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?
Apr 28

100%
90%

Jun 16

Jul 28

92%
84%

82%

80%

70%
60%
50%
40%
30%
20%

15%

11%
10%

5%

5%

3%

3%

0%
Yes

CNBC Fed Survey July 28, 2015

Page 1 of 33

No

Don't know/unsure

FED SURVEY
July 28, 2015
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?
70%

60%

59%

50%

47%

40%

32%

32%

30%

20%

12%
10%

0%

Declining
inflation

Weak US
economic
growth

CNBC Fed Survey July 28, 2015

Page 2 of 33

Weak overseas
growth

Weak payroll
growth

Concern over
market reaction
to a hike

FED SURVEY
July 28, 2015
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?
80%

70%
Modestly more slack

60%

50%

40%

Considerably more slack

30%
Modestly less slack

20%
Considerably less slack

10%

No difference

0%
July 29

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

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%

CNBC Fed Survey July 28, 2015

Page 3 of 33

FED SURVEY
July 28, 2015
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?
70%
Modestly more slack

60%

50%

40%

30%
Considerably more slack

Modestly less slack

20%
No difference

10%

Considerably less slack

0%
July 29

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

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%

CNBC Fed Survey July 28, 2015

Page 4 of 33

FED SURVEY
July 28, 2015
4. What is your measure of full employment in the U.S.?
Apr 28

Jun 16

Jul 28

35%

Averages:

30%

Apr 28: 4.8%

25%

Jun 16: 4.8%

Jul 28: 4.7%

20%

15%

10%

5%

0%

Unemployment rate

CNBC Fed Survey July 28, 2015

Page 5 of 33

FED SURVEY
July 28, 2015
5. In July, will the Fed alter its statement to signal a rate hike is
nearing?
70%

63%
60%

50%

40%

34%
30%

20%

10%

3%
0%
Yes

CNBC Fed Survey July 28, 2015

Page 6 of 33

No

Don't know/unsure

FED SURVEY
July 28, 2015
6. At what level of year-over-year wage growth would you
become concerned that inflationary pressures are building?
Jun 16

Jul 28

50%

45%

Averages:

40%

Jun 16: 3.6%

35%

Jul 28: 3.5%

30%

25%

20%

15%

10%

5%

0%

0%

1%

2%

3%
4%
Wage growth

5%

6%

7%

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

CNBC Fed Survey July 28, 2015

Page 7 of 33

FED SURVEY
July 28, 2015
7. At the current level of wage growth, are you ...?
Jun 16

Jul 28

70%

65%
62%
60%

50%

40%

30%

21%21%

20%

10%

9%

10%
6%

5%

3%
0%

0%

Concerned
Concerned
about inflation about deflation

CNBC Fed Survey July 28, 2015

Page 8 of 33

Believe the
risks are
neutral

Theres little
Don't
connection
know/unsure
between wages
and overall
price inflation

FED SURVEY
July 28, 2015
8. What is the minimum rate of average monthly payroll growth
that you believe the Fed will require to:
Hike rates initially

0%

Less than 100K

10%

15%

20%

35%

40%

45%

0%
6%

6%
12%

29%

175K to 200K

18%

44%

200K to 225K

32%

6%

225K to 250K

18%

9%
9%

More than 250K

3%
3%

CNBC Fed Survey July 28, 2015

Page 9 of 33

30%

3%
3%

150K to 175K

Don't know/unsure

25%

0%
0%

100K to 125K

125K to 150K

5%

Enact subsequent hikes

50%

FED SURVEY
July 28, 2015

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

December 31, 2015

December 31, 2016

2,400

2311

2296

2293

2,300

2259
2194 2187

2,200

2247
2156 2159

2149

2,100

2254

2135

2128

2111
2075

2,000

1,900

1,800
Jul 29

Sep 16

Oct 28

Dec 16

Jan 27
'15
Survey Dates

CNBC Fed Survey July 28, 2015

Page 10 of 33

Mar 17 Apr 282 Jun 16

Jul 28

FED SURVEY
July 28, 2015
10.
What do you expect the yield on the 10-year Treasury
note will be on ?
December 31, 2015

December 31, 2016

4.0%

3.52%
3.5%
3.43%

3.45%

3.24%
3.14%

3.17%

3.19%
3.0%

3.04%
2.96%
2.89%
2.64%
2.57%
2.62%

2.5%

2.54%
2.33%

2.0%
Jul 29

Sep 16

Oct 28

Dec 16

Jan 27
'15
Survey Dates

CNBC Fed Survey July 28, 2015

Page 11 of 33

Mar 17 April 28

Jul 16

Jul 28

FED SURVEY
July 28, 2015
11.
What is your forecast for the year-over-year percentage
change in real U.S. GDP for ?
2015

2016

3.4%

3.2%
+3.02% +3.00%

+3.02%

3.0%

+2.99%

+2.90% +2.90%

+2.90%
+2.81%

2.8%

+2.88%

+2.75%

+2.84%
+2.80%

+2.81%

+2.78%

+2.69% +2.70%

2.70%

2.6%
2.41%

2.4%

2.2%

2.0%

+2.25%

Jan
Mar 18 Apr 28
28, '14

2015 +2.90

+3.02

+3.00

Jun 4

Jul 29 Sep 16 Oct 28 Dec 16

Jan
Mar 17
27, '15

+2.81

+2.75

+3.02

+2.99

+2.69

+2.70

+2.25 2.41%

+2.88

+2.80

+2.84

+2.81

+2.78 2.70%

2016

CNBC Fed Survey July 28, 2015

Page 12 of 33

+2.90

+2.90

April
28

Jun 16

Jul 28

FED SURVEY
July 28, 2015
12.
What is your forecast for the year-over-year percentage
change in the headline U.S. CPI for ?
2015

2.4%

2016

2.29% 2.27%

2.29%
2.17%

2.2%

2.08%
2.0%

2.02%

2.01%

2.17%

2.07%
1.96%

1.8%

1.74%
1.6%

1.4%

1.17%

1.17%

1.2%

1.10%

1.0%

1.01% 1.00%
0.8%
Jun 4

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

CNBC Fed Survey July 28, 2015

Page 13 of 33

FED SURVEY
July 28, 2015
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?
14%

59%
responded
"None. The Fed
won't consider
this factor"

12%

10%

Average for
numerical
responses:

8%

31.4%
6%

4%

2%

0%
0%

10%

20%

30%

40%

50%

60%

Rate hike probability

CNBC Fed Survey July 28, 2015

Page 14 of 33

70%

80%

90%

100%

FED SURVEY
July 28, 2015
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

CNBC Fed Survey July 28, 2015

Page 15 of 33

FED SURVEY
July 28, 2015
15.
How would you characterize the Fed's current monetary
policy?
Too accommodative

Just right

Too restrictive

Don't know/unsure

70%

Too accomodative

60%

60%

54%
49%

50%
43%

49%

49%

50%

50%

50%
44%

47%

46%

43%

40%

49%

43%

47%

44%
39%
35%
32%

30%

Just right

28%
20%

17%
Don't know/unsure

10%

13%

8%
6%

6%

5%

3%
3%

0%

3%

6%
6%

3%

3%

6%

3%
5%
Too restrictive

3%
3%

6%
0%

Jul 31, Jul 29, Aug 20 Sep 16 Oct 28 Dec 16 Jan 27, Mar 17 Apr 28 Jun 16 Jul 28
'12
'14
'15

CNBC Fed Survey July 28, 2015

Page 16 of 33

FED SURVEY
July 28, 2015
16.
Where do you expect the fed funds target rate will be on
?
2.5%

2.13%
2.04%

1.99%

2.0%

1.93%
1.84%

Dec 2016

1.75%

1.56%

1.5%
1.46%

1.41%

1.05%

1.0%

0.99%

0.97%
0.92%

0.98%
0.89%
0.83%

0.82%
0.89%

0.73%

0.83%
0.70% 0.72%

Dec 2015

0.68%

0.47%

0.5%

0.54%

0.0%
Jul
30
Dec 31, 2015 0.97

0.53%

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

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

Dec 31, 2016

CNBC Fed Survey July 28, 2015

Page 17 of 33

0.71%

FED SURVEY
July 28, 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?
4.0%

3.5%
3.30%

3.16%

3.20%

3.17%

3.11%

3.06%

3.04%

2.98%

3.0%

2.85%

2.5%

2.0%
Aug 20 Sep 16 Oct 28 Dec 16 Jan 27, Mar 17 Apr 28 Jun 16 Jul 28
'15
Survey Dates

CNBC Fed Survey July 28, 2015

Page 18 of 33

FED SURVEY
July 28, 2015
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

CNBC Fed Survey July 28, 2015

Page 19 of 33

FED SURVEY
July 28, 2015
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):
Mar 17

0%

10%

20%

Apr 28

Jun 16

30%

Jul 28

40%

50%
41%

39%

Greece

13%

11%

Portugal

12%
13%
12%

8%

Spain

10%
12%

9%

7%

Italy

8%

11%

8%

Ireland

5%

5%
7%
3%

Germany

France

3%

2%
3%

5%

3%
3%

CNBC Fed Survey July 28, 2015

Page 20 of 33

50%
49%

60%

FED SURVEY
July 28, 2015
20.
a:

The recent agreement between Greece and its creditors is

100%

91%
90%

80%

70%

60%

50%

40%

30%

20%

9%

10%

0%

0%
Permanent solution

CNBC Fed Survey July 28, 2015

Page 21 of 33

Temporary solution

Don't know/unsure

FED SURVEY
July 28, 2015
21.

What effect will the Greece deal have on:

Greece's economy

The eurozone's economy

80%

68%

70%

59%

60%

50%

40%

30%

18%

20%

15%

15%

9%

10%

9%

9%

0%
Positive

Neutral

CNBC Fed Survey July 28, 2015

Page 22 of 33

Negative

Don't know/unsure

FED SURVEY
July 28, 2015
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)?
50%

47%
45%

40%

35%

29%

30%

24%

25%

20%

15%

10%

5%

0%
Yes

CNBC Fed Survey July 28, 2015

Page 23 of 33

No

Don't know/unsure

FED SURVEY
July 28, 2015
23.
Has the U.S. stock market already discounted a fed funds
rate hike by the Federal Reserve this year?
Yes

No

Don't know/unsure

70%

61%
60%
56%

53%

53%
50%

50%

50%
47%

47%

40%
36%

39%

38%

38%

30%

20%
12%
8%

10%

9%

3%
0%

0%

0%
Dec 16

Jan 27

CNBC Fed Survey July 28, 2015

Page 24 of 33

Mar 17
Apr 28
Survey dates

Jun 16

Jul 28

FED SURVEY
July 28, 2015
Has the U.S. bond market already discounted a fed funds rate
hike by the Federal Reserve this year?
Yes

No

Don't know/unsure

80%

70%

60%

67%

62%

56%

50%

40%

42%

33%

30%

35%

20%

10%
3%

3%
0%
0%
Apr 28

CNBC Fed Survey July 28, 2015

Page 25 of 33

Jun 16
Survey dates

Jul 28

FED SURVEY
July 28, 2015
24. What is the single biggest threat facing the U.S. economic
recovery?
Apr 30

Jun 18

Jul 30

Sep 17

Jul 29

Sep 16

Oct 28

Dec 16

0%

5%

Oct 29

Dec 17

Jan 27 '15

Mar 17

10%

15%

Jan 28 '14

Mar 18

April 28

Jun 16

20%

25%

30%

Apr 28
Jul 28

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
Global
Rise in
Slow wage
Geopolitic
economic
interest
growth
al risks
weakness
rates

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

Don't
know/uns
ure

Other

Apr 30

0%

11%

2%

2%

0%

20%

Jun 18

0%

13%

0%

3%

3%

20%

28%

15%

Jul 30

4%

14%

10%

2%

2%

0%

22%

30%

8%

Sep 17

2%

7%

18%

4%

0%

2%

22%

27%

4%

Oct 29

0%

13%

8%

3%

3%

3%

24%

29%

8%

Dec 17

2%

2%

15%

2%

0%

2%

29%

32%

5%

Jan 28 '14

0%

21%

12%

0%

0%

2%

30%

21%

7%

Mar 18

0%

18%

5%

0%

5%

3%

26%

23%

10%

Apr 28

0%

13%

18%

8%

0%

5%

3%

21%

26%

3%

Jul 29

3%

12%

12%

12%

0%

3%

6%

12%

29%

12%

Sep 16

3%

11%

11%

6%

0%

3%

6%

29%

26%

6%

Oct 28

3%

8%

8%

10%

0%

3%

3%

15%

18%

31%

Dec 16

0%

3%

14%

3%

0%

6%

3%

14%

14%

40%

Jan 27 '15

0%

16%

6%

41%

16%

6%

0%

0%

0%

9%

13%

0%

Mar 17

0%

14%

17%

28%

8%

6%

0%

6%

3%

0%

14%

6%

April 28

3%

19%

8%

28%

11%

6%

0%

0%

3%

8%

11%

3%

Jun 16

0%

11%

6%

22%

25%

14%

0%

0%

0%

3%

17%

3%

Jul 28

0%

9%

9%

29%

6%

12%

0%

0%

0%

9%

21%

6%

CNBC Fed Survey July 28, 2015

Page 26 of 33

Debt
ceiling

Deflation Inflation

Slow job
growth

FED SURVEY
July 28, 2015
25. In the next 12 months, what percent probability do you
place on
theSURVEY
U.S. entering recession? (0%=No chance
FED
of recession,
100%=Certainty of recession)
April 30,
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%

17.3%

19.1%
17.6%

15%

16.9%

17.4%
16.2%
15.1%

16.9%
16.2%
15.3%

15.2%

16.4%

15.1%

15.0%

14.6%

14.7%
13.6%
13.0%

10%

5%

0%

Aug
Sep Oct
11,
19 31
'11

Jan
Mar Apr
23,
16 24
'12

Jul
31

Jan
Sep Dec
Mar Apr Jun
29,
12 11
19 30 18
'13

Jul
30

Sep Oct Dec

6
29 17

Jan
Mar Apr
28
18 28
'14

Jul
29

Sep Oct Dec

16 28 16

Jan
Mar April Jun
27
17 28 16
'15

Jul
28

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

Survey Dates

CNBC Fed Survey July 28, 2015

Page 27 of 33

FED SURVEY
July 28, 2015
26. What is your primary area of interest?

FED SURVEY
April 30,
Other
20%
Currencies
3%
Fixed Income
11%

Economics
49%

Equities
17%

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
CNBC Fed Survey July 28, 2015
Page 28 of 33

FED SURVEY
July 28, 2015
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.
FEDa SURVEY
Greece is forming
new ring of Hell in Dante's inferno.
April 30,
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 nearterm 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 nearCNBC Fed Survey July 28, 2015
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FED SURVEY
July 28, 2015
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
SURVEY
volatile limitedFED
liquidity
aftershock of the Fed's action.
April 30,
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.

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Subodh Kumar, Subodh Kumar & Associates: Unavoidable
reality is one of interest rate increases as Fed Chair Yellen and
FEDhave
SURVEY
several governors
underscored. We believe the Fed rate hikes
April 30,2015. The first tranches of quantitative ease
start from September
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.
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Rob Morgan, Sethi Financial Group: In spite of slow job growth
and low inflation, the Fed needs ammo to fight the next recession
FED
and will hike at
leastSURVEY
once, and maybe twice, before year-end.
April 30,
James Paulsen, Wells Capital Management: One of the most
interesting current financial market characteristics is despite
widening concerns about weaker global growth and deflation, 10year 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
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FED SURVEY
July 28, 2015
headed for the best years of the expansion in 2016/2017.

FED
SURVEY
Diane Swonk,
Mesirow
Financial: Limp off for the Fed will be an
April 30,
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.

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