FED SURVEY

April 24, 2012
These survey results represent the opinions of 53 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 19-20, 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, 2011 January 23, 2012 August 11, 2011 March 16, 2012 September 19, 2011 April 24, 2012 October 31, 2011

19%
Yes

34% 33% 33% 37%

46% 48% 48%

68%
59% 63% 56%

No

46% 44% 13% 17% 7% 7% 8% 4% 12%

Don't know/unsure

CNBC Fed Survey – April 24, 2012
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FED SURVEY
April 24, 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, 2011 October 31, 2011 April 24, 2012 $700 August 11, 2011 January 23, 2012 September 19, 2011 March 16, 2012

$600

$628 $527 $457 $377 $567 $448 $456

$500

$400

$300

$200

$100

$0 Average (In Billions)

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FED SURVEY
April 24, 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?
January 23, 2012 March 16, 2012 April 24, 2012

0%

10%

20%

30%

40%

50%

60%

70%

January 2012

3%

March

33%

April

0%
June

22% 18% 28%

45%

65%

July

8% 9%
6% 9% 6% 0% 9% 6% 0% 9% 6%

18%

September

October

December 2012

2013

0% 0%

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FED SURVEY
April 24, 2012 4. Which, if any, of the following additional actions do you think the Fed will take to drive down long-term yields?
March 16, 2012
50% 45% 40% 35% 30% 25% 20% 15% 10%
11% 15% 12% 2% 25% 25% 39% 35% 43% 42%

April 24, 2012

5%
0% Extend 'Operation Twist' beyond June Purchase Reduce the additional longinterest rate term securities paid on excess but sterilize reserves those purchases None

Other

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

Other responses:
 Unsterilized LSAP including Treasuries and MBS

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FED SURVEY
April 24, 2012 5. Do you expect the Federal Reserve to keep interest rates exceptionally low through late 2014?
March 16, 2012 April 24, 2012

60%

57%
50%

49%

49%

40%

40%

30%

20%

10%

3%
0% Yes No

2%

Don't Know/Unsure

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FED SURVEY
April 24, 2012 6. Relative to current fundamentals, the Federal Reserve's characterization of the economy in its policy statement is:
March 16, 2012
70%

April 24, 2012

60%

63%

64%

50%

40%

30%

33% 25%

20%

10%

9%
0% Too pessimistic Just right

5%
Too optimistic

0%

2%

Don't know/unsure

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FED SURVEY
April 24, 2012 7. Which of these statements best describes your view of the Fed's calendar-date guidance in its policy statement (that it expects to keep interest rates exceptionally low through late 2014)?
45%

40%

42% 38%

35%

30%

25%

20%

21%

15%

10%

5%

0% It was a mistake that could undermine the Fed's credibility It was a good decision that has helped drive down interest rates Don't Know/Unsure

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FED SURVEY
April 24, 2012 8. When Fed Chairman Ben Bernanke's term ends in 2014, do you expect he will be renominated:
40%

35%

35%
30%

35%

29%
25%

20%

15%

10%

5%

2%
By either a Democratic or Republican president By only a Republican president By only a Democratic president He won't be renominated by either a Democratic or Republican president

0%

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FED SURVEY
April 24, 2012 9. Do you expect Bernanke will be the Fed Chairman after his current term expires in 2014?
60%

55%
50%

40%

30%

34%

20%

10%

11%

0%
Yes No Don't know/unsure

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FED SURVEY
April 24, 2012 10. If Bernanke is not renominated, please write in a name that you expect will be nominated to be Fed Chairman by a Republican president.
0% 5% 10% 15% 20% 25% 30% 35%

Mike Boskin

3%

Martin Feldstein

10%

Richard Fisher

10%

Glenn Hubbard

26%

Donald Kohn

3%

Greg Mankiw

16%

John Taylor

29%

Paul Volcker

3%

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FED SURVEY
April 24, 2012 If Bernanke is not renominated, please write in a name that you expect will be nominated to be Fed Chairman by a Democratic president.
0% 10% 20% 30% 40% 50%

Alan Blinder

7% 7% 3% 3% 3% 3% 3% 20% 3% 3% 43%

Bill Dudley

Roger Ferguson

Timothy Geithner

Austan Goolsbee

John Maynard Keynes

Christina Romer

Larry Summers

Paul Volcker

John Williams

Janet Yellen

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FED SURVEY
April 24, 2012 11. How would you characterize the Fed's current monetary policy?
July 20, 2011 October 31, 2011 April 24, 2012 0% 10% 20% 30% 40% 41% 39% 34% 37% 36% 50% 60% August 11, 2011 January 23, 2012 September 19, 2011 March 16, 2012

26% Too accommodative

53%

Just right

40% 38%

52% 52%

48% 45% 51%

Too restrictive

3% 12% 12% 10% 12% 6% 8% 5% 10% 9% 8% 5% 4% 6%

Don’t know/Unsure

CNBC Fed Survey – April 24, 2012
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FED SURVEY
April 24, 2012 12. Where do you expect the S&P 500 stock index will be on …?
July 20, 2011 August 11, 2011 September 19, 2011

October 31, 2011
April 24, 2012

January 23, 2012

March 16, 2012

1421 1310 1312
June 30, 2012

1358 1329 1397

1372

December 31, 2012

1387 1436 1400
This is the third survey in which we asked for a December 31, 2012 forecast.

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FED SURVEY
April 24, 2012 13. What do you expect the yield on the 10-year Treasury note will be on … ?
July 20, 2011 October 31, 2011 April 24, 2012 August 11, 2011 January 23, 2012 September 19, 2011 March 16, 2012

3.75% 2.99%

2.59%
June 30, 2012

2.77% 2.19% 2.32% 2.15%

December 31, 2012

2.52% 2.59% 2.40%
This is the third survey in which we asked for a December 31, 2012 forecast.

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FED SURVEY
April 24, 2012 14. What is your forecast for the year-over-year percentage change in real U.S. GDP?
July 20, 2011 October 31, 2011 April 24, 2012 August 11, 2011 January 23, 2012 September 19, 2011 March 16, 2012

+2.85% +2.47% +2.24%
2012

+2.37%

+2.45%
+2.46% +2.39%

2013

+2.59% +2.74% +2.55%
This is the second survey in which we asked for a 2013 forecast.

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FED SURVEY
April 24, 2012 15. When do you think the FOMC will first increase the fed funds rate?
January 23, 2012 0% 2012 - Q1 Q2 Q3 Q4 2013 - Q1 Q2 Q3 Q4 2014 - Q1 Q2 Q3 Q4 2015 or later Don't know/unsure 3% 0% 4% 4% 3% 4% 6% 10% 0% 1% 1% 8% 9% 5% 4% 7% 15% 14% 5% March 16, 2012 10% April 24, 2012 15% 20%

0% 0% 2% 0%

4%

18%

9% 11% 11% 11% 11% 9%

14% 15% 13%

9%

13%

15% 8% 10% 9% 13%

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FED SURVEY
April 24, 2012 16. In the most recent quarterly Fed forecast, six of the 17 members of the Federal Open Market Committee said they believe the first fed funds increase will come in 2013. In the next quarterly Fed forecast, how many members do you expect will say 2013?
60%

50%

Average:
40%

6.27

30%

20%

10%

0%

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

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FED SURVEY
April 24, 2012

17. When do you think the Federal Reserve will make its first planned decrease in the size of its balance sheet?
January 23, 2012 March 16, 2012 April 24, 2012

0%
2012 - Q1 Q2 Q3 Q4 2013 - Q1 Q2 Q3 Q4 2014 - Q1 Q2 Q3 Q4 2015 or later Don't know/unsure 4% 0% 3% 2% 2% 3% 0% 0%

5%

10%

15%

20%

25%

30%

6%

10% 9% 12% 10% 11% 9% 10% 11% 13% 11% 14% 18% 20%

8% 4% 2% 4% 3% 4% 6%

9% 10%

1% 2% 0% 18% 16% 27%

3% 4%

6%

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FED SURVEY
April 24, 2012 18. Where do you expect the fed funds target rate will be on …?
July 20, 2012 October 31, 2011 April 24, 2012 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% August 11, 2011 January 23, 2012 September 19, 2011 March 16, 2012

June 30 2012

0.13% 0.16% 0.22% 0.14% 0.14% 0.16%

0.47%

Dec 31 2012

0.25% 0.27% 0.35% 0.20% 0.23% 0.17%

1.01%

June 30 2013

0.41% 0.42% 0.27%

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

CNBC Fed Survey – April 24, 2012
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FED SURVEY
April 24, 2012 19. 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)

August 11, 2011 January 23, 2012

September 19, 2011 March 16, 2012

October 31, 2011 April 24, 2012

36.1% 34.0%

25.5% 20.3% 20.6%

19.1%

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FED SURVEY
April 24, 2012 20. What is the single biggest threat facing the U.S. economic recovery?
March 16, 2012 0% 5% April 24, 2012 10% 15% 20% 25% 30% 35% 40%

European recession/financial crisis

17%

37% 36%

Tax/regulatory policies

27% 4% 8% 26%

Slow job growth

High gasoline prices

8% 4% 4% 2% 0% 11%

Overall inflation

Don't know/unsure

Other:

17%

Other responses:
    Housing/shadow inventory overhang Deleveraging & deficit reduction Lingering headwinds from the crisis Political uncertainty, taxes, Europe, gas prices, people   afraid of their own shadows Sluggish nominal growth/inadequate monetary stimulus Politics

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FED SURVEY
April 24, 2012
  2013 “fiscal cliff” (2) Clogged foreclosure process

21. What is the chance that high oil prices cause another U.S. economic recession? (0%=No chance of recession, 100%=Certainty of recession)
40%

35%

Average Probability

30%

Mar 16, 2012: 23.8% April 24, 2012: 21.8%

25%

20%

15%

10%

5%

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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FED SURVEY
April 24, 2012 22. What is your primary area of interest?

Other 13%

Currencies 19% Fixed Income 13% Equities 19%

Economics 55%

Comments:
David Ader, CRT Capital Group: The sad fact is the Fed is going at this alone. They may be right, they may be wrong, about the consequences of their efforts to support the economy. But the real failure, the real mistake, is that the politicians can't come up with a plan. They rant, they bicker, but dig their heels in at ideological extremes and end up doing nothing. At least the Fed is trying. John Augustine, Fifth Third Asset Management: The Fed put the 2014 date in because they are very concerned about fiscal policy in 2013 taking the economy into recession. Dean Baker, Center for Economic and Policy Research: Economists have to learn to understand the weather. The strong numbers in the winter were very much weather driven. The weak numbers we're seeing now is payback. Kevin Caron, Stifel, Nicolaus/Washington Crossing Advisors: The economy is getting better -- more private jobs, more private investment. Continued success requires hastening the transition from public led recovery to private led expansion. CNBC Fed Survey – April 24, 2012
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FED SURVEY
April 24, 2012
Kevin Giddis, Raymond James/Morgan Keegan: Over the next six months the market will likely determine where the Fed stands, and whether Europe can be contained, or if it’s just the beginning of a prolonged and damaging recession. Dan Greenhaus, BTIG: Unfortunately it’s nearly impossible for us in markets to forecast this sort of stuff when those with their hands on monetary levers of power don’t even know themselves. Lee Hoskins, Pacific Research Institute: Fed policy continues to misallocate capital, build bubbles, and hinders rather than helps real growth. Constance Hunter, AXA Investment Managers: The U.S. economy is still in rehab. It can stand without crutches, but it cannot move forward without them. The problem is that monetary policy alone cannot move the shadow inventory of housing through the system and exceptionally low interest rates for such an extended period of time could cause distortions in capital allocation (in the U.S. and abroad) that have problematic ramifications down the road. Monetary policy has kept us out of a vicious circle of deflation, but it has yet to ignite strong fixed asset investment, strong hiring, and a recovery in the housing market. Hugh Johnson, Hugh Johnson Advisors: As I crunch the numbers, inflation (PCE%) will be higher in 2013 than Federal Reserve is forecasting, prompting a shift toward restraint, and tax and spending policy should shift toward restraint (hopefully not aggressively) in 2013. This combination is likely to impede equity price moves in Q4 and 2013. John Kattar, Eastern Investment Advisors: The window is closing on the Fed's flexibility to do something dramatic before the election. I expect them to broadly hint at the possibility of QE at next week's meeting, just to keep options open. But it will probably require much worse news (lower stock market, bad economic data, or European crisis) to get them to act. The likelihood is now below 50%, and most likely timing is May inter-meeting. Barry Knapp, Barclays PLC: Equity investors seem to believe the FOMC decision process is a 2 variable model best illustrated by the Okun's Law conundrum and have not considered the 3rd variable, inflation. Additionally the CNBC Fed Survey – April 24, 2012
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FED SURVEY
April 24, 2012
S&P 500 above 1400 was discounting the strong labor data in January & February rather than softer GDP tracking estimates as evidenced by the sharp rally in the consumer discretionary sector. As a consequence of that fundamental mispricing of the economic outlook and misunderstanding of Fed policy, the FOMC meeting and GDP report could be seminal moments with equities likely to sell off. David Kotok, Cumberland Advisors: These are extraordinary times. Confidence intervals around forecasts are wider than ever. Subodh Kumar, Subodh Kumar & Associates: Tougher standards are now needed on composition of company earnings and on risk premiums in bonds. QE is not the cure-all markets seem to assume. In turn, the Fed has to obfuscate less on QE value and its side effects so as to broaden the tools it uses. Joseph LaVorgna, Deutsche Bank: Energy prices would have to rise significantly and stay at an elevated level for a couple of quarters in order for us to become more concerned about recession. In our view, north of $150 on WTI is the point at which recession risk rises materially. Guy LeBas, Janney Montgomery Scott: The "eco-phoria" present this winter is finally beginning to fade as the markets recognize that the above-trend economic numbers were the result of unseasonably warm weather. That will result in additional caution, though slow growth rather than recession is the most likely outcome. Ward McCarthy, Jefferies: There are upside organic risks to the economy. The downside risks are all political. Rob Morgan, Fulcrum Securities: Is it really a good idea for the Fed to publish quarterly the interest rate forecasts of the individual rate setters? In January, six of 17 rate setters said they think rates will rise in 2013. What if eventually a majority say that, but the pronouncement continues to state that rates will stay constant until 2014? James Paulsen, Wells Capital Management: There is no longer an economic crisis in the U.S. Why, therefore, is the Fed still employing emergency or crisis policies? Zero interest rates, $1.5 trillion excess bank reserves, QE policies, and

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FED SURVEY
April 24, 2012
guaranteed interest rates are not policies appropriate for a recovery. The Fed needs to move beyond its crisis mindset and appropriately normalize policy to reflect the maturation of the U.S. economic cycle from crisis to recovery. Failure to do so soon risks creating another crisis -- an inflation crisis! Lynn Reaser, Point Loma Nazarene University: Some payback from the mild weather boost from earlier in the year is now likely to weigh on many economic indicators in coming weeks. Bears will celebrate while bulls express denial. The Fed will stay on the sidelines, waiting for more data to emerge after the fog lifts. John Roberts, Hilliard Lyons: We have changed to a bullish stance in the near term due to Q1 earnings coming in well above very low expectations. However, beyond that we anticipate a pullback in the equity markets through the election due to nasty political rhetoric, slowing corporate profit growth, and lower consumer spending. Chris Rupkey, Bank of Tokyo-Mitsubishi: The media is keeping this recession story/looming crisis story/downside risks story alive, and thank goodness as it keeps me employed writing why the world is not going to end tomorrow. The interesting thing to me is how people have the same concerns they had at the end of last summer even though the S&P 500 is up almost 10% YTD. Diane Swonk, Mesirow Financial: Bernanke has been vindicated on the Fed's forecast, with growth now giving back some of the seasonal strength we saw earlier in the year, but I can't imagine he wants to stick around for another term of shenanigans by our political leadership. Mark Vitner, Wells Fargo: The Fed's efforts at becoming more transparent may have actually increased uncertainty about future monetary policy. Too many people view the Fed's forecasts of short-term interest rates as a commitment to keep long-term interest rates near current levels, possibly putting off key financial decisions. Mark Zandi, Moody's Analytics: The current lull in economic activity will likely prove temporary and additional monetary stimulus unnecessary, but given the

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FED SURVEY
April 24, 2012
still considerable downside risks it is appropriate for the Federal Reserve to have a bias toward further action. Clare Zempel, Zempel Strategic: The fundamental limitation on the recovery/expansion's pace is the Fed's refusal to support nominal GDP growth above 4%. That refusal reflects misguided acceptance of the overly pessimistic consensus belief that post-bubble expansions are necessarily and and unalterably weak.

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