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FED SURVEY

December 16, 2014


These survey results represent the opinions of 38 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 December 11-13, 2014. 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. By how much do you believe the Fed will, on net, increase or


decrease the size of its balance sheet in 2015 and 2016?
2015

2016

$100

$50

$60
$24

$0

Billions

-$25

-$50
-$54
-$83

-$100
-$104
-$150

-$146

2016 Forecast

-$171

-$200
Mar 18

Apr 28

Jul 29

Aug 20
Survey Dates

CNBC Fed Survey December 16, 2014


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Sep 16

Oct 28

Dec 16

FED SURVEY
December 16, 2014
3. What is the probability the Fed will begin a new QE program in
the next year/two years? (0%=No chance of new QE, 100%=Certainty
of new QE)

Next year

Next two years

20%

18%
18%

16%

14%
14%

14%
14%

12%

10%

10%

9%

8%

6%

4%

2%

0%
Sep 16

Oct 28

Dec 16

Chance of new QE

Note: In previous surveys, this question was: What is the probability the Fed will begin a new QE
program in the 12/24 months after it concludes the current QE program?

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
4. The Fed will remove the phrase considerable time from its
monetary policy statement in ...

0%

Sep 16
20%

10%

Oct 28
30%

24%

December

11%

After December

13%
11%

January

21%

After January

February

8%

March

July or later

11%

3%

0%

3%

CNBC Fed Survey December 16, 2014


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60%

70%

24%
23%

October

June

50%

41%

September

April

Dec 16
40%

41%

66%

FED SURVEY
December 16, 2014
5. Which of these is the bigger risk to your forecasts for Fed policy
in 2015?
Fed will be more dovish than I expect

Fed will be more hawkish than I expect

Risks are balanced


70%

64%
Fed more dovish

60%

53%
50%

50%

49%

40%

39%

34%
30%
Risks are balanced

24%

21%

20%
14%
10%

13%
8%

Fed more hawkish

0%
Jul 29

Sep 16

CNBC Fed Survey December 16, 2014


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Oct 28

Dec 16

FED SURVEY
December 16, 2014
6. 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?
Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now


80%

69%

70%

60%
60%
Modestly more slack

50%

55%

48%

40%
40%

36%

34%
Modestly less slack

30%
Considerably more slack

24%
20%

20%

11%
10%

8%

4%

4%

6%
No difference

August 20

CNBC Fed Survey December 16, 2014


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8%
5%

6%
3%

0%

July 29

16%

Considerably less slack

9%

9%

18%

Sep 16

5%
0%
Oct 28

0%
Dec 16

FED SURVEY
December 16, 2014
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?
Considerably more slack now

Modestly more slack now

No difference

Modestly less slack now

Considerably less slack now


70%
64%

64%

60%
60%

Modestly more slack

56%

55%

50%

40%

Modestly less slack

30%
24%
20%

Considerably more slack


No difference

13%

10%
8%
Considerably less slack

0%
July 29

August 20

CNBC Fed Survey December 16, 2014


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Sep 16

Oct 28

Dec 16

FED SURVEY
December 16, 2014
What is the probability there will be a 10 percent correction for
the U.S. stock market by March 31, 2015? (0%=No chance of
correction, 100%=Certainty of correction)

25%

Average:
44.7%

20%

15%

10%

5%

0%
0%

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

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
7. Where do you expect the S&P 500 stock index will be on ?
June 30, 2015

December 31, 2015

June 30, 2016

December 31, 2016

2,400

2,300

Dec 31 2016

2311

June 30, 2016

2250

2,200

2149

2194

2111
2075

2,100

2,000

2017

2029

2109

2093
2066

2053

1,900

1,800
Apr 28

Jun 4

July 29

Sep 16

Survey Dates

CNBC Fed Survey December 16, 2014


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Oct 28

Dec 16

FED SURVEY
December 16, 2014
8. What do you expect the yield on the 10-year Treasury note will
be on ?
June 30, 2015

December 31, 2015

June 30, 2016

December 31, 2016

4.0%
Dec 31, 2016
June 30, 2016

3.54%

3.52%

3.43%

3.5%

3.45%
3.30%

3.24%
3.15%

3.16%

3.0%

3.19%

2.90%

2.96%

2.63%

2.5%

2.0%
Apr 28

Jun 4

Jul 29

Sep 16

Survey Dates

CNBC Fed Survey December 16, 2014


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Oct 28

Dec 16

FED SURVEY
December 16, 2014
9. What is your forecast for the year-over-year percentage change
in real U.S. GDP for ?
2014

2015

2016

3.1%

+3.02%+3.00%

+3.02%
+2.90%+2.90%

+2.90%

2.9%

+2.81%
+2.88%

+2.75%
+2.77%+2.78%
+2.75%

2.7%

2016

2.5%

+2.63%
+2.62%
+2.60%+2.62%
+2.56%
+2.56%
+2.53%
+2.52%

+2.43%

2.3%

+2.33%
+2.26%+2.28%

2.1%

1.9%
+1.89%

1.7%

1.5%

Jan
29,
'13

Mar
19

Apr
30

Jun
18

Jul
30

Sep
17

Oct
29

Dec
17

Jan
28,
'14

Mar
18

Apr
Jul
Jun 4
28
29

Sep
16

Oct
28

Dec
16

2014 +2.56+2.60+2.62+2.56+2.52+2.63+2.53+2.62+2.77+2.78+2.75+2.33+1.89+2.26+2.28+2.43
2015

+2.90+3.02+3.00+2.81+2.75+2.90+2.90+3.02

2016

+2.88

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
10. What is your forecast for the year-over-year percentage
change in the headline U.S. CPI for ?
2014

2015

2016

2.4%

2.29%

2016

2.27%

2.17%

2.2%

2.02%

2.02%

1.99%

2.01%

2.0%

1.8%

1.78%

1.77%

1.74%
1.59%

1.6%

1.4%

1.2%

1.0%
Jun 4

Jul 29

Sep 16
Survey Dates

CNBC Fed Survey December 16, 2014


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Oct 28

Dec 16

FED SURVEY
December 16, 2014
11. When do you expect the Fed to allow its balance sheet to
decline?
Apr 28

Jun 4

Jul 29

Sep 16

Oct 28

Dec 16

35%

Averages:

April 28 survey:

October 2015

30%

June 4 survey:

March 2016
June 29 survey:

25%

December 2015
Sept. 16 survey:

December 2015

20%

Oct. 28 survey:

January 2016
15%

Dec. 16 survey:

February 2016
10%

0%

Oct
Nov
Dec
Jan '15
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan '16
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan '17
After Jan

5%

Note: In the April survey, the question was phrased as: When do you believe the Fed will begin
reducing the size of its balance sheet?

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
12. When do you think the FOMC will first increase the fed funds
rate?
April 28

Jun 4

Jun 29

Aug 20

Sep 16

Oct 28

60%

Averages:

April 28 survey:
50%

July 2015
June 4 survey:

August 2015
40%

July 29 survey:

August 2015
Aug 20 survey:

July 2015
30%

Sep 16 survey:

June 2015
Oct 28 survey:
20%

July 2015
Dec 16 survey:

July 2015
10%

0%

CNBC Fed Survey December 16, 2014


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Dec 16

FED SURVEY
December 16, 2014
13. How would you characterize the Fed's current monetary
policy?
Too accommodative

Just right

Too restrictive

Don't know/unsure

60%

Just right
50%

49%

49%

49%

49%

50%

46%
43%

43%

43%

40%

44%

Too accomodative

39%

30%
28%

20%
17%

13%

Too restrictive

10%

Don't know/unsure
6%
3%

3%

6%

5%

3%

3%

6%

0%
July 31, 2012July 29, 2014

Aug 20

CNBC Fed Survey December 16, 2014


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Sep 16

Oct 28

Dec 16

FED SURVEY
December 16, 2014
14. Where do you expect the fed funds target rate will be on ?
2.5%
Dec 2016
2.13%
2.04%

1.99%

1.93%

2.0%

1.56%

1.53%

1.48%

1.5%

1.38%
June 2016

1.05%

1.0%

0.97%

0.99%

0.98%

0.92%

0.89%

0.89%

0.83%

0.82%

Dec 2015

0.83%
0.70%

0.72%

0.68%

0.50%

0.5%

0.39%

0.40%
0.33%

0.31%

Oct
28

Dec
16

June 2015

0.0%
Jul 30

Sep
17

Oct
29

Dec
17

Jan
28
'14

Jun 30, 2015

Mar
18

Apr
28

Jun 4 Jul 29

Aug
20

Sep
16

0.50%0.39%0.40%0.33%0.31%

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%

Jun 30, 2016

1.53%1.56%1.48%1.38%

Dec 31, 2016

1.99%2.13%2.04%1.93%

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
15. At what fed funds level WILL/SHOULD the Federal Reserve
stop hiking rates in the current cycle? That is, what will/should
be the terminal rate?
Aug 20

Sep 16

Oct 28

Dec 16

5.0%

4.0%

3.16% 3.20%

3.30%

3.44% 3.39% 3.40% 3.38%


3.17%

3.0%

2.0%

1.0%

0.0%
Will

CNBC Fed Survey December 16, 2014


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Should

FED SURVEY
December 16, 2014
16. When do you believe fed funds will reach its terminal rate?
Aug 20

Sep 16

40%

Average:
35%

Aug 20 survey:

Q4 2017

30%

Sep 16 survey

Q3 2017

25%

Oct 28 survey

Q4 2017

20%

Dec 16 survey

Q1 2018

15%

10%

5%

0%

CNBC Fed Survey December 16, 2014


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Oct 28

Dec 16

FED SURVEY
December 16, 2014
17. How will lower oil prices affect U.S. GDP/core inflation in the
first quarter?
0.50

0.40

+0.39

0.30

0.20

Pct. points

0.10

0.00

-0.10

-0.20

-0.27

-0.30

-0.40
GDP

CNBC Fed Survey December 16, 2014


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Inflation

FED SURVEY
December 16, 2014
19. Will the European Central Bank launch a QE program in which
it purchases sovereign bonds?
90%

78%

80%

74%
70%

60%

50%

40%

30%

20%

17%

15%

10%
10%

6%

0%
Yes

No

Don't know/unsure

Note: In Oct 8 survey, question was: Will the European Central Bank do outright quantitative easing?

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
When do you believe the ECB will announce its quantitative
easing? (Only asked of those who answered yes to previous question.
Oct 28

Dec 16

50%

45%

Averages:
Oct 28 survey
February 2015

40%

35%

Dec 16 survey
February 2015

30%

25%

20%

15%

10%

5%

0%
Nov Dec Jan Feb Mar Apr May Jun
'15

CNBC Fed Survey December 16, 2014


Page 20 of 32

Jul

Aug Sep Oct Nov Dec After


Dec
'15

FED SURVEY
December 16, 2014
20. Has the U.S. stock market already discounted a fed funds rate
hike by the Federal Reserve next year?
60%

56%

50%

40%

36%

30%

20%

8%

10%

0%
Yes

CNBC Fed Survey December 16, 2014


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No

Don't know/unsure

FED SURVEY
December 16, 2014
21. How much concern do you have that economic weakness in
Europe could create wider global risks? (1=Not concerned at all,
10=Highest level of concern)

Sep 16

Oct 28

Dec 16

10

5.4
5

CNBC Fed Survey December 16, 2014


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5.4
4.8

FED SURVEY
December 16, 2014
22. What is the single biggest threat facing the U.S. economic
recovery?
Apr 30

Jun 18

Jul 30

Mar 18

Apr 28

Jul 29

0%

Sep 17

Oct 29

Sep 16

Oct 28

5%

10%

15%

Dec 17

Jan 28 '14

Dec 16

20%

25%

30%

35%

40%

45%

European recession/financial crisis


Tax/regulatory policies
Slow job growth
Inflation
Deflation
Debt ceiling
Too little budget deficit reduction
Too much budget deficit reduction

Rise in interest rates


Geopolitical risks
Other
Don't know/unsure
Don't
know/uns
ure

Other

Apr 30

0%

11%

Jun 18

0%

13%

Jul 30

4%

14%

Sep 17

2%

7%

Oct 29

0%

Dec 17

2%

Jan 28 '14

Rise in
Geopolitic
interest
al risks
rates

Too much Too little


budget
budget
deficit
deficit
reduction reduction
9%
2%

Debt
ceiling

Deflation Inflation

Slow job
growth

2%

2%

0%

20%

European
Tax/regula
recession/
tory
financial
policies
crisis
31%
20%

13%

2%

0%

3%

3%

20%

28%

15%

10%

4%

0%

2%

2%

0%

22%

30%

8%

18%

4%

2%

4%

0%

2%

22%

27%

4%

13%

8%

5%

3%

3%

3%

3%

24%

29%

8%

2%

15%

2%

2%

2%

0%

2%

29%

32%

5%

0%

21%

12%

2%

2%

0%

0%

2%

30%

21%

7%

Mar 18

0%

18%

5%

8%

0%

0%

5%

3%

26%

23%

10%

Apr 28

0%

13%

18%

8%

3%

3%

0%

5%

3%

21%

26%

3%

Jul 29

3%

12%

12%

12%

0%

0%

0%

3%

6%

12%

29%

12%

Sep 16

3%

11%

11%

6%

0%

0%

0%

3%

6%

29%

26%

6%

Oct 28

3%

8%

8%

10%

3%

0%

0%

3%

3%

15%

18%

31%

Dec 16

0%

3%

14%

3%

3%

0%

0%

6%

3%

14%

14%

40%

CNBC Fed Survey December 16, 2014


Page 23 of 32

FED SURVEY
December 16, 2014
23. In the next 12 months, what percent probability do you
FED
SURVEY
place on the
U.S.
entering recession? (0%=No chance of
30,
recession,April
100%=Certainty
of recession)
40%
36.1%

35%
34.0%

30%

28.5%

25.9%

25%

26.0%

25.5%

20%

20.3%

20.6%

20.4%

18.4%

18.2%

19.1%

16.9%

17.6%

17.3%

16.9%
16.2%

15%

16.2%

15.3%

15.2%

15.1%
15.0%

14.6%

13.6%

10%

5%

0%

Aug
Sep
11,
19
2011

Oct
31

Jan
Mar
23,
16
2012

Apr
24

Jul
31

Sep Dec
12
11

Jan
Mar
29,
19
2013

Apr
30

Jun
18

Jul
30

Sep
6

Oct
29

Dec
17

Jan
Mar
28
18
2014

Apr
28

Jul
29

Sep
16

Oct
28

Dec
16

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

Survey Dates

CNBC Fed Survey December 16, 2014


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FED SURVEY
December 16, 2014
24. What is your primary area of interest?

FED SURVEY
April 30,

Other
17%

Currencies
6%
Fixed Income
14%

Economics
46%

Equities
17%

Comments:
Robert Brusca, Fact and Opinion Economics: Inflation is lower
and policy is tighter than the Fed and policymakers realize. The real
biggest risk to the US economy is the ongoing diversion of resources
to China and failure to implement real free trade rules for the global
economy.
Thomas Costerg, Standard Chartered Bank: The FOMC meeting
is likely to deliver a hawkish outcome. But we remain cool-headed
about our rate-tightening scenario. We continue to see September
2015 as the likely timing for the first rate hike. We also think the
rate plateau will be 2.0%, much lower than the 3.75% the Fed
expects. We think the Fed under-estimates the likely decline in core
inflation in coming months. Inflation is likely to remain low in coming
years. As an aside, note that the 2015 FOMC is turning more dovish
given the rotation of regional Fed presidents.

CNBC Fed Survey December 16, 2014


Page 25 of 32

FED SURVEY
December 16, 2014
Tony Crescenzi, PIMCO: There are three escapes the Fed must
make in order to declare its mission a success:

FED SURVEY

April
30, trap: Get banks to lend
1. Escape from
a liquidity
2. Escape from quantitative easing: Stop the bond buying program
3. Escape from the zero bound: Hike the policy rate above zero
If all goes according to our forecast and the U.S. economy continues
to make progress toward the Feds dual mandate goals of maximum
sustainable employment and 2 percent inflation, the Federal Reserve
will likely begin to raise its federal funds rate target off the zero
bound sometime next year. William Dudley, President of the
Federal Reserve Bank of New York
Heed Dudleys words. The timeline for the Feds first rate hike will
likely hold. That said; we suggest not getting too wrapped up in the
exact timing of the Feds first move. Focus instead on the speed and
magnitude of future hikes. With inflation low and wage growth
weak, the Fed can be afford to be patient. A pickup in wage growth
in 2015 wont likely change matters, either. Can anyone imagine
Janet Yellen saying to Americans if wages do accelerate: For six
years you hurt through 2% annual wage growth, a full percentage
point below normal, but over the past six months youve all done
pretty well, so we at the Fed are going to raise rates aggressively to
put a stop to it! No way! More likely the Fed lets the U.S. economy
run hot a bit, as William Dudley recently said, by keeping its policy
rate below where it normally would when the unemployment rate
has fallen.
The Fed is leery of the risks of moving too soon. It recognizes the
difficulties of resuscitating growth once it falters. In contrast,
inflation worries are more readily doused if they surface. In either
case, the Fed cant wait indefinitely and will likely feel compelled to
get started around the middle of 2015 and pivot somewhat from the
predominant risk-management focus of recent years, which has
CNBC Fed Survey December 16, 2014
Page 26 of 32

FED SURVEY
December 16, 2014
centered on the risks of moving too soon.

FED
SURVEY
The Fed simply
doesnt
know at what point inflation pressures will
April 30,
kick in it is probing
for the answer. Yet, the more the jobless rate
falls, the more the Fed will have to tend to the possibility that
inflation may accelerate. While this means escaping from zero, dont
expect the rate rocket to go too far. The Fed itself sees its policy rate
staying very low for years to come, projecting in its quarterly
Summary of Economic Projections a policy rate of around 2.5% at
the end of 2016, even as it projects success in reaching its goals on
employment and inflation.
This is striking considering that the Fed normally maintains a neutral
policy stance when it believes economic conditions are ideal, which
to the Fed translates to a policy rate of 3.75%. Janet Yellen and the
Fed obviously want to keep their thrusters open so that Americans
can get fatter paychecks, which have been moving in slow motion,
like a man walking on the moon.
PIMCO believes that the neutral policy rate is far lower than the Fed
believes, at around 2%. There are many potent reasons for this (see
Rich Claridas, Navigating the New Neutral). Here are five provided
by the Fed in the minutes to its March 19th, 2014 meeting:
1.
2.
3.
4.
5.

Higher precautionary savings by U.S. households


Higher global savings
Demographics
Slower growth in potential output
Restrained credit growth

These potent secular headwinds are important for investors to stay


mindful of when constructing their investment portfolios. Be leery of
getting caught up in the very convincing optimistic cyclical outlook
and the tendency to over-extrapolate the longer-term outlook from
shorter-term trends.
CNBC Fed Survey December 16, 2014
Page 27 of 32

FED SURVEY
December 16, 2014
As just mentioned, we suggest a focus on the big picture, by
centering portfolio construction on the speed and magnitude of
FEDThis
SURVEY
future rate hikes.
means constructing portfolios that are likely to
April
30, rates not only in the United States, but also
benefit from low
policy
in Europe, where markets are priced for both the European Central
Bank and the Bank of Japan to keep their policy rates under 1% for
the rest of the decade.
Investors in such a climate are likely to continue reaching for yield
and higher returns by reaching outward along the risk spectrum
shown below. We expect these assets to remain well supported for
some time.
All that said, asset prices dont move in a straight line and there are
short-term considerations to heed, not the least of which is the
launch of the Feds rate hike cycle, which could well be disruptive to
the many assets that have taken flight from the Feds monetary fuel.
Investors can be opportunistic if they stay mindful of the destination
for rates in the U.S. and globally when market sentiment inevitably
occasionally sours against assets that are likely to benefit from
todays era of low interest rates.
So will the Fed achieve its great escape? Probably. Yet like other
central banks, it is not likely going very far, so it will feel like it never
left.
John Donaldson, Haverford Trust Co.: Essentially every inhibition
to the Fed removing the "considerable time" phrase has been
removed. The ability to make that change right now has been
handed to them on the proverbial silver platter. Stock market at fair
valuation, check. Employment improving, check. Bond market stable,
check. Every single borrower who can has refinanced their debt,
check. Global rates low, check. Dollar strengthening, check.

CNBC Fed Survey December 16, 2014


Page 28 of 32

FED SURVEY
December 16, 2014
Neil Dutta, Renaissance Macro Research: With real GDP
expanding at or above 3.5% four of the last five quarters, underlying
FED SURVEY
US growth momentum
is much stronger than commonly appreciated
30, to continue pushing the unemployment rate
and more thanApril
enough
down faster relative to the FOMC's central tendency. We are highly
skeptical that the relationship between supply and demand has been
repealed in the US labor market; wages will accelerate next year. A
forward looking Fed will do what it always has done for that last two
tightening cycles -- lift rates to anchor business and household
inflation expectations.
Kevin Giddis, Raymond James/Morgan Keegan: The fixed
income market, specifically U.S. Treasuries, has been the biggest
upside surprise of 2014. As we approach another year end, very few
experts are making bold interest rate predictions for 2015. My, how
the world has changed! While 2015 may or may not be the year in
which the Fed raises short-term interest rates, it is probably safe to
say that recent events (inflation and global weakness) lead us to
believe that long rates will be pretty steady in the year ahead.
Stuart Hoffman, PNC Financial Services Group: Crude oil price
decline is a BIG net win for the U.S. economy. Oil price spikes in
1973-74, 1979-80, and 1990 caused recessions in U.S. economy so
why would an oil price plummet not have the opposite effect of
"pumping up" U.S. economic and job growth? Economist law of not
necessarily equal but definitely opposite reaction.
Hugh Johnson, Hugh Johnson Advisors: As we have learned so
often in the past, financial/economic crises are
transmitted/propagated to all parts of the world through (a)
declining trade flows, (b) declining commodity prices, (c) declining
capital flows, (d) psychology (fear). The current crisis (or near crisis)
in Russia will be transmitted through deteriorating trade flows and
declining commodity prices to Europe. The risk of disarmed ECB
interest rate policy and European fiscal restraint raises very
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FED SURVEY
December 16, 2014
significant risks for the European economy and European inflation.
These risks are quite likely to be transmitted to the US and
FED SURVEY
elsewhere although
they are unlikely to derail the current US bull
Aprileconomic
30,
stock market and
expansion. Concerns are clearly
intensifying...justifiably.
John Kattar, Ardent Asset Advisors: The Fed needs to be more
focused on the deflationary risk of collapsing oil prices and a surging
dollar than on the better employment numbers now. At the margin,
I think this makes them more dovish.
Subodh Kumar, Subodh Kumar & Associates: Market
expectations have lingered of a brave new world driven by
quantitative ease. Rather than being proactive currently, markets
appear to be reactively jousting. The reality even for central banks
and certainly Wall Street is the interaction between momentum,
value and geopolitics.
Geopolitics cannot be solely laid to rest on Islamic fundamentalist
terrorism but includes border tensions and income distribution from
the Levant to Europe to Asia. The volatility for the unexpected is
likely to rise, including currency.
We favor value over momentum as the next likely change for which
to prepare portfolios now. The risks we see lie in European
weakness and geopolitical tensions with the upside potential driven
by better Asian growth, including Japan, developing from late 2015.
Still, S&P 500 operating and global earnings are likely to be less than
year-end 2014 consensus. In fixed income, we favor medium-term
corporate and sovereign issues denominated in North American
currencies and in Sterling. In equities, diversification dominated by
geographic dispersion is likely to be a lesser factor than quality in
financial strength, ongoing cash flow and last but not least seasoned
operational management.
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FED SURVEY
December 16, 2014
For frugality over aspiration globally different from the last cycle, we
underweight the consumer and instead overweight industrials for
SURVEY
infrastructure FED
and geopolitics-linked
defense spending. Likely in
April 30, we still favor Finance and Information
sustained restructuring,
Technology with advantage for early movers embracing deep
change.
Rob Morgan, V2V Associates: The Fed will face a bit of a
conundrum in 2015 - a strengthening economy, but inflation that is
running below the desired band.
Joel Naroff, Naroff Economic Advisors: It is all coming together
and the Fed will use the stronger economy as the cover to raise rates
sooner than expected.
Lynn Reaser, Point Loma Nazarene University: It is now high
time to remove the phrase "considerable time" from the Fed's
statement. The impact of plunging oil prices on growth will be much
stronger than any feed through to lower core inflation.
John Ryding, RDQ Economics: The Fed has to begin to set the
stage for rate hikes in 2015 at next week's FOMC meeting.
Expecting "considerable time" to be replaced by language that says
"can afford to be patient in removing accommodation"
Allen Sinai, Decision Economics: The U.S. economy looks terrific
and a challenge for the Federal Reserve will be how to balance the
achievement of full employment but not price stability in choosing
the path for the federal funds rate.
Hank Smith, Haverford Investments: The Fed has done an
excellent job over the past 6 years. With some help from better fiscal
policy, the Fed should do a good job getting back to neutral/normal.
Diane Swonk, Mesirow Financial: The primary responsibility of
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FED SURVEY
December 16, 2014
any central bank is price stability; too low inflation could be the Fed's
greatest optical to raising rates next year. The Fed has much to lose
FED
SURVEYTheir powder is dry if they have to
by raising rates
prematurely.
April
30, to the zero bound.
raise rates only
to return
Peter Tanous, Lynx Investment Advisory: Looking for higher
GDP growth next year--a Spring Surprise
Scott Wren, Wells Fargo Advisors: Lower oil prices, just like
lower interest rates, are not always a good thing. Sure, consumers
have more money in their pockets to spend and some industries see
their costs lowered. On the other side of the coin, however, is the
concern over why oil prices and interest rates are low. I would much
rather see oil prices rising along with interest rates as a result of
global economic growth accelerating at an above average pace....low
oil prices and low interest rates tell me that the markets do not
believe that will be the case any time soon. Unfortunately, I agree.
Mark Zandi, Moody's Analytics: The Federal Reserve will stick
with the script it put in place over a year ago, namely to begin
raising short-term rates in June 2015 and normalizing rates by the
end of 2017.

CNBC Fed Survey December 16, 2014


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