cnbc fed survey - july 28, 2015

CNBC Fed Survey July 28, 2015 Page 1 of 33

FED SURVEY July 28, 2015

These survey results represent the opinions of 35 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 collected

on July 23-24, 2015. 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 the Federal Reserve raise the federal funds rate in 2015?

84%

11%

5%

92%

5% 3%

82%

15%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Don't know/unsure

Apr 28 Jun 16 Jul 28



2. If the Fed does not hike this year, which two factors from the following list do you believe will most likely be the reason?

59%

47%

32% 32%

12%

0%

10%

20%

30%

40%

50%

60%

70%

Declininginflation

Weak USeconomicgrowth

Weak overseasgrowth

Weak payrollgrowth

Concern overmarket reaction

to a hike



3. Relative to an economy operating at full capacity, what best describes your view of the amount of resource slack in the U.S. right now for labor?

July 29August

20Sep 16 Oct 28 Dec 16 Jan 27 Mar 17 Apr 28 Jun 16 Jul 28

Considerably more slack now 48% 34% 20% 18% 16% 16% 13% 6% 5% 12%

Modestly more slack now 36% 40% 60% 69% 55% 50% 63% 64% 54% 47%

No difference 4% 6% 3% 0% 0% 6% 11% 0% 15% 9%

Modestly less slack now 8% 11% 6% 5% 24% 19% 11% 22% 15% 24%

Considerably less slack now 4% 9% 9% 8% 5% 9% 3% 8% 10% 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Modestly less slack

Modestly more slack

Considerably less slack

No difference

Considerably more slack



Relative to an economy operating at full capacity, what best describes your view of the amount of resource slack in the U.S. right now for production capacity?

July 29August

20Sep 16 Oct 28 Dec 16 Jan 27 Mar 17 Apr 28 Jun 16 Jul 28

Considerably more slack now 12% 9% 8% 8% 8% 0% 14% 8% 10% 21%

Modestly more slack now 56% 60% 64% 64% 55% 59% 57% 57% 62% 38%

No difference 8% 14% 8% 15% 13% 19% 14% 5% 8% 15%

Modestly less slack now 16% 9% 14% 8% 24% 13% 11% 19% 13% 21%

Considerably less slack now 4% 9% 3% 5% 0% 9% 5% 11% 8% 6%

0%

10%

20%

30%

40%

50%

60%

70%

No difference

Modestly more slack

Modestly less slack

Considerably less slack

Considerably more slack



4. What is your measure of full employment in the U.S.?

0%

5%

10%

15%

20%

25%

30%

35%

Unemployment rate


Averages:

Apr 28: 4.8%

Jun 16: 4.8%

Jul 28: 4.7%



5. In July, will the Fed alter its statement to signal a rate hike is nearing?

34%

63%

3%

0%

10%

20%

30%

40%

50%

60%

70%




6. At what level of year-over-year wage growth would you become concerned that inflationary pressures are building?

14% chose Theres little connection between wages and overall price inflation.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% 1% 2% 3% 4% 5% 6% 7%

Wage growth

Jun 16 Jul 28

Averages:

Jun 16: 3.6%

Jul 28: 3.5%



7. At the current level of wage growth, are you ...?

10%

5%

62%

21%

3%

6%

9%

65%

21%

0% 0%

10%

20%

30%

40%

50%

60%

70%

Concernedabout inflation

Concernedabout deflation

Believe therisks areneutral

Theres little connection

between wages and overall

price inflation

Don'tknow/unsure

Jun 16 Jul 28



8. What is the minimum rate of average monthly payroll growth that you believe the Fed will require to:

0%

3%

0%

6%

29%

44%

6%

9%

3%

0%

3%

6%

12%

18%

32%

18%

9%

3%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Less than 100K

100K to 125K

125K to 150K

150K to 175K

175K to 200K

200K to 225K

225K to 250K

More than 250K

Don't know/unsure

Hike rates initially Enact subsequent hikes



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

2075

2149

2111

2194 2187

2128

2156 2159 2135

2311 2296

2247

2259

2293

2254

1,800

1,900

2,000

2,100

2,200

2,300

2,400

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27

'15

Mar 17 Apr 282 Jun 16 Jul 28

Survey Dates

December 31, 2015 December 31, 2016



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

3.43% 3.45%

3.19%

2.96%

2.54%

2.57%

2.33%

2.64%

2.62%

3.52%

3.04%

3.14%

2.89%

3.24% 3.17%

2.0%

2.5%

3.0%

3.5%

4.0%

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27'15

Mar 17 April 28 Jul 16 Jul 28

Survey Dates

December 31, 2015 December 31, 2016



11. What is your forecast for the year-over-year percentage change in real U.S. GDP for ?

Jan

28, '14Mar 18 Apr 28 Jun 4 Jul 29 Sep 16 Oct 28 Dec 16

Jan

27, '15Mar 17

April

28Jun 16 Jul 28

2015 +2.90 +3.02 +3.00 +2.81 +2.75 +2.90 +2.90 +3.02 +2.99 +2.69 +2.70 +2.25 2.41%

2016 +2.88 +2.80 +2.84 +2.81 +2.78 2.70%

+2.90%

+3.02% +3.00%

+2.81%

+2.75%

+2.90% +2.90%

+3.02% +2.99%

+2.69% +2.70%

+2.25%

2.41%

+2.88%

+2.80%

+2.84% +2.81%

+2.78%

2.70%

2.0%

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%

3.4%

2015 2016



12. What is your forecast for the year-over-year percentage change in the headline U.S. CPI for ?

2.02%

2.29% 2.27%

2.01%

1.74%

1.17%

1.01% 1.00%

1.17%

1.10%

2.17%

2.07%

2.08%

1.96%

2.29%

2.17%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Jun 4 Jul 29 Sep 16 Oct 28 Dec 16 Jan 27,'15

Mar 17 April 28 Jun 16 Jul 28

Survey Dates

2015 2016



13. According to fed fund futures trading at the CME the probability of a rate hike in September is 38 percent. What rate hike probability do you believe is too low for the Fed to

actually hike rates?

0%

2%

4%

6%

8%

10%

12%

14%

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

Rate hike probability

59% responded

"None. The Fed won't consider

this factor"

Average for numerical responses:

31.4%



14. When do you expect the Fed to hike the fed funds rate and allow its balance sheet to decline?

Survey Date Fed Funds Hike

Average Forecast

Balance Sheet

Average Forecast

April 28, 2014 survey July 2015 October 2015

June 4 survey August 2015 March 2016

July 29 survey August 2015 December 2015

August 20 survey July 2015 Not asked

September 16 survey June 2015 December 2015

October 28 survey July 2015 January 2016

December 16 survey July 2015 February 2016

Jan. 27, 2015 survey September 2015 April 2016

March 17 survey August 2015 April 2016

April 28 survey October 2015 May 2016

June 16 survey October 2015 July 2016

July 28 survey November 2015 June 2016



15. How would you characterize the Fed's current monetary policy?

28%

49%

46%

49%

44%

39%

50%

54%

50%

60%

43%

43%

49%

43%

49% 50%

47%

32%

44%

35%

47%

17%

6%

3% 3% 3%

6% 5%

3%

6%

13%

3%

3%

6% 5% 6%

3%

8%

6%

3%

0% 0%

10%

20%

30%

40%

50%

60%

70%

Jul 31,'12

Jul 29,'14

Aug 20 Sep 16 Oct 28 Dec 16 Jan 27,'15


Too accommodative Just right Too restrictive Don't know/unsure

Too accomodative

Don't know/unsure

Too restrictive

Just right



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

Jul

30

Sep

17

Oct

29

Dec

17

Jan

28

'14

Mar

18

Apr

28

Jun

4

Jul

29

Aug

20

Sep

16

Oct

28

Dec

16

Jan

27,

'15

Mar

17

April

28

Jun

16

Jul

28

Dec 31, 2015 0.97 0.92 0.82 0.70 0.72 0.83 0.99 0.68 1.05 0.89 0.98 0.89 0.83 0.73 0.71 0.54 0.53 0.47

Dec 31, 2016 1.99 2.13 2.04 1.93 1.75 1.84 1.46 1.56 1.41

0.97% 0.92%

0.82%

0.70% 0.72%

0.83%

0.99%

0.68%

1.05%

0.89%

0.98%

0.89%

0.83%

0.73% 0.71%

0.54% 0.53%

0.47%

1.99%

2.13%

2.04%

1.93%

1.75%

1.84%

1.46%

1.56%

1.41%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Dec 2016

Dec 2015



17. At what fed funds level will the Federal Reserve stop hiking rates in the current cycle? That is, what will be the terminal rate?

3.16% 3.20%

3.30%

3.17% 3.11%

3.04%

2.85%

3.06%

2.98%

2.0%

2.5%

3.0%

3.5%

4.0%

Aug 20 Sep 16 Oct 28 Dec 16 Jan 27,

'15


Survey Dates



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

Survey Date Forecast

August 20 survey Q4 2017

September 16 survey Q3 2017

October 28 survey Q4 2017

December 16 survey Q1 2018

Jan. 27, 2015 survey Q1 2018

March 17 survey Q4 2017

April 28 survey Q1 2018

June 16 survey Q1 2018

July 28 survey Q2 2018



19. What is the percentage chance each of the following countries will leave the euro zone in the next 3 years? (0%=No chance of leaving, 100%=Certainty of leaving):

41%

13%

12%

9%

8%

3%

39%

11%

8%

7%

5%

3%

5%

50%

12%

10%

8%

5%

2%

3%

49%

13%

12%

11%

7%

3%

3%

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

Greece

Portugal

Spain

Italy

Ireland

Germany

France




20. The recent agreement between Greece and its creditors is a:

0%

91%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Permanent solution Temporary solution Don't know/unsure



21. What effect will the Greece deal have on:

15%

9%

68%

9%

18%

59%

15%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Positive Neutral Negative Don't know/unsure

Greece's economy The eurozone's economy



22. Assuming a new agreement is reached, do you believe that Greece will pass the first review (that is, enact sufficient economic reforms to satisfy the initial creditor review)?

47%

24%

29%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%




23. Has the U.S. stock market already discounted a fed funds rate hike by the Federal Reserve this year?

56%

53% 53%

47%

61%

50%

36% 38%

47%

50%

39% 38%

8% 9%

0%

3%

0%

12%

0%

10%

20%

30%

40%

50%

60%

70%

Dec 16 Jan 27 Mar 17 Apr 28 Jun 16 Jul 28

Survey dates




Has the U.S. bond market already discounted a fed funds rate hike by the Federal Reserve this year?

42%

67%

62% 56%

33% 35%

3%

0%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%


Survey dates




24. What is the single biggest threat facing the U.S. economic recovery?

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

European recession/financial crisis

Tax/regulatory policies

Slow job growth

Inflation

Deflation

Debt ceiling

Rise in interest rates

Geopolitical risks

Global economic weakness

Slow wage growth

Other

Don't know/unsure

Europeanrecession/financial

crisis

Tax/regulatory

policies

Slow jobgrowth

InflationDeflationDebt

ceiling

Rise ininterest

rates

Geopolitical risks

Globaleconomicweakness

Slow wagegrowth

OtherDon't

know/unsure

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

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

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

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

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

Dec 17 5%32%29%2%0%2%15%2%2%

Jan 28 '14 7%21%30%2%0%0%12%21%0%

Mar 18 10%23%26%3%5%0%5%18%0%

Apr 28 3%26%21%3%5%0%8%18%13%0%

Jul 29 12%29%12%6%3%0%12%12%12%3%

Sep 16 6%26%29%6%3%0%6%11%11%3%

Oct 28 31%18%15%3%3%0%10%8%8%3%

Dec 16 40%14%14%3%6%0%3%14%3%0%

Jan 27 '15 0%13%9%0%0%0%6%16%41%6%16%0%

Mar 17 6%14%0%3%6%0%6%8%28%17%14%0%

April 28 3%11%8%3%0%0%6%11%28%8%19%3%

Jun 16 3%17%3%0%0%0%14%25%22%6%11%0%

Jul 28 6%21%9%0%0%0%12%6%29%9%9%0%

Apr 30 Jun 18 Jul 30 Sep 17 Oct 29 Dec 17 Jan 28 '14 Mar 18 Apr 28

Jul 29 Sep 16 Oct 28 Dec 16 Jan 27 '15 Mar 17 April 28 Jun 16 Jul 28



FED SURVEY April 30,

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)

Aug11,

'11

Sep19

Oct31

Jan23,

'12

Mar16

Apr24

Jul31

Sep12

Dec11

Jan29,

'13

Mar19

Apr30

Jun18

Jul30

Sep6

Oct29

Dec17

Jan28

'14

Mar18

Apr28

Jul29

Sep16

Oct28

Dec16

Jan27

'15

Mar17

April28

Jun16

Jul28

Series1 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 17.3 15.3 16.9 14.6 16.2 15.0 15.1 13.6 13.0 16.4 14.7 15.1 17.4

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%

17.3%

15.3%

16.9%

14.6%

16.2%

15.0%

15.1%

13.6% 13.0%

16.4%

14.7%

15.1%

17.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates




26. What is your primary area of interest?

Comments: Robert Brusca, Fact and Opinion Economics: Monetary policy is not 'too tight ' as I said because of interest rates that are 'too high.'

It is bank regulation and the imposition of high capital/asset ratios IN CONJUNCTION WITH the way Fed stress tests are performed that make policy restrictive. I still don't think that the Fed thinks of its policy that way and that is the reason why monetary policy stays too

tight. Since banks have to keep capital relative to assets in order to survive the pit of a draconian stress test, the effective capital asset ratio they have to have is really much greater. It is why banks are not lending more. Fed policy on banks is really onerous regulation

and is highly restrictive. Overseas.. EMU IS IMPOSING AUSTERITY. Where could growth possibly come from, let alone inflation? Commodity and oil prices are crashing, gold is imploding, the dollar is strong and the FED is ITCHING to hike rates. Wake me when this

bad dream is over! Janet! Who really thinks that the economy will pick up in the second half of the year? Good luck with that. By the

Economics

49%

Equities 17%

Fixed Income

11%

Currencies

3%

Other 20%




way, Greece is still just an accident waiting to happen. It needs too much debt relief to be able to survive and it will not get enough of it. Greece is forming a new ring of Hell in Dante's inferno.

Thomas Costerg, Standard Chartered Bank: We think the FOMC will adopt a do no harm approach when it meets this week: the statement is unlikely to give explicit strong guidance about a near-term rate hike, in our view. The only hint we foresee might be a

more upbeat tone about the domestic economy in the first paragraph. We still expect a September rate hike, but this hinges on an improvement in domestic data ahead of the meeting, particularly signs of an uptrend/bounce in wages/inflation and signs of

improvement in H2 GDP growth after a meagre performance in H1. John Donaldson, Haverford Trust Co.: There is an exceptionally wide range of predictions regarding the Fed. One extreme expects no

action until the middle of 2016. The other extreme calls for a 3% funds rate by the end of 2016. Both do not take the FOMC at its word that moves will be soon and gradual. We take the FOMC at its word and expect the first move in September and that subsequent

moves will be very gradual. When a Fed Chair uses a word (gradual) three times in one comment during Congressional testimony, you should pay attention.

Mark Elenowitz, TriPoint Global Equities: While countries such as China and Greece continue on a downward spiral, our domestic capital markets have proven their resilience to international

pressures and I believe this same resilience will be shown once the Fed raises rates. Dennis Gartman, The Gartman Letter: I have too many venues

already in place to make a fool of myself; I needn't supply others. Kevin Giddis, Raymond James/Morgan Keegan: The market seems to be saying "no" even as the Fed is saying "yes" to a near-




term rate hike. While the Fed ultimately has the stick, they really need the market to come along so we don't find ourselves in a highly volatile limited liquidity aftershock of the Fed's action.

Stuart Hoffman, PNC Financial Services Group: GDP data on 7/30 for 2Q'15 and revisions to 2012-2014 will be "game changers" for outlook for timing of the first funds rate hike. I expect real GDP growth will be revised up from the pre-revision 2.3% average for

2012-2014 along with a smoother quarterly pattern reflecting less "residual seasonality." I expect 1Q'15 real GDP to be revised up to near 0.8% and 2Q'15 to top 3% so first-half real GDP will be up by nearly 2%. This will cause upward revisions to the market's and

FOMC's consensus forecasts for real GDP in 2015 (4Q-4Q) and support an initial funds rate hike at the September FOMC meeting. Then the 2Q ECI data on 7/31 will show workers' wage and fringe benefit compensation running close to up 2.5% from a year ago, well

above the AHE data and help "light up" the Yellen labor market dashboard Art Hogan, Wunderlich Securities: The bond market and the

strong dollar have already tightened for the Fed. Its time for the Committee to join the Party.

Hugh Johnson, Hugh Johnson Advisors: There are two important issues that need to be resolved before the Fed will be comfortable/justified in moving toward restraint. The first is inflation. It is still unclear if and when the rate of consumer inflation will move

to 2.0%. The second issue is China. Given the performance of the Shanghai Composite it is very unclear what will be the outcome for the financial markets and economy of China and, by implication, global financial markets and global economy. There needs to be a

significantly higher level of confidence that Chinese policymakers will manage the decline in equities and impact on Chinese domestic consumption well. This is important.




Subodh Kumar, Subodh Kumar & Associates: Unavoidable reality is one of interest rate increases as Fed Chair Yellen and several governors have underscored. We believe the Fed rate hikes start from September 2015. The first tranches of quantitative ease

were necessary. Later ones likely have had side effects like procrastination on restructuring by governments and companies as well as complacency in the capital markets. The corporate earnings reports continue to have expectations being cut to levels then

routinely exceeded in actual reporting but which now risk diluting market information content. With bifurcation sharp and buybacks clouding issues, we favor quality of operational and financial structure. In the critical financial services sector, which is still

addressing past scandals and globally facing regulatory, capital structure and business change, we favor the early movers on restructuring.

Guy LeBas, Janney Montgomery Scott: Leaked economic projections provided to the FOMC indicate that Fed board staff economists project only one 25bps rate hike this year. Alternately, we could see two "micro hikes" of less than 25bps to get to the same

point--the potential for a micro hike is being largely ignored, but hard to say exactly how market participants would interpret such an action differently from a single 25bps hike.

John Lonski, Moody's: At the current annual rate of base metals price deflation, the 10-year Treasury has always been less than its year-earlier reading, while fed funds has never been hiked. Also, the

current widening of the high-yield bond spread and the ongoing climb by the average expected frequency of high-yield defaults weigh against significantly higher interest rates. What many refer to as a "lift off" by interest rates might better be described as a "spurt."

Drew Matus, UBS Investment Research: We believe zero rates are restraining economic activity. A move off of the zero bound may boost economic activity.




Rob Morgan, Sethi Financial Group: In spite of slow job growth and low inflation, the Fed needs ammo to fight the next recession and will hike at least once, and maybe twice, before year-end.

James Paulsen, Wells Capital Management: One of the most interesting current financial market characteristics is despite widening concerns about weaker global growth and deflation, 10-year government bond yields in the U.S. and in Germany remain

near yearly highs. Does this reflect increased certainty of near-term Fed tightening or is the bond market suggesting yields maybe have finally bottomed for this recovery cycle?

John Roberts, Hilliard Lyons: While we are early in the Q2 earnings season, cautiousness in forward guidance among some of the large multinational companies outside of F/X impacts have caused us to become even more defensive in our recommendation

for client positioning in the equity markets. The length of the current Bull market only adds to this caution and the potential for at least a modest pullback. If these early indications of weakness are confirmed as we move through earnings season, the markets may

have already reached their highs for the year. Chris Rupkey, Bank of Tokyo-Mitsubishi: The Fed is behind the

curve. They will break the fixed income markets if they don't raise rates from zero shortly. Failure to normalize rates is changing the cyclical nature of interest rates, confusing corporations who always try to lower interest costs. Fed officials from other years fought

inflation for too long and the current Fed is fighting unemployment for too long. We cannot know now what problems their zero rates policy will cause for the economy in the years to come. It may be creating a new housing price bubble. Yellen, at her SF Fed perch,

didn't stop the first bubble so perhaps she doesn't see that her policy risks a new bubble. Allen Sinai, Decision Economics: U.S. and global economies are




headed for the best years of the expansion in 2016/2017. Diane Swonk, Mesirow Financial: Limp off for the Fed will be an interactive process, driven by both data and financial market

reactions to the process; markets will need time to adjust to normalization in policy Peter Tanous, Lynx Investment Advisory: The biggest concern

today is the future of China's growth. Will China's efforts to manage its economy and stock market work? We just don't know. Scott Wren, Wells Fargo Advisors: The U.S. economy will likely

continue on this modest growth/modest inflation path for several more years. Stocks can do fine in this environment. International growth will also be modest and inflation will stay low. Expect 6% to 10% total return for the S&P 500 over the next couple of years. We

are likely in the 7th inning of this cycle. We want our clients to be optimistic and use market volatility to put sidelined funds to work. Mark Zandi, Moody's Analytics: All the ingredients are in place for

the Fed to begin normalizing monetary policy.

cnbc fed survey - july 28, 2015

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