cnbc fed survey results - december 11, 2012

7/28/2019 CNBC Fed Survey Results - December 11, 2012

1/31

CNBC Fed Survey December 11, 2012Page 1 of 31

FED SURVEYDecember 11, 2012

These survey results represent the opinions 48 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 December 6-7, 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 whodid accept our invitation.

1.Do you expect the Federal Reserve to replace the expiringOperation Twist with outright assets purchases?

88%

8%4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Don't know/unsure


2/31



For those who answered yes to question #1: What specifically

will the Fed purchase to replace Operation Twist?

2%

50%

48%

0%0%

10%

20%

30%

40%

50%

60%

MBS Only Treasuries Only Mix of Treasuriesand MBS

Other


3/31



2.In January, how much do you expect total monthly assetpurchases to be from the Fed, including the new QE programannounced in September and taking into account whateveramount, if any, that you believe the Fed will add to replaceOperation Twist?

0%

5%

10%

15%

20%

25%

30%

35%

Billlions of dollars


4/31



3.By the end of December 2013, what is the total amount ofadditional asset purchases the Federal Reserve will havemade?

0%

5%

10%

15%

20%

25%

30%

Billlions of dollars


5/31



4.At what unemployment rate will the Fed halt its assetpurchases?

6% of respondents selected Fed purchases will not react to the unemployment rate

0%

5%

10%

15%

20%

25%

30%

35%

Average:6.5%


6/31



5.At what inflation rate will the Fed halt its asset purchases?

20% of respondents selected Fed purchases will not react to the inflation rate

0%

5%

10%

15%

20%

25%

30%

35%

40%

Average:3.4%


7/31



6.Should the Fed use explicit economic targets to triggermonetary policy?

32%

60%

9%

45%

49%

6%

0%

10%

20%

30%

40%

50%

60%

70%


September 12, 2012 December 11, 2012


8/31



7.If the Fed does choose to use economic targets, which of thefollowing do you favor? (You may select more than one.)

Other responses:

Broad swath of employment indicators Equity markets Money supply It should definitely not use economic targets Labor force participation rate

55%

36%

40%

9%

75%

43%

32%

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation Unemployment rate Nominal GDP Other



9/31



8.In the Feds policy statement after its December 11-12meeting, the FOMCs low-rate calendar guidance will:

Comments on this question:

John Augustine, Fifth Third Asset Management: Sometime during 2013 Fed drops calendarguidance and goes to economic target guidance.

Tony Crescenzi, Pimco: The Fed needs more time to study how to replace its forward guidance. The

Fed will need to anchor inflation expectations if it is to put more focus on employment, which is likely.

John Donaldson, Haverford Trust Co.: Ultimately, the mid-2015 guidance will prove to be too long

as the first policy move will be earlier.

79%

9%4%

0% 0%4% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


10/31



Lee Hoskins, Pacific Research Institute: The Fed should drop date guidance and stick with an

explicit inflation target with guidance as to how changes in the inflation rate will prompt policy actions

Over time the Fed only determines the inflation rate and has no control over real variables such asemployment or real GDP. How many times does the Fed need to run the QE experiment before it

becomes obvious that it fails to produce employment or real GDP growth? QE 5,6,7?

Hugh Johnson, Hugh Johnson Advisors: Implicit goals of Federal Reserve policy would seem toinclude:

(a) Maintaining both short and longer-term interest rates (including mortgage rates) at levelsthat are "low and attractive to borrowers"(b) Preserve some downward pressure on the dollar to stimulate exports to offset weakness in

exports to Europe

(c) Stimulate ongoing recovery in housing and housing prices to improve the asset side ofhousehold balance sheets and, as result, further the deleveraging process

(d) Help stock prices for same reason as cThis policy is accommodative and responsive to underlying economic conditions (which remain anemic

and is arguably humane. The unfortunate aspect about the current state of affairs is that tax andspending policy is not accommodative, responsive to underlying economic conditions, or humane.Reducing deficits is important, but must be secondary until the excess (debt) of the financial crisis is

eliminated or reduced. Deficits are and will continue to come down as a percentage of GDP and theyshould come down somewhat "harder" so that debt as percentage of GDP reverses course downward.But this requires only a "nudge" to tax and spending policy...not an ax. Review 1937-1938.

Alan Kral, Trevor Stewart Burton & Jacobsen: Term will be indefinite

Joseph LaVorgna, Deutsche Bank: Sometime early next year, the Fed will agree on a set of

economic variables that will provide thresholds for the removal of policy accommodation.

Mark Luschini, Janney Montgomery Scott: The Fed either institutes or makes strong reference to

the intention to move from a date-dependent approach to a state-dependent approach.

Drew Matus, UBS Investment Research: QE is the roach motel of policy: once a central bank chec

in, they can never check out.

Ward McCarthy, Jefferies: They may link this to economic projections.

Joel Naroff, Naroff Economic Advisors: Since the fiscal cliff issue will not be resolved by then, th

Fed cannot change its outlook. Depending upon what happens with the discussions, the Fed couldmodify things at its January meeting.

Chris Rupkey, Bank of Tokyo-Mitsubishi: Over time the Fed has wrecked the money markets bypushing rates to zero four long years ago. Now with QE and forward guidance they are trying to bring

down long-term rates to zero as well. They wrecked the money market and now their actions arewrecking the bond market. This is the longest Fed easing during an economic expansion in history. A

long as they keep doing this it tells the public the economy is still not all right in their view. This policy

is starting to look like a mistake.


11/31



Hank Smith, Haverford Investments: The so called "grand compromise" of tax and entitlement

reform is the key fiscal policy if done right that will allow the Fed to start the unwinding process.

Diane Swonk, Mesirow Financial: Changes to communications is an evolutionary process, and we

still don't have consensus on how to convey more economic targets.

Clare Zempel, Zempel Strategic: Fed should replace the low-rate promise with a pledge to dowhatever it takes to raise nominal GDP growth to 5.5% on a sustained year-over-year basis.

9.Do you believe further quantitative easing can help lower theunemployment rate?

36%

59%

5%

37%

59%

4%

0%

10%

20%

30%

40%

50%

60%

70%




12/31



Do you believe further quantitative easing can help mortgage

rates?

59%

33%

9%

0%

10%

20%

30%

40%

50%

60%

70%



13/31



Do you believe further quantitative easing can help lower bondyields?

58%

30%

13%

0%

10%

20%

30%

40%

50%

60%

70%



14/31



10.Would further purchases of government or mortgage backedsecurities by the Fed impair market pricing and overallfunctioning?

43%

52%

5%

59%

28%

13%

0%

10%

20%

30%

40%

50%

60%

70%




15/31



11.Would further QE cause inflation?

35%

46%

9%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Yes No It already is Don't know/unsure


16/31



12.Do you believe the U.S. will go over the fiscal cliff?

41%

46%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%



17/31



13.If the U.S. does go over the fiscal cliff, do you believe it wido so:

2% 2%

28%

43%

19%

6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Permanently For most of2013

For only afew months

For only afew weeks

For only afew days

Don'tknow/unsure


18/31



14.What would be the impact on GDP if the U.S. goes over thefiscal cliff?

0%

5%

10%

15%

20%

25%

30%

2013 GDP 2014 GDP

Averages:

2013 GDP: -1.61%

2014 GDP: -0.61%


19/31



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

July 31 was the first survey in which we asked for a June 30, 2013 forecast.

1387

1436

14001396

14511453

1497

1417

1480

December 31, 2012 June 30, 2013

Jan 23 March 16 April 24 July 31 Sept 12 Dec 11


20/31



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

July 31 was the first survey in which we asked for a June 30, 2013 forecast.

2.52%2.59%

2.40%

1.69%

1.98%

1.78%

2.06%

1.64%

1.90%

December 31, 2012 June 30, 2013



21/31



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

+2.85%+2.47%

+2.24%+2.37%

+2.45%

+2.59%

+2.46%

+2.74%

+2.39%

+2.55%

+1.93%

+2.26%

+2.06%

+2.21%

+2.06%

+1.91%

2012

2013

July 20, 2011 Aug 11 Sept 19 Oct 31

January 23, 2012 March 16 April 24 July 31

Sept 12 Dec 11


22/31



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

Notes: Responses for individual quarters are combined by year. In the July 31 survey, the choice of2015 or later was replaced with choices for each quarter and 2016 or later was added. In theDecember 11 survey, the choice of 2016 or later was replaced with choices for each quarter and 20

or later was added.

2012 2013 2014 2015 2016 2017 Don't Know

April 24 4% 34% 45% 13% 4%

July 31 0% 22% 28% 37% 11% 2%

Sept 12 0% 16% 23% 34% 18% 8%

Dec 11 0% 4% 32% 38% 17% 6% 9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

April 24 July 31 Sept 12 Dec 11


23/31



19.When do you think the Federal Reserve will make its firstplanned decrease in the size of its balance sheet?

Notes: Responses for individual quarters are combined by year. In the July 31 survey, the choice of2015 or later was replaced with choices for each quarter and 2016 or later was added. In theDecember 11 survey, the choice of 2016 or later was replaced with choices for each quarter and 20

or later was added.

2012 2013 2014 2015 2016 2017 Don't Know

April 24 8% 45% 14% 28% 6%

July 31 0% 27% 38% 18% 16% 2%

Sept 12 0% 17% 28% 26% 17% 13%

Dec 11 0% 2% 30% 35% 7% 11% 15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%



24/31



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

0.41%

0.42%

0.27%

0.20%

0.33%

0.14%

0.27%

0.16%

0.21%

0.0% 0.1% 0.2% 0.3% 0.4% 0.5%

June 30

2013

Dec 31

2013



25/31



21.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%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Aug 11,2011

Sept 19 Oct 31 Jan 23,2012

March16



26/31



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

Other responses:

Geopolitical shock Newspaper stories exaggerating the risks that the

economy faces

Excessive deficit reduction

Radical federal policy shift

March 16 April 24 July 31 Sept 12 Dec 11

European recession/financial crisis 17% 37% 30% 24% 11%

Tax/regulatory policies 36% 27% 16% 11% 33%

Slow job growth 4% 8% 7% 15% 9%

High gasoline prices 26% 8% 0% 0% 0%

Overall inflation 4% 4% 0% 0% 2%

Deflation 5% 2% 0%

"Fiscal Cliff" 41% 39% 35%

Don't know/unsure 2% 0% 0% 2% 2%

Other: 11% 17% 2% 7% 9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


27/31



What is your primary area of interest?

Comments:

John Augustine, Fifth Third Asset Management: There will be asmall tax agreement made prior to 12/31, but not a spendingagreement. The White House needs a tax agreement as the middleclass would be negatively impacted the most by tax expirations, notthe wealthy (outside of the estate tax).

Tony Crescenzi, PIMCO: At the end of the day, thefiscal cliffisa small issue when considering the longer-term budget challengesfacing the United States, which is on a course to see its debts risesignificantly in the years ahead owing to sharp growth rates in thesize of government spending programs. The medium to long-termbudget problems of the United States are far more important to theultimate destination of markets than is thefiscal cliff.

John Donaldson, Haverford Trust Co.: Allowing the economy to

Economics53%

Equities17%

Fixed Income15%

Currencies

0%Other15%


28/31



"go over the cliff" would be extremely reckless. The possibility ofunintended consequences is almost limitless.

Kevin Giddis, Raymond James/Morgan Keegan: Thefiscalcliffconversation has edged its way to the "head of the class" whenconsidering the possibility of a new recession. If it can be avoided,then economic growth returns to just "being hard" vs. "nearlyimpossible."

Dan Greenhaus, BTIG: While it may not be the primary threat,thefiscal cliffis certainly the paramount immediate threat. If the

cliff is triggered, and the cuts/tax increases remain in place forseveral weeks or worse, several months, its hard to construct a

scenario where the U.S. economy is not in recession. Recoveringfrom that recession is not as simple as "fixing" the cliff's issues. TheU.S. economy is not a light switch.

Lee Hoskins, Pacific Research Institute: The Fed has laudableintentions but we all know what road they pave. Bubbles, inflation,and misallocation of capital are the likely outcome of its misguided

policies.

Hugh Johnson, Hugh Johnson Advisors: Essentially, the outlookremains positive for the economy, profits, and stock prices for 2013and 2014 assuming U.S. tax and spending policy does not become"too aggressive" as it did in 1937-1938. This requires patience(deficits are declining as percentage of GDP, with modest increasesin tax revenues and modest reductions in spending debt will begin todecline as percentage of GDP and will not reach the 90 percent

"danger zone") and sensible tax and spending decisions. The outlookfor 2013 and 2014 depends on it (as by now we all suspect).

John Kattar, Ardent Asset Advisors: ZIRP and QE have becomesuch a fixed part of investor expectations that it is difficult to seehow or when the Fed could unwind these policies without major


29/31



economic or market dislocations. The Fed has stayed too long at theparty.

Barry Knapp, Barclays PLC: There is an inordinate amount offocus on the timing of the deal and while important, we believe thelarger issue is whether the ultimate deal that emerges avoids theEuropean approach of too much reliance on taxation and no realstructural change to debt sustainability.

David Kotok, Cumberland Advisors: There is little margin forshocks to the system. That is why Middle East and oil shocks are

very high risk. U.S. and global recovery is very fragile.

Joseph LaVorgna, Deutsche Bank: Monetary policy is dampeningthe "animal spirits" of the business cycles; and the long-term effectsof QE could be very detrimental to economic growth and financialstability.

Guy LeBas, Janney Montgomery Scott: A more appropriate termwould be the "fiscal whiff..." In seriousness, however, our country

faces one of relatively few decision points as to whether we valueeconomic growth today or a sustainable budget path and bettergrowth tomorrow. That decision is largely a moral one, not aneconomic one. Thefiscal cliffis brought about by this unavoidableconflict. "Fixing" thefiscal cliffwithout long term reforms is just asrisky--if not more so--than "going over."

John Lonski, Moody's: As far as the perceived risk of going overthe "fiscal cliff" is concerned, improved market sentiment is at odds

with sharply lower consumer sentiment and anecdotal evidence ofdiminished business confidence. Also, recent financial market ralliesmay lessen the perceived urgency among policymakers of resolving"fiscal cliff" issues prior to 1/1/2013.

Drew Matus, UBS Investment Research: QE is the roach motel


30/31



of policy: once a central bank checks in, they can never check out.

Ward McCarthy, Jefferies: The U.S. economy could grow at 3percent to 3.5 percent in short order if the politicians could get thebudget right.

Rob Morgan, Fulcrum Securities: The Fed should be wary ofusing economic targets to guide policy. Changes to policy takemonths to ripple through the economy so using some economictargets to guide policy is somewhat like driving a car using only therear-view mirror.

Chad Morganlander, Stifel Nicolaus (Washington CrossingAdvisors): Regardless of what the Federal Reserve does the globaleconomy in 2013 will look like 2012. We expect the U.S. economywill grow at a sluggish pace of 1-2 percent. The European economywill contract at -1 percent and global growth expectations willcontinue to be reduced. We are advising clients to stay balanced andmove up the quality spectrum on equities and fixed incomeinvestments.

Joel Naroff, Naroff Economic Advisors: A reasonable resolutionto thefiscal cliffcould lead to much better growth in 2013 and theFed ending its aggressive easing program before the end of 2014.

John Roberts, Hilliard Lyons: Our projections are based on anegotiated agreement on thefiscal cliffthat increases rates slightlyat the top end, reduces the ability to take some deductions acrossthe board, puts entitlements on a more sustainable footing, and cuts

some government spending. Should these goals not be met, ourexpectations will be overly optimistic. We continue to believe thatequities are solidly undervalued versus competing investments, butpolitical/governmental considerations are impacting equity pricingmore than fundamentals at this time.


31/31


Chris Rupkey, Bank of Tokyo-Mitsubishi: I was just kidding. Ithink we are all doomed. Fiscal Cliffpales in importance against

the end of the world forecast by the Mayan calendar. Get youraffairs in order, this ship is going down.

Hank Smith, Haverford Investments: If we fall over thefiscalcliffthe equity market (the new vigilante) will sell off dramaticallywhich will force the hand of Washington to quickly do tax reform andthen entitlement reform. 2013 is the year certainty replacesuncertainty resulting in an unleashing of pent up demand causingGDP growth to accelerate.

Diane Swonk, Mesirow Financial: Everything hinges on fiscalpolicy: If we avertcliffand move forward on credible deficitreduction, 2013 could be a pivotal year on the upside; if we fail, welose what little influence we have in the world politically andeconomically. We will have squandered what's left of our legacy byslitting our own economic throats.

Scott Wren, Wells Fargo Advisors: In 2013, I think the market is

going to start to demand that Washington begins to address ourlonger term fiscal problems. I think Congress will likely begin togravitate toward the Simpson-Bowles plan or something verysimilar...it was bipartisan and a result of the President's commission.While I disagree with parts of this proposal, it is a good startingpoint...right now we just need a plan. Almost any plan.

Clare Zempel, Zempel Strategic: Monetary policy is more potentthan fiscal and could offset anyfiscal cliffweakness. The Fed

should adopt a "market monetarist" (nominal GDP targeting) policyto lift employment, because that is proper, and because it may helppreclude harmful radical political-economic shifts.

cnbc fed survey results - december 11, 2012

Documents