 Survey

19%
Yes

34%

46%
48% 48% 68% 59%

37%
No

46% 44% 13% 17% 7% 7% 8%

Don't know/unsure

CNBC Fed Survey – January 23, 2012 Page 1 of 32

FED SURVEY

January 23, 2012 2. For those respondents who replied ‘Yes’ to question #1: How large do you expect the new quantitative program will be over the next year (12 months)? Please do not include reinvestment of maturing securities.
July 20 Survey October 31 Survey August 11 Survey January 23 Survey September 19 Survey

$700

$600

$628
$567

$500

$527 $457

$400

$377
$300

$200

$100

$0 Average (In Billions)

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FED SURVEY

January 23, 2012 3. For those respondents who replied ‘Yes’ to question #1: At which meeting of the Federal Open Market Committee do you think the Fed is most likely to announce a new QE program?
September 19 Survey 0% January 2012 5% October 31 Survey 10% 15% 20% January 23 Survey 25% 30% 35%

5% 3% 15%

26%

March

19%

33%

April

5%

7%

22%

June

5% 4% 0% 4% 0% 6%

28%

July

8% 11%

September

October

0%

December 2012

0%

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FED SURVEY

January 23, 2012 4. Do you expect the Federal Reserve to change the time reference in its guidance that it "anticipates that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013?"
60%

50%

50% 46%

40%

30%

20%

10%

0% Yes No

4%
Don't Know/Unsure

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FED SURVEY

January 23, 2012 5. To what time period do you expect the Fed will change its guidance?
0% Mid 2012 5% 10% 15% 20% 25% 30% 35% 40% 45%

8%
3% 0% 14% 30% 5% 0% 0% 41% 0%

End 2012

Mid 2013

End 2013

Mid 2014

End 2014

Mid 2015

Later than mid 2015

Drop reference to a specific time

Don't know/unsure

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FED SURVEY

January 23, 2012 6. Do you support the FOMC's decision to publish its members' forecasts for the federal funds rate?
80%

70%

60%

67%

50%

40%

30%

28%
20%

10%

5%
Yes No Don't Know/Unsure

0%

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FED SURVEY

January 23, 2012 7. Why do you think the FOMC decided to publish member interest rate forecasts?
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Because of its As a way to commitment signal easier to monetary transparency policy “Other” responses:        To move away from what some saw as a commitment to keep rates at a certain level for a specified period of time They view transparency as a goal in its own right So we know how the consensus came about As a step toward inflation targeting To better manage expectations in an uncertain world and unlock money on the sidelines Misguided transparency concept Communication policy Both

44%

32%

12% 9% 3%

0%
Neither Don't Know/Unsure Other

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FED SURVEY

January 23, 2012 8. How will the publication of members' fed funds targets affect U.S. bonds?
60%

50%

53%

40%

30%

32%

20%

10%

9% 5%
0% Lower yields No change Higher Yields Don't Know/Unsure

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FED SURVEY

January 23, 2012 9. How will the publication of members' fed funds targets affect U.S. stocks?
70%

60%

59%
50%

40%

30%

32%

20%

10%

0%

1%
Lower prices No change Higher prices

8%
Don't Know/Unsure

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FED SURVEY

January 23, 2012 10. How will the publication of members' fed funds targets affect monetary policy?
50%

45%

46%

40%

35%

30%

25%

28%

20%

20%

15%

10%

5%

5%
Improve it No change Make it worse Don't Know/Unsure

0%

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FED SURVEY

January 23, 2012 11. How will the publication of members' fed funds targets affect the U.S. economy?
80%

70%

69%
60%

50%

40%

30%

20%

21%

10%

3%
0% Positive impact No impact Negative impact

7%
Don't Know/Unsure

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FED SURVEY

January 23, 2012 12. How will the publication of members' fed funds targets affect U.S. inflation?
90%

80%

77%
70%

60%

50%

40%

30%

20%

10%

14% 1%
Reduce inflation No impact

8%
Increase inflation Don't know/unsure

0%

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FED SURVEY

January 23, 2012 13. How will the publication of members' fed funds targets affect U.S. employment?
80%

70%

75%

60%

50%

40%

30%

20%

19%
10%

3%
0% Positive impact on employment (more jobs created) No impact

4%

Negative impact on Don't Know/Unsure employment (fewer jobs created)

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FED SURVEY

January 23, 2012 14. Should the Fed change its guidance for how long it will keep interest rates low from a calendar date to economic targets, such as inflation, unemployment, or nominal GDP?
October 31 Survey 70% January 23 Survey

60%

57%
50%

50% 46%

40%

36%
30%

20%

10%

7%
0% Yes No

4%

Don't Know/Unsure

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FED SURVEY

January 23, 2012 15. What target or targets should the Fed use?
100%

90%

86%
80%

76%
70%

60%

50%

47%
40%

50% 42%

41%

30%

20%

10%

0% Inflation Unemployment Nominal GDP

5% 5%
Other

Respondents were able to select more than one response, so percentages total more than 100%

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FED SURVEY

January 23, 2012 16. Will the change in FOMC voting members in 2012 result in easier policy?
October 31 Survey
60%

January 23 Survey

50%

49%
40%

44% 39%

30%

31%

20%

20%
10%

17%

0% Yes No Don't Know/Unsure

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FED SURVEY

January 23, 2012 17. How would you characterize the Fed's current monetary policy?
July 20 Survey October 31 Survey 0% August 11 Survey January 23 Survey 10% 20% 30% 40% 41% 26% Too accommodative 39% 34% 37% 50% 60% September 19 Survey

52% 52% Just right 40% 48%

45%

3%
12% Too restrictive 12% 10%

12%

5% 10% Don’t know/Unsure 9% 8%

5%

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FED SURVEY

January 23, 2012 18. What grade would you give Fed Chairman Ben Bernanke?
December 22, 2010 Survey October 31, 2011 Survey July 21, 2011 Survey January 23, 2012 Survey

A

26% 22% 21% 23% 42%

B

48% 46% 48%
22% 19% 20% 13% 5% 5% 11% 9% 5% 3% 0% 0%

C

Averages
Oct 31 Survey:

D

2.78
Jan 23 Survey:

F

2.90

Don't know/unsure

4% 2% 7%

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

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FED SURVEY

January 23, 2012 19. Where do you expect the S&P 500 stock index will be on … ?
July 20 Survey August 11 Survey Sept 19 Survey

Oct 31 Survey

January 23 Survey

1421 1310
June 30, 2012

1312 1358 1329

December 31, 2012

1387
This is the first survey in which we asked for a December 31, 2012 forecast.

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FED SURVEY

January 23, 2012 20. What do you expect the yield on the 10-year Treasury note will be on … ?
July 20 Survey
Oct 31 Survey

August 11 Survey
January 23 Survey

Sept 19 Survey

3.75% 2.99%
June 30, 2012

2.59% 2.77%

2.19%

December 31, 2012

2.52%
This is the first survey in which we asked for a December 31, 2012 forecast.

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FED SURVEY

January 23, 2012 21. What is your forecast for the year-over-year percentage change in real U.S. GDP?
July 20 Survey October 31 Survey August 11 Survey January 23 Survey September 19 Survey

+2.85% +2.47%
2012

+2.24% +2.37% +2.45%

2013

+2.59%
This is the first survey in which we asked for a 2013 forecast.

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FED SURVEY

January 23, 2012 22. When do you think the FOMC will first increase the fed funds rate?
0% 2012 - Q1 Q2 Q3 Q4 5% 10% 15% 20%

0% 1% 1% 8% 5% 18% 14% 11% 14% 10% 4% 3% 10% 3%

2013 - Q1
Q2 Q3 Q4 2014 - Q1 Q2 Q3 Q4 2015 or later

Don't know/unsure

CNBC Fed Survey – January 23, 2012 Page 22 of 32

FED SURVEY

January 23, 2012 23. When do you think the Federal Reserve will make its first planned decrease in the size of its balance sheet?
0% 2012 - Q1 Q2 Q3 Q4 2013 - Q1 Q2 Q3 Q4 5% 10% 15% 20%

0% 3% 3% 10% 12% 11% 11% 4% 14% 10%

2014 - Q1
Q2 Q3 Q4 2015 or later Don't know/unsure

3%
1% 18% 3%

CNBC Fed Survey – January 23, 2012 Page 23 of 32

FED SURVEY

January 23, 2012 24. Where do you expect the fed funds target rate will be on … ?
July 20 Survey
October 31 Survey

August 11 Survey
January 23 Survey

Sept 19 Survey

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

0.47%
June 30 2012

0.13% 0.16% 0.22% 0.14%

1.01%
Dec 31 2012

0.25%
0.27% 0.35% 0.20%

June 30 2013

0.41%

This is the first survey in which we asked for a June 30, 2013 forecast.

CNBC Fed Survey – January 23, 2012 Page 24 of 32

FED SURVEY

January 23, 2012 25. 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)
45%

Average Probability of Recession
40%

35%

Aug 11 Survey: 34.0% Sept 19 Survey: 36.1% Oct 31 Survey: 25.5% Jan 23 Survey: 20.3%

30%

25%

20%

15%

10%

5%

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Aug 11 Survey

Sept 19 Survey

Oct 31 Survey

January 23 Survey

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FED SURVEY

January 23, 2012 26. What is the probability, in your opinion, that each of the following countries will default on its debt in the next three years? (0%=No chance of default, 100%=Certainty of default)
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% Portugal July 20 Survey Aug 11 Survey Sept 19 Survey Oct 31 Survey January 23 Survey 52% 45% Ireland 48% 37% Italy 24% 23% Greece 83% 70% Spain 28% 25% 2% 3% Germany France

United States 4% 2%

United Kingdom 2%

41%
47% 49%

34%
33% 33%

23%
28% 28%

82%
84% 88%

24%
26% 30%

2%
2% 2%

4%
4% 6%

1%
2% 1%

2%
3% 2%

Germany, France, and United Kingdom were not included in the July 20 survey

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FED SURVEY

January 23, 2012 27. What is your outlook for the European Monetary Union five years from now
July 21 Survey Oct 31 Survey 0% 10% January 23 Survey 20% 30% 40% 50% 60% 70%

42%
No countries will be ejected or leave

47% 24%

53%
Some countries will be ejected or leave

52% 63%

It will be largely dissolved and most European countries will have their own currency

0% 2% 6%

5%
Don't know/unsure

0%
8%

CNBC Fed Survey – January 23, 2012 Page 27 of 32

FED SURVEY

January 23, 2012 28. What is your primary area of interest?

Currencies 1%

Other 14%

Fixed Income 14% Equities 21%

Economics 51%

Comments:
Robert Brusca, Fact and Opinion Economics: Gipsis in biggest trouble (Greece, Ireland Portugal, Spain, Italy). Italy is too big to default but it is in trouble. Portugal, Spain, and Greece have huge financial and competitiveness problems as well. While everyone is focused on raising money the REAL ISSUE is how to restore competitiveness. And that is hard to fix without a depreciation of the currency, and that can't be done without leaving the eZone and if that IS done default is quite likely. Thus the most important thing to fix is competitiveness (and it is not even on the table). Tony Crescenzi, PIMCO: There are three objectives to the Fed's upcoming communications strategy: 1) Flatten the forward curves, which is to say, push further out expectations for the a reversal in monetary policy. 2) Lower interest rate volatility by anchoring rates via the conditional rate commitment. 3) Push investors to move out the risk spectrum. Mike Dueker, Russell Investments: Fed policymakers have always been told to submit forecasts of output, inflation and unemployment conditional on what they perceive to be "appropriate" monetary policy. With the federal funds rate now on the list, the distinction between “most likely” and "appropriate" policy seems more important and glaring than ever. Another new feature is that the forecasts will be attached to specific members of the FOMC--they no longer will be able to hide in the pack. Fixed-income markets will have to be very careful in interpreting the path for the fed funds rate put forward by any individual policymaker. She/he might submit a path for the fed funds rate that she/he deems

CNBC Fed Survey – January 23, 2012 Page 28 of 32

FED SURVEY

January 23, 2012
appropriate but not at all likely. This distinction was less material for output and inflation forecasts. The main purpose of adding the fed funds rate to the list of FOMC forecasts is to posit a path for the funds rate that is believed to be consistent with an inflation target. The Fed also wants to give a preview of the time frame it expects to have the rate near zero. Brett Gallagher, Artio Global Investors: The actions taken by Western monetary and political entities will prolong the current malaise, ensuring continued slow economic and jobs growth for many years into the future. Rather than taking the medicine and cleaning out the imbalances, which would require us to suffer some near-term discomfort, they would rather extend our sickness indefinitely. Brian Gendreau, Financial Network: At the beginning of last year economists and strategists were optimistic and outcomes were disappointing. This year they are more cautious, suggesting any surprise will be to the upside. Dan Greenhaus, BTIG: If you believe the cost of money matters, then lower interest rates should, as always, help boost the economy beyond where it otherwise might be. But if you believe the cost of money does not matter, as I do not, then moderately easier policy should have, at best, a moderate effect. Stuart Hoffman, PNC: QE 3 is not necessary and could be counterproductive to achieving the Fed's dual mandate. Lee Hoskins, Pacific Research Institute: The Fed is attempting to accelerate the growth in GDP but has no ability to do so over the intermediate term and risks inflation by doing so. The Fed needs to start normalizing interest rates and stop intervening in the yield curve. Hugh Johnson, Hugh Johnson Advisors: Message of financial markets collectively and important monetary and economic variables is that the U.S. economy will continue to expand through 2013...although the growth rate of the economy (real GDP), employment, and consumption will be below longer-term averages as the deleveraging process continues. John Kattar, Eastern Investment Advisors: My bet is on nominal GDP targeting no later than the April meeting. During 2012, all of the major central banks in the world will ease, although probably not in coordinated fashion and to varying degrees. Barry Knapp, Barclays PLC: The most interesting question is whether the Fed will adopt a more explicit inflation target. If they hint at QE3 we would expect equities to react negatively as the market focuses on the economic signaling effect, or in other words maybe the Fed knows something we don't about the domestic economy, global growth, or EU area bank deleveraging. David Kotok, Cumberland Advisors: Fly fishing is more predictable than economic outcomes. More fun, too. (David answered this survey via Wifi from Rio Puelo's Alta Puelo Lodge in Chile.)

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FED SURVEY

January 23, 2012
Subodh Kumar, Subodh Kumar & Associates: Abiding lesson for central banks, Wall Street, and investors is that systemic risk cannot be diversified away. Risk adjustments recognizing this are still underway and causing volatility to remain elevated Guy LeBas, Janney Montgomery Scott: We're increasingly concerned about the level of "Eco-phoria" that has infected the markets. That is, the interpretation of recent "ok" economic data has been far more optimistic than the underlying numbers justify, and that's setting up the markets for some disappointment once 4Q growth numbers are released. John Lonski, Moody's: The Fed strives to promote "risk tolerance.” If Europe stabilizes soon enough, noteworthy rallies by equities and corporate credit will ensue. Who would have ever thought the now favored proxy for European risk -- the 10-year Italian government bond yield -- would loom so large? Drew Matus, UBS Investment Research: Change to Fed forecasts for FF rate rather than date specified in statement should satisfy both doves and hawks. Ward McCarthy, Jefferies: I think the FOMC will continue to provide calendar refrence in providing rate guidance, but put it in the context of the FOMC economic forecasts. Rob Morgan, Fulcrum Securities: The growing strength in the economy will almost certainly force the Fed to abandon the committee's pledge to keep rates steady through mid2013. Joel Naroff, Naroff Economic Advisors: Barring a European meltdown, growth is likely to continue accelerating and be stronger than expected which will cause the Fed to be more optimistic by the end of the year. They will start signaling changes by then but are not likely to implement any rate hikes until they take action on the balance sheet. That pushes rate hikes into the summer or fall of 2013. Marc Pado, Cantor Fitzgerald: Low inventories, strong cost controls, low corporate debt, and high cash levels should avert a recession and maintain slow growth. The key is the P/E ratio. It is very low. "Perception" needs to change to move markets higher. James Paulsen, Wells Capital Management: I fail to understand how "diverse interest rate forecast" and constant "chatter" by 12 members of the Fed with "diverse views" provides clarity to the financial markets and businesses......rather, it would seem to add to uncertainty and simply create more fear. If the Fed wants to boost confidence, they would do better by "saying less" and letting their actions speak for themselves Lynn Reaser, Point Loma Nazarene University: The Fed's decision to publish its forecasts carries three primary risks: (1) It places more attention on its forecasting ability relative to its policy role; (2) It could damage its credibility; and (3) It could bias policy decisions to achieve the forecasts.

CNBC Fed Survey – January 23, 2012 Page 30 of 32

FED SURVEY

January 23, 2012
John Roberts, Hilliard Lyons: We see a positive Q4 earnings season and positive sentiment for the new year sending the S&P 500 up to more than 1350 before a pullback below 1200 driven by continuing European problems, lower earnings estimates driven by declining profit margins and a high level of populist rhetoric in the Presidential campaign. However, we anticipate a sharp increase in the market following the election into the year-end as we see the President being re-elected but the Republicans taking control of both houses of Congress. The gridlock that ensues, combined with some agreement on the debt issues and a recovering economy, sets the basis for a very strong bull market in 2013, as investors begin to compare the low interest rate environment to a market P/E ratio in the 12 range and investors push the market P/E close to 14 by year-end 2013. Chris Rupkey, Bank of Tokyo-Mitsubishi: The center of the Committee is signaling that QE MBS program is possible. I do not view this as full-blown quantitative easing although the FX markets might. It is done to help with the financing problems experienced by many in the mortgage markets. The Fed feels the weight of the nation's unemployed on their shoulders and wants to try to do more to help. This is one way to help without (maybe) being criticized for wantonly printing money. It is targeted, timely, and temporary, any MBS purchase program. John Ryding, RDQ Economics: The publication of the interest rate assumptions behind the FOMC forecasts will make the forecasts easier to interpret. At the present time we have forecasts based on unpublished policy assumptions, which makes the forecasts for the outyears difficult to interpret. Robert Shapiro, Sonecon: The economy is improving finally, but the Eurozone debt crisis poses a significant threat to growth this year and next. Hank Smith, Haverford Investments: I am a Republican. The Republican primary candidates who are criticizing Bernanke....Gingrich and Paul.....are full of it. Bernanke has done an extraordinary job, particularly given the lousy fiscal policy he has had to deal with. Stephen Stanley, Pierpont Securities: With unemployment falling and the inflation rate much higher than in 2010, the Fed is for inexplicable reasons intent on continuing to add to the current degree of accommodation. The current group's reaction function is a radical departure from historical norms. Diane Swonk, Mesirow Financial: The key to 2012 is that Europe moves from being a crisis to a chronic problem, and that Washington does something of use for deficit reduction during the lame duck Congress. Peter Tanous, Lynx Investment Advisory: The economy will be stronger than expected in 2012, led by higher consumer spending and a rebound in housing much earlier than most expect. The housing affordability index is at an all-time high. The recovery depends on a

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FED SURVEY

January 23, 2012
strong rebound in housing and it's on its way. Europe will continue to be a sideshow but most of the bad options are on the table and known. Jason Trennert, Strategas: In the absence of grown-up long-term fiscal policies, all roads lead to additional quantitative easing in both the U.S. and in Europe. Mark Vitner, Wells Fargo: It looks like we are going to be sailing through some rough seas in 2012. The Fed will try to do everything in their power to minimize the impact on the U.S. economy and financial markets but there are limits as to what they can do. Scott Wren, Wells Fargo Advisors: I think some investors will see the better fourth quarter GDP number next week.....likely around 3%....and try to extrapolate that going forward. That would be a mistake, in my opinion. GDP in 2012 will probably be a touch above 2%. The U.S. and other developed nations will be deleveraging for years to come. Mark Zandi, Moody's Analytics: It won't be a break-out year for the economy, but 2012 will be better than 2011. Europe remains the most serious threat to this optimism, but with the ECB's recently aggressive actions it is receding as a threat. It is also encouraging the Fed remains on high alert and the bar for additional monetary easing appears to be very low with the recent changes to the FOMC. Whether the Fed actually ease further depends critically on what fiscal policymakers do or don't do regarding the extension of the payroll tax holiday and emergency UI program and the expiring Bush-era tax cuts. Clare Zempel, Zempel Strategic: The Market Monetarist's view makes the most sense. The Fed and the ECB need to shift from their near-obsessive focus on inflation to Nominal GDP targeting.

CNBC Fed Survey – January 23, 2012 Page 32 of 32

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