CNBC Fed Survey results, October 29, 2013

7/27/2019 CNBC Fed Survey results, October 29, 2013

1/33

CNBC Fed Survey October 29, 2013Page 1 of 33

FED SURVEYOctober 29, 2013

These survey results represent the opinions of 40 of the nations top money managers, investment

strategists, and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses were collecte

on October 25-26, 2013. 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.For all of 2013 and for all of 2014 (and only in 2014), what isthe total amount of additional asset purchases the Federal

Reserve will have made?

$858.8$917.0 $936.6

$883.6$921.9 $941.9

$948.5

$1,023.7

$370.6 $367.1 $373.5 $374.8 $381.9

$646.1

$0

$200

$400

$600

$800

$1,000

$1,200

1/29/2013 4/30/2013 7/30/2013 9/17/2013

Billions

2013 2014


2/33



2.In what month do you expect the Fed to begin tapering itspurchases?

0%

10%

20%

30%

40%

50%

60%

June 18 July 30 Sept 6 Sept 17 Oct 29

Averages

Jan 29: Dec 2013

March 19: Jan 2014

April 30: Feb 2014

June 18: Dec 2013

July 30: November 2013

Sep 6: November 2013

Sept 17: November 2013

Oct 29: April 2014Plurality of 45% said March 2014


3/33



3.By how much do you believe the Fed will reduce its assetpurchases in that first month?

$22.1

$19.2

$12.6

$14.5 $14.2

$0

$5

$10

$15

$20

$25

July 5 July 30 Sept 6 Sept 17 Oct 29

Billions

On average, respondents

believe the Fed willmaintain its new level ofasset purchases for 3.03months.


4/33



4.What mix of Treasuries vs. mortgage-backed securities do youexpect in the Federal Reserve's taper?

28% 29%

72% 71%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep 17 Oct 29

Treasuries MBS


5/33



5.When do you expect the Federal Reserve will completely stoppurchasing assets?

0%

5%

10%

15%

20%

25%

30%

June 18 July 30 Sept 6 Sept 17 Oct 29

Averages

Jan 29: Nov 2013

Mar 19: May 2014Apr 30: July 2014Jun 18: July 2014

July 30: Aug 2014

Sept 6: Aug 2014

Sept 17: Aug 2014

Oct 29: Dec 2014

Plurality of 23%saidOct1415% said later than Jun 2015


6/33



6.Based on your expectations for tapering, what percentage ofthe ultimate impact on each market is already discounted inthe overall prices of that market?

66%

58%

68%

81%

73%

82%81%

70%

81%

58%

50%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Treasuries Equities Mortgages

July 30 Sept 6 Sept 17 Oct 29


7/33



7.Compared to Ben Bernanke, Fed chair nominee Janet Yellenwill be:

15%

44%

28%

3%

0%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Much moredovish

Somewhatmore dovish

No different Somewhatmore

hawkish

Much morehawkish

Don'tknow/unsure


8/33



8.Please rate the following four candidates for the Fedchairmans job on the listed qualities. (On a scale of 1 to 5,where a higher number means a higher rating.)

Numbers in parentheses to the right of the qualities represent how essential they are to the job of Fchairman on a scale of 1 (least) to 5 (most), as ranked in the July 30 survey.

4.35

4.22

3.32

3.95

3.35

3.38

4.16

3.97

3.42

3.36

4.05

3.42

3.44

3.54

2.89

3.08

3.65

4.57

3.34

3.31

2.00 2.50 3.00 3.50 4.00 4.50 5.0

Monetary policy expertise (4.52)

Ability to manage a financial crisis (4.30)

Good communication skills (4.22)

Respect from financial markets (4.18)

Concern about inflation (4.08)

Financial market expertise (4.04)

Respect from international financial leaders (3.41)

Concern about unemployment (3.39)

Good political skills (3.27)

Banking regulatory expertise (2.94)

Bernanke Yellen


9/33



Sum of candidate ratings weighted by essentialness of each quality.

0

20

40

60

80

100

120

140

160

Yellen Bernanke

Banking regulatory expertise (2.94)

Good political skills (3.27)

Concern about unemployment (3.39)

Respect from international financial

leaders (3.41)

Financial market expertise (4.04)

Concern about inflation (4.08)

Respect from financial markets (4.18)

Good communication skills (4.22)

Ability to manage a financial crisis

(4.30)

Monetary policy expertise (4.52)


10/33



9.What grade would you give Fed Chairman Ben Bernanke?

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

26%

42%

22%

5%

5%

22%

48%

19%

5%

3%

4%

23%

48%

13%

9%

0%

7%

30%

48%

18%

2%

2%

0%

21%

50%

21%

0%

3%

5%

0% 10% 20% 30% 40% 50% 60%

A

B

C

D

F

Don't know/unsure

Dec 22, 2010 July 21, 2011 Jan 23, 2012 Sept 17, 2013 Oct 29, 2013

Average forSept 17 survey:

B (3.00)

Average for

Oct 29survey:

B- (2.77)


11/33



Comments on this question:

Robert Brusca, Fact and Opinion Economics: (B) A for crisis management andresponse. B/C for policy in the recovery.

John Donaldson, Haverford Trust Co.: (A) If he had not been on duty, therecession could have been much, much worse.

Mike Dueker, Russell Investments: (B) Bernanke was great at managing throughfinancial crisis, but not as strong at understanding what would precipitate a financialcrisis.

Stuart Hoffman, PNC: (A) An A for effort and for results.

Lee Hoskins, Pacific Research Institute: (C) Bernanke resurrected the discreditePhillips curve with strong support from Yellen, so expect a weak response to risinginflation in the future.

Barry Knapp, Barclays PLC: (B) Crisis management is an A, impact of 5+ years ofZIRP (zero interest rate policy) and UMP is likely to prove less favorable.

David Kotok, Cumberland Advisors: (B) Before Lehman, results were based on

academic view. After Lehman failed, he became seasoned and forceful.

Subodh Kumar, Subodh Kumar & Associates: (C) The total Bernankeconsideration is pre-2007 miss of bubble; good skills at QE1 at start of crisis; miss of

QE3 in boosting real growth.

Justin Lederer, Cantor Fitzgerald: (B) Based on 2008 actions.

Lynn Reaser, Point Loma Nazarene University: (B) Mr. Bernanke handled thefinancial crisis very well. The exit strategy and implementation strategy from

monetary ease remain to be tested.

John Roberts, Hilliard Lyons: (B) Really a B+. He helped inflate the bubble in thefirst place, and probably gets a low grade because of this. However, the response to

the crisis was such to overwhelm those issues. The question, however, becomeswhether he extends the current accommodation too long. From that perspective, you

could probably give him an incomplete because the ultimate grade will not be appare


12/33



for a significant period after he leaves.

John Ryding, RDQ Economics: (C) A+ for handling of financial crisis, C forcommunication, D for monetary policy.

Diane Swonk, Mesirow Financial: (A) We will look back and realize he saved usfrom a depression worse than the Great Depression.

Peter Tanous, Lynx Investment Advisory: (Don't Know/Unsure) We won't knowthe final grade until we see the effects of the massive increase in the Fed's balance

sheet and the effect, if any, of "printing" huge amounts of new money.

Jason Trennert, Strategas: (B) He deserves an A+ for understanding that he couldincrease the size of the Fed's balance sheet without creating inflation. If there is a

problem, in my view it's that his munificence has allowed fiscal policy makers tocompletely shirk their responsibilities to the American people.

.


13/33



10.Overall, how do you rate the clarity and credibility of Fedcommunications?

5%

55%

21%

18%

0%0%

10%

20%

30%

40%

50%

60%

Very clear andcredible

Somewhat clearand credible

Somewhat notclear and

credible

Not very clearand credible

Don'tknow/unsure


14/33



11.Since September 2012, market functioning in the governmenbond market has:

2%

8%

4%3%

19%

11%12%

17%

20%

24%

60%

65%

47%46%

42%

50%

15%

15%

29%

25%27%

16%

2% 2% 2% 2%

3%0%

10%

20%

30%

40%

50%

60%

70%

March 19 April 30 June 18 July 30 Sept 17 Oct 29

Worsened somewhat

Improved somewhat

Improved a lot

Sta ed the same

Worsened a lot


15/33



12.Since September 2012, market functioning in the mortgage-backed security market market has:

4%

2%

5%4% 5%

3%

31%

22%

21%

31%

23%

29%29%

39%

21%

31%

41%

37%

20% 20%

32%

20%18% 18%

2%

4%5%

6%

5%5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

March 19 April 30 June 18 July 30 Sept 17 Oct 29

Stayed the same

Worsened a lot

Improved a lot

Worsened somewhat

Improved somewhat


16/33



13.Compared with the debate at the beginning of the year, thenext round of discussions to raise the debt ceiling will be:

19%

44%

35%

2%

24%

49%

27%

0%

10%

23%

67%

0%0%

10%

20%

30%

40%

50%

60%

70%

80%

More contentious About the same Less contentious Don't know/unsure

July 30 Sept 17 Oct 29


17/33



What is the probability that the United States fails to raise the

debt ceiling in the coming months and defaults on at least someof its payments?

0%

10%

20%

30%

40%

50%

60%

70%

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

Percentage

ofrespondents

Default probability

July 30 Sept 17 Oct 29

AveragesJuly 30: 6.6%

Sept 17: 8.4%Oct 29: 4.6%


18/33



14.When it comes to the budget deficit, the United States:

80%

67%

52%

40% 40%

50%53%

16%

25%

39%

44%

52%

41%40%

4% 4%9%

12%

8% 9%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

January 29 March 19 April 30 June 18 July 30 Sept 17 Oct 29

Should urgently enact a plan that puts it on a path toward a sustainable

budget deficit

Has at least a couple of years before it must enact such a plan

Does not need to enact a plan that puts it on a path toward a sustainabl

budget deficit

Don't know/unsure


19/33



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

1547

1589

1612

1655

1691

1654

1685

1753

1723

1751

1709

1752

1816

1,400

1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

1,850

Jan 292013

Mar 19 Apr 30 Jun 18 Jul 30 Sep 6 Sep 30 Oct 29

Survey Dates

December 31, 2013 June 30, 2014


20/33



16.What do you expect the yield on the 10-year Treasury notewill be on ?

2.31% 2.35%

2.10%

2.41%

2.73%

3.00% 3.02%

2.65%

2.80%

3.10%

3.33%3.39%

3.00%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Jan 29

2013

Mar 19 Apr 30 Jun 18 Jul 30 Sep 6 Sep 30 Oct 29

Survey Dates

December 31, 2013 June 30, 2014


21/33



17.What is your forecast for the year-over-year percentagechange in real U.S. GDP for ?

+2.6%

+2.7%

+2.6%

+2.3%

+2.2%

+1.9%

+2.1%+2.1%+2.1%+2.1%

+1.9%

+2.0%+1.9%

+2.6%+2.6%+2.6%

+2.6%+2.5%

+2.6%

+2.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Survey Dates

2013 2014


22/33



18.What effect, if any, did the government shutdown/debtceiling debate have on your GDP forecast for these quarters?

0%

10%

20%

30%

40%

50%

60%

70%

80%

2013 Q4 2014 Q1 2014 Q2

Averages:

2013 Q4

-0.29%2014 Q1

No change

2014 Q2

+0.04%


23/33



19.(Asked if forecast was lowered) How much of the negativeimpact came from:

53%

71%81%

44%

26%

19%

3% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 Q4 2014 Q1 2014 Q2

Rise in uncertainty Government spending reductions Other


24/33



21.Compared to last year, the holiday shopping season will be:

8%

23%

35%

31%

0%

4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

A lot better Somewhatbetter

The same Somewhatworse

A lot worse Don'tknow/unsure


25/33



22.When do you think the FOMC will first increase the fed fundsrate?

Increase fed funds rate

(Average response)

Survey Date

Dec

11,

2012

Jan

29,

2013

Mar

19,

2013

Apr

30,

2013

Jun

18,

2013

Jul

30,

2013

Sept

6,

2013

Sept

17,

2013

Sept

6,

2013

2013 Q2

Q3

Q4

2014 Q1

Q2

Q3

Q4

2015 Q12015

Q12015

Q12015

Q1

Q22015

Q22015

Q22015

Q2

Q32015

Q32015

Q32015

Q3

Q4

2016 Q1

Q2

Q3

Q4

2017 or later


26/33



23.Currently, Fed policy is not to raise interest rates until theunemployment rate is at least 6.5%. Will the Fed change thatguidance?

30%

60%

10%

44%

51%

4%

47%

42%

11%

0%

10%

20%

30%

40%

50%

60%

70%

Yes No Don't know/unsure

Jul 30 Sep 17 Oct 29


27/33



24.Where do you expect the fed funds target rate will be on ?

0.33%

0.27%

0.21%

0.17%0.19%0.19%

0.16%0.15%0.13% 0.13%

0.11%

0.20%0.18%

0.16%0.14%0.13%

0.28%

0.21%0.21%

0.97%

0.92%

0.82%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

Jul 31 Sep12

Dec11

Jan29

2013

Mar19

Apr30

Jun18

Jul 30 Sep 6 Sep17

Oct29

Survey Dates

Dec 31, 2013 June 30, 2014 Dec 31, 2014 Dec 31, 2015


28/33



25.In the next 12 months, what percent probability do you placeon the U.S. entering recession? (0%=No chance of recession,100%=Certainty of recession)

34.0%

36.1%

25.5%

20.3%

19.1%

20.6%

25.9%

26.0%

28.5%

20.4%

17.6%

18.2%

15.2%

16.2%

16.9%

18.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates


29/33



26.What is the single biggest threat facing the U.S. economicrecovery?

0% 5% 10% 15% 20% 25% 30% 3

European recession/financial crisis

Tax/regulatory policies

Slow job growth

High gasoline prices

Overall inflation

Deflation

Debt ceiling

Too little budget deficit reduction

Too much budget deficit reduction

Rise in interest rates

Other

Don't know/unsure

Europ

reces

/finan

cris

Tax/regul

atory

policies

Slow job

growth

High

gasoline

prices

Overall

inflationDeflation

Debt

ceiling

Too little

budget

deficit

reduction

Too

much

budget

deficit

reduction

Rise in

interest

rates

Other

Don't

know/un

sure

Apr 30 20%31%20%2%0%2%2%2%9%11%0%

Jun 18 15%28%20%2%3%3%0%2%13%13%0%

Jul 30 8%30%22%4%0%2%2%0%4%10%14%4%

Sep 17 4%27%22%7%2%0%4%2%4%18%7%2%

Oct 29 8%29%24%3%3%3%3%3%5%8%13%0%

Apr 30 Jun 18 Jul 30 Sep 17 Oct 29


30/33



27.What is your primary area of interest?

Comments:

Robert Brusca, Fact and Opinion Economics: God Help us.

John Donaldson, Haverford Trust Co.: The criticism of Yellen asbeing soft on inflation is unfair. She is fully committed to the Fed'sdual mission. There has been so little inflation during her tenure asvice-chair, what opportunity has there been for her to "talk tough"on inflation?

Mike Dueker, Russell Investments: While the increase in stock

prices in 2013 might provide some optimism to Fed policymakers,they have to consider whether consumption will respond as stronglyto stock market wealth as previous estimates suggested. Manypeople are behind in saving for retirement and they might view stockmarket gains as more ephemeral than they used to, so theirwillingness to consume part of recent stock market gains might be

Economics45%

Equities

21%

Fixed Income

13%

Currencies

0%

Other21%


31/33



limited.

Kevin Giddis, Raymond James/Morgan Keegan: Just about thetime you think the bond bull market is about to end because of somenewly found economic strength, the U.S. government goes intoaction, and makes it all better for bonds. This will likely continue into2014 as well. Thank you Washington!

Stuart Hoffman, PNC: Shorter holiday shopping season will notprevent a rise in holiday sales of 3.0-3.5% from last year. 2 millionmore employed, high house and stock prices and lower gasoline

prices drive holiday sales higher.

Lee Hoskins, Pacific Research Institute: Despite all the forwardguidance, inflation target and employment rate guide, post-policyaction still rests on next month's data. Effective policy requires alonger-term perspective.

David Kotok, Cumberland Advisors: Federal government actionshave ONLY added to slowing. Congress and the White House have

only made things worse than they would otherwise be.

Alan Kral, Trevor Stewart Burton & Jacobsen: With an electioncoming, the Fed will refrain from tightening monetary policy

Subodh Kumar, Subodh Kumar & Associates: Fudges on U.S.budget restructuring, European finance restructuring and laborrestructuring in Japan are risks for the global economy, quantitativeeasing (QE) notwithstanding. Another QE collateral risk is that it is

likely abetting political procrastination. Quality of delivery and offinancial structure should be emphasized in portfolio structure alongwith cash reserves and other assets for diversification.

Rob Morgan, Fulcrum Securities: The weak non-farm payrollreport on October 22nd virtually guarantees that the Fed won't taper


32/33



QE until 2014.

Chad Morganlander, Stifel Nicolaus (Washington CrossingAdvisors): Unfortunately, the U.S. economy in 2014 will look similarto 2013. This will force the Federal Reserve to continue QE longerthan consensus expectations. Investors should expect sub-pareconomic growth coupled with modest corporate earnings and topline growth.

James Paulsen, Wells Capital Management: Could we have a bitof an inflation scare sometime in 2014? Yellen will come in as

chairman perceived as a dove when the U.S. dollar is already veryweak and falling, commodity prices bottomed in 2013 and may beshowing signs of lifting again, emerging world economies arereaccelerating after 2 years of slowing while both Europe and Japanare growing again (adding again to global inflation pressures).Inflation stock sectors like materials have been outpacing the stockmarket in recent months, the Baltic freight rate index has recentlyexploded higher, annual wage inflation is close to breaking to newhighs for the recovery and the unemployment rate may have a 6

percent-ish handle on it just as Yellen takes the helm. Perhaps,most importantly, what if monetary velocity finally turns up in 2014as it has in every post-war recovery. (This would really change theconversation at the Fed)? I am not suggesting 2014 will produce amajor inflation problem, but could it produce a "fear" of inflation forthe first time in this recovery?

Lynn Reaser, Point Loma Nazarene University: The U.S.economy now faces a crisis in confidence. Monetary policy can now

inflate asset prices but will have little impact on spurring more jobgrowth and lower unemployment.

John Roberts, Hilliard Lyons: Too much bullishness/complacencycurrently in the equity markets. While earnings remain good, weakrevenue growth remains a worry and with GDP growth as low as it is,


33/33


valuations are slightly extended in the current economicenvironment.

John Ryding, RDQ Economics: September seriously hurt thecredibility of Fed communications and has left the market focusingexcessively on the latest jobs number.

Richard Steinberg, Steinberg Global Asset Management: Oncewe get past the Washington noise (and it will be noisy), the focuswill have to be job growth. Unemployed people don't buy goods andservices.

Diane Swonk, Mesirow Financial: Brinkmanship has cost us inways we will not know for years to come, economically andgeopolitically

f

Documents

CNBC Fed Survey results, October 29, 2013