CNBC Fed Survey, Jan. 26, 2016

CNBC Fed Survey – January 26, 2016 Page 1 of 29

FED SURVEY January 26, 2016

FED SURVEY April 30,

These survey results represent the opinions of 40 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 January 21-22, 2016. 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. At its January meeting, the Federal Reserve will:

0%

0%

100%

0%

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

Raise interest rates

Lower interest rates

Keep rates unchanged

Don't know/unsure




2. After January's meeting, the Federal Reserve's next move will most likely be:

When will the Federal Reserve make its next move?How many

times will the Federal Reserve hike rates this year (2016)?

74%

18%

0%

8%

88%

10%

0%

3%

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



Move to negative interest rates

Launch new quantitative easing

Jan 15 Jan 27

For respondents who said: Average month:


(88%) May 2016


(10%) August 2016

Move to negative

interest rates (0%) --

Launch new quantitative

easing (3%) April 2016




2%

12%

29%

21%

29%

7%

14%

14%

40%

10%

16%

4%

2%

13%

13%

40%

15%

15%

3%

0%

0%

0%

0%

0%

0%

3%

0%

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

0

1

2

3

4

5

6

7

8

9

10

More than 10

Fed will cut rates

Don't know/unsure

Dec 15 Jan 15 Jan 26

Averages:

Dec 15 survey: 2.8

Jan 15 survey: 2.1

Jan 26 survey: 2.1




4. Please rate the following factors on how much influence they had on the recent stock sell-off. (5=Maximum

influence, 0=Minimum influence)

Other:

Bull markets eventually end

and this one has been the third

longest in history.

Global (including US) economy

is still so weak, that the

market needs Fed to help it

out.

Irrationality

Markets implicitly became too

far ahead of deliverable growth

whether economic or company.

Profits recession not expected

to end until Q4.

The observable fundamentals

look decent. What troubles the

market are the unobservable

risks.

4.33

4.10

3.77

3.58

2.89

2.63

2.44

2.42

0 1 2 3 4 5

Other

Oil price decline

Slowdown in China

growth

Slowdown in globalgrowth

Fed forecast for anaverage of four rate

hikes this year

Normal market volatilityafter recent strong gains

Slowdown in USeconomic growth

Recent Fed rate hike

Average response




Italian banking crisis is missed

by markets. High yield

meltdown is missed by

markets.

The Fed Dec. rate hike and 4-

hike forecast is only one of

many factors that combined

have led to the selloff and

increased volatility.

The severity of both the oil

price drop and the slowdown in

China were consensus-

destroying moves.

Stupid pet tricks on the part of

the Fed. Its dogmatic approach

to policy is not appreciated in

this era where new thinking (or

at least SOME thinking) is

required. The Fed is so knee

jerk.

Oil price decline viewed as a

negative sign for US and global

economy but will come to be

seen as positive once oil price

stops falling.

Winter consumer spending was

disappointing especially in light

of the theoretical boost from

low gas prices. Low oil prices

are now mostly seen as bad

news, a U turn from the

general view a few months

ago.

Effect of oil price decline on

high yield (HY) bond spreads of

energy and commodity related

issuers. Wider HY spreads for

issuers outside of energy and

commodities as well. The

tendency of widening HY

spreads to precede a

meaningful slowdown or a

recession in the U.S. has been

a big negative influence on the

stock market.

China is new at currency

devaluation and it makes us

nervous. They will get better

and we will calm down.

Fear mongering and risk

aversion. Political uncertainty

and lack of reasonable

candidates with

comprehensible platforms.




5. What impact will the recent stock market sell-off have on the Fed?

56%

36%

5%

3%

0%

10%

20%

30%

40%

50%

60%

Will delay futurehikes

Will have no effecton future hikes

Will prompt Fed tocut rates or ease

policy further

Don't know/unsure




6. How will the recent declines for stocks and Treasury yields affect the economy in the first quarter?

40%

0%

61%

0%

0% 10% 20% 30% 40% 50% 60% 70%

Reduce growth

Increase growth

Have no effect on growth

Don't know/unsure

Average reduction: 0.4 percentage points




7. How serious a concern is China for the US economy? (10=Highest level of seriousness, 1=Not serious at all)

5.1

4.6 4.7 4.7

1

2

3

4

5

6

7

8

9

10

Aug 25 Sep 16 Oct 27 Jan 26

Survey Dates




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

2311 2296

2247

2259

2293

2254

2159

2166

2140

2000

2035

2223

2107

2158

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

2,250

2,300

2,350

Dec 16 Jan 27'15

Mar 17 April28

Jun 16 Jul 28 Sept16

Oct 27 Dec 15 Jan 15'16

Jan 26

Survey Dates

December 31, 2016 December 31, 2017




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

3.52%

3.04%

3.14%

2.89%

3.24%

3.17%

2.88%

2.67% 2.67%

2.51%

3.09%

2.88%

2.0%

2.5%

3.0%

3.5%

4.0%

Dec 16 Jan 27'15

Mar 17 April 28 Jul 16 Jul 28 Sept 16 Oct 27 Dec 15 Jan 26'16

Survey Dates

December 31, 2016 December 31, 2017




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

1.99%

2.13%

2.04%

1.93%

1.75%

1.84%

1.46%

1.56%

1.41%

1.12%

1.17%

0.91% 0.90% 0.85%

0.88%

1.61% 1.61% 1.62%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Aug20

Sep16

Oct28

Dec16

Jan27,'15

Mar17

April28

Jun16

Jul28

Aug25

Sept16

Oct27

Dec15

Jan15'16

Jan26

Dec 31, 2016 Dec 31, 2017




11. 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%

2.79%

2.69%

2.65% 2.58%

2.56%

2.0%

2.5%

3.0%

3.5%

4.0%

Aug20

Sep16

Oct28

Dec16

Jan27,

'15

Mar17

Apr28

Jun16

Jul28

Aug25

Sept16

Oct27

Dec15

Jan26

'16

Survey Dates




12. 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

August 25 survey Q3 2018

September 16 survey Q1 2018

October 27 survey Q3 2018

December 15 survey Q1 2018

Jan. 26, 2016 survey Q2 2018




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

Dec 16Jan 27,

'15Mar 17 April 28 Jun 16 Jul 28 Sept 16 Oct 27 Dec 15

Jan 26

'16

2016 +2.88% +2.80% +2.84% +2.81% +2.78% +2.70% +2.64% +2.60% +2.45% 2.17%

2017 +2.43% 2.31%

+2.88%

+2.80%

+2.84%

+2.81%

+2.78%

+2.70%

+2.64% +2.60%

+2.45%

2.17%

+2.43%

2.31%

2.1%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

3.0%

2016 2017




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

2.17%

2.07% 2.08%

1.96%

2.17%

2.17%

1.89%

1.75%

1.88%

1.50%

2.12%

2.07%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Dec 16 Jan 27,

'15

Mar 17 April 28 Jun 16 Jul 28 Sept 16 Oct 27 Dec 15 Jan 26

'16

Survey Dates

2016 2017




15. When do you expect the Fed to allow its balance sheet to decline?

Survey Date Balance Sheet

Average Forecast

April 28, 2014 survey October 2015

June 4 survey March 2016

July 29 survey December 2015

September 16 survey December 2015

October 28 survey January 2016

December 16 survey February 2016

Jan. 27, 2015 survey April 2016

March 17 survey April 2016

April 28 survey May 2016

June 16 survey July 2016

July 28 survey June 2016

August 25 survey September 2016

September 16 survey August 2016

October 27 survey November 2016

December 15 survey December 2016

Jan. 26, 2016 survey February 2017




16. How would you characterize the Fed's monetary

policy?

28%

49%

46%

49%

44%

39%

50%

54%

50%

60%

54%

64%

49%

36%

43%

43%

49%

43%

49% 50%

47%

32%

44%

35%

47%

32%

23%

33%

46%

17%

6%

3% 3% 3%

6% 5% 6% 4%

8%

8%

13%

13%

3%

3%

6% 5% 6%

3%

8%

6%

3%

10%

5%

10%

5%

0%

10%

20%

30%

40%

50%

60%

70%

Jul 31,

'12

Jul 29,

'14

Aug

20

Sep 16Oct 28Dec 16 Jan

27, '15

Mar 17Apr 28Jun 16 Jul 28 Sept

16

Oct 27Dec 15Jan 26

'16

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

Too accomodative

Don't know/unsure

Too restrictive

Just right




17. The Federal Reserve's December interest rate hike was:

(For those answering “a mistake”) Why was it a mistake?

“Other” answer: All the above. But also and MOSTLY because it made no sense. The Fed

had not met its own minimal objectives for a rate hike but instead chose to LIE about it. NO WAY

inflation was on a path to 2% with the dollar strong and oil plummeting. The Fed lost a lot of

credibility with that move.

15%

80%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A mistake The right move Don't know/unsure

33%

50%

17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Negative effect on stocks Negative effect oneconomic growth

Other




18. How will lower oil prices affect your GDP growth forecast for 2016?

23%

31%

33%

13%

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

Reduce growth

Increase growth

Have no effect on growth

Don't know/unsure

Average increase: 0.3 percentage points

Average reduction:

0.5 percentage points




19. How will lower oil prices affect your core CPI forecast for 2016?

64%

5%

31%

0%

0% 10% 20% 30% 40% 50% 60% 70%

Reduce inflation

Increase inflation

Have no effect oninflation

Don't know/unsure

Average increase: 0.4 percentage points

Average reduction:

0.4 percentage points




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

“Other” responses:

Faster wage growth against backdrop

of low productivity squeezing profit

margins

Fear and cowardice on the part of the

American people, oh, and Donald

Trump

Fed

Secular changes in consumption and

debt tolerance

The Fed

Decelerating monetary aggregates

Lower than expected business sales

Policy mistake here or abroad

Fed having to continue raising

interest rates even though real GDP

growth remains near 2.5%-ish

because wages and core CPI inflation

continue to rise

Survey

Date European r

ecessio

n/

financia

l cris

is

Tax/

regula

tory p

olicie

s

Slo

w j

ob g

row

th

Inflation

Deflation

Debt

ceilin

g

Ris

e in inte

rest

rate

s

Geopolitical ris

ks

Glo

bal econ w

eakness

Slo

w w

age g

row

th

Terroris

t att

acks in t

he

U.S

.

Oth

er

Don't k

now

/

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%

Sept 16 0% 16% 2% 0% 4% 0% 0% 8% 45% 8% 14% 2%

Oct 27 0% 8% 5% 3% 8% 0% 8% 13% 41% 10% 5% 0%

Dec 15 0% 10% 5% 0% 0% 0% 8% 10% 44% 5% 3% 15% 0%

Jan 26 '16 0% 10% 5% 0% 3% 0% 0% 5% 44% 8% 0% 23% 3%




21. 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

Sep

19

Oct

31

Jan23,'12

Mar

16

Apr

24

Jul

31

Sep

12

Dec

11

Jan29,'13

Mar

19

Apr

30

Jun

18

Jul

30

Sep

6

Oct

29

Dec

17

Jan28'14

Mar

18

Apr

28

Jul

29

Sep

16

Oct

28

Dec

16

Jan27'15

Mar

17

April

28

Jun

16

Jul

28

Sept

16

Oct

27

Dec

15

Jan15'16

Jan

26

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 18.6 22.1 22.9 28.8 24.1

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%

18.6%

22.1%

22.9%

28.8%

24.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Survey Dates




22. What is your primary area of interest?

Comments: Marshall Acuff, Silvercrest Asset Management: The principal headwind for US stocks has been and will continue to be declining

earnings growth expectations in a market that continues to be fair to fully valued. John Augustine, The Huntington National Bank: The 4-Cs for

stocks to stabilize - traction in commodity prices, confidence, corporate profits and currencies. Jim Bianco, Bianco Research: Famously the markets have

predicted 9 of the last 5 recessions. This is a better record than economists! Pay attention to markets.

Economics

48%

Equities 25%

Fixed Income

13%

Currencies

0% Other 15%




Robert Brusca, Fact and Opinion Economics: Depressing dilly of a monetary policy. Fed is dogmatic and not at all keeping its eye on the bouncing ball of growth and of changing fortunes. The Fed has decided already that we will, WILL, have mean reversion as it is

simply TIME for things to get back to normal so they will and monetary policy will tighten to anticipate that event. What a screwed up bit of arrogance from the Fed after being so clueless all recovery long and about the oncoming recession itself. In my view, the new

regulations on banks implemented by using stress tests on banks are so different and so highly restrictive bank lending is not going to do anything like fostering inflation for a very long time, if ever. Normalcy is gone forever. Instead we have this whatever you want

to call it. The Fed itself has become the biggest risk to growth. Thomas Costerg, Standard Chartered Bank: In December the Fed probably intended to hike rates again in March, but they

probably did not expect such market volatility. The Fed is very sensitive to market sentiment and a sharp increase in the VIX could delay the next hike. March remains our main scenario; the VIX index will be key. The risk of a recession remains quite high as financial

conditions are tightening and lower oil prices are now mostly a negative. The Fed may end up cutting rates sooner than widely expected, in our view. (We expect the Fed to be back at near zero

levels by March 2017) John Donaldson, Haverford Trust Co.: A second Fed move was never likely for this meeting. The market volatility has taken March

off the table as well. Perhaps June for the second move.




Neil Dutta, Renaissance Macro Research: In 2015, core inflation was broadly stable despite a rapid appreciation in the dollar exchange rate and collapse in energy prices. Thus, as these factors abate, core inflation has room to accelerate in 2016. The recent sell

off in risk assets undoubtedly complicates the Fed's tightening plans. However, any delay is likely to be tactical given the broad set of macro-economic conditions that are in place. After all, the unemployment rate is 5.0% with core inflation moving to target.

We would be surprised if the Fed hiked only once or twice in 2016. Three or four hikes appears to be a reasonable baseline path. Mike Englund, Action Economics: The longer-term Fed policy

outlook shouldn't be changing daily with daily changes in stock prices. Only changes in underlying fundamentals should drive the longer-term policy outlook, and there is little evidence that the stock market sell-off is being driven by deteriorating fundamentals.

Stuart Hoffman, PNC Financial Services Group: In the past 35 years, stock market "corrections" (10+% declines) predicted 21 of the last 5 recessions!

Art Hogan, Wunderlich Securities: This is not 2008 and the sooner we stop that analogy the better off markets will be. We are

going through a normal market correction, not a financial crisis. John Kattar, Ardent Asset Advisors: The Fed's decision to gradually normalize policy is the right one, despite recent

dislocations in markets. However, I think that the transition would be easier if the Fed shifted its focus from rates to the balance sheet. Given the cumulative effects of QE, managing rates is awkward and only possible with blunt tools like massive reverse repos and the

IOER.




David Kotok, Cumberland Advisors: The Italian banking system is in crisis. That is driving market risk. So is the high-yield meltdown. China is only one factor. Oil is reaching levels of entry and transmission of low oil to growth takes about a year.

Subodh Kumar, Subodh Kumar & Associates: In addition to evolving central bank policy, other considerations emerge. Recent challenges persist whether closer to one end of the spectrum like

China with a managed economy or closer to the other like the United States with a freer economy. Geopolitical issues remain, including the U.S election. In the markets, the rise in junk and emerging market bond yields continues, reflecting marked increases in

leverage over the last cycle. In equities, rebalancing between value and erstwhile momentum fervor is taking place. Market behavior looks classical to us. More focus has emerged now in the markets on our long held favor for focus on quality of delivery and financial

structure. Globally, change in equity market leadership is likely to come from U.S. markets first and then, as is classical, once global growth is firmly established, flow into emerging markets. Other markets would be in between with rotation dependent on growth

delivery. Sector wise, the financials are likely to be crucial to change in the markets.

Guy LeBas, Janney Montgomery Scott: The Fed isn't "supposed" to consider a market selloff in its mission--unless that selloff causes tighter credit conditions (it is somewhat) or reflects weaker market participants' expectations for the economy (it may be). We can no

longer ignore the prospect that the risk asset selloff represents a prediction of deteriorating US economic growth or recession 6 - 12 months down the road.

John Lonski, Moody's: Persistently wide high-yield bond spreads might yet reduce access to affordable business credit.




Ward McCarthy, Jefferies: China is a bigger threat to US inflation than it is to US growth. Rob Morgan, Sethi Financial Group: The Fed says they'll raise

rates 4 times this year and I believe them. US job growth is accelerating and inflation is coming into the Fed's desired band. The desire by the Fed to have ammo to fight the next recession - higher rates -will trump concerns over the recent stock market correction.

Joel Naroff, Naroff Economic Advisors: This too shall pass and when it does, the markets, especially Treasuries, will rebound as more realistic growth estimates are factored into earnings

projections. James Paulsen, Wells Capital Management: It is still a long time until the March Fed meeting. Should the financial market stabilize

(even at a lower level) and US economic growth reports remain okay, I believe the Fed will still raise rates at the March meeting and indicate it is still on the path of 4 hikes during 2016. Core consumer price inflation and wage inflation are likely to keep rising should US

real GDP growth remain in the 2.25% to 2.75% range, forcing the Fed to keep raising interest rates.

Lynn Reaser, Point Loma Nazarene University: Financial markets have started off 2016 with a major case of the flu, which is threatening to spread from business to consumers to the Fed. While painful, some downtime was probably necessary and is unlikely to

develop into pneumonia or a bear market and recession.




John Roberts, Hilliard Lyons: We see 2016 as a "Tale of two markets," with a significant early year sell-off--potentially of bear market magnitude--driven by earnings shortfalls, low oil prices and general global economic weakness, reversing in a bull market second

half, as oil prices begin to rise, and earnings surprises reverse to the upside and markets move up significantly as investors anticipate an improving pricing environment for the commodity and energy complexes in 2017.

Merrill Ross, Wunderlich: US monetary policy is not going to be effective until there is greater synchronicity in global markets. The US, like Norway, Canada, Japan and other countries, will be unable

to achieve escape velocity and will be back at the zero bound before the target rate is at 3%. Chris Rupkey, Bank of Tokyo-Mitsubishi: I privately feel we are

all doomed, despite my sunny economic forecast. Build a panic room. John Ryding, RDQ Economics: Recent volatility in markets is

contagion but the disease is unclear. Lower oil prices are first negative for growth and then positive. China's market is deflation of a bubble. We see nothing fundamental in market dips and expect

the Fed to look through this in March. Allen Sinai, Decision Economics: Financial turmoil and stock market swoon are overdone, especially with additional policy

stimulus to come from outside the U.S. Hank Smith, Haverford Investments: More than ever the US economy needs corporate tax reform and regulatory relief (so too

Europe). Alas that won't happen this year...maybe '17?




Peter Tanous, Lynx Investment Advisory: We have recently been in the third-longest bull market in history. Bull markets end. Get used to it.

Scott Wren, Wells Fargo Investment Institute: In our opinion, the recent correction is based on fear, not fundamentals. The modest growth/modest inflation environment of the last 5 years should continue throughout this year and into next. We do not see

the U.S. economy slipping into recession and see stocks higher over the next 12-month period. This correction is an opportunity for retail investors who can look through the nearer term volatility and take a 12+ month outlook.

Documents

CNBC Fed Survey, Jan. 26, 2016