cnbc fed 'snap' survey results: june 4, 2012

7/31/2019 CNBC Fed 'Snap' Survey Results: June 4, 2012

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CNBC Fed Survey June 4, 2012Page 1 of 14

FED SURVEYJune 4, 2012

These survey results represent the opinions of 60 of the nations top money managers,investment strategists, and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses werecollected on June 4-5, 2012, after the U.S. May employment report was released. Participantswere 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 thosewho did accept our invitation.

1. Will there be another Federal Reserve quantitative easingprogram in the next year (12 months)?

19%

68%

13%

46%

37%

17%

34%

59%

7%

48%

46%

7%

48%

44%

8%

33%

63%

4%

33%

56%

12%

58%

32%

10%

Yes

No

Don't know/unsure

July 20, 2011 August 11, 2011 September 19, 2011 October 31, 2011

January 23, 2012 March 16, 2012 April 24, 2012 June 4, 2012


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2. For those respondents who replied Yes to question #1 :How large do you expect the new quantitative programwill be over the next year (12 months)? Please do notinclude reinvestment of maturing securities.

$377

$628

$527

$457

$567

$448 $456 $451

$0

$100

$200

$300

$400

$500

$600

$700

Average (In Billions)

July 20, 2011 August 11, 2011 September 19, 2011

October 31, 2011 January 23, 2012 March 16, 2012

April 24, 2012 June 4, 2012


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3. For those respondents who replied Yes to question #1: Atwhich meeting of the Federal Open Market Committee do youthink the Fed is most likely to announce a new QE program?

The Before June Meeting option has only been offered in the June 4 survey.

3%

33%

22%

28%

8%

6%

0%

0%

18%

45%

9%

9%

9%

9%

0%

0%

65%

18%

6%

6%

6%

0%

3%

42%

47%

8%

0%

0%

0%

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

January 2012

March

April

Before June Meeting

June

July

September

October

December 2012

2013

January 23, 2012 March 16, 2012 April 24, 2012 June 4, 2012


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4. Which, if any, of the following additional actions do youthink the Fed will take to drive down long-term yields?

Respondents were able to select more than one response, so percentages total more than 100%

Other responses:

Extend language promising low rates Buy MBS (2) No clue Unsterilized purchases The Fed does not want to see such low long-term yields; QE should lead

them to rise by reducing downside risks. Announce an interest rate target beyond fed funds Lower discount rate

25%

39%

11%

43%

12%

25%

35%

15%

42%

2%

42%

31%

25% 24%

14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Extend

'OperationTwist' beyondJune

Purchase

additional long-term securitiesbut sterilize

those purchases

Reduce the

interest ratepaid on excessreserves

None Other

March 16, 2012 April 24, 2012 June 4, 2012


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5. Do you expect the Federal Reserve to keep interest ratesexceptionally low through late 2014?

40%

57%

3%

49% 49%

2%

67%

28%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No Don't Know/Unsure

March 16, 2012 April 24, 2012 June 4, 2012


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6. How would you characterize the Fed's current monetarypolicy?

41%

52%

3%

5%

26%

52%

12%

10%

39%

40%

12%

9%

34%

48%

10%

8%

37%

45%

12%

5%

53%

38%

6%

4%

36%

51%

8%

6%

33%

52%

10%

5%

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

Too accommodative

Just right

Too restrictive

Dont know/Unsure

July 20, 2011 August 11, 2011 September 19, 2011

October 31, 2011 January 23, 2012 March 16, 2012

April 24, 2012 June 4, 2012


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7. What is your primary area of interest?

Comments:

John Silvia, Wells Fargo : Further QE3 requires a sustained drop in

the employment outlook its a blip so far. Wait for a few moremonths of evidence.

John Ryding, RDQ Economics : The slowdown in headline inflationbelow the 2% target and the slight rise in the unemployment ratewill likely encourage the doves on the FOMC to push for an extensionof Operation Twist. QE3 is likely to be held back and rolled out onlyif growth slows sharply or the euro crisis intensifies.

Drew Matus, UBS Investment Research : Uncertainty related toGreece has acted as QE by driving U.S. Treasury yields lower.

Dan Greenhaus, BTIG : Growth in Q1 was just 1.9% while theeconomy appears to be stagnating into Q2. With European issuesweighing on global growth, particularly by hurting Asian exports, the

Economics42%

Equities24%

Fixed Income12%

Currencies5%

Other17%


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Federal Reserve is surely going to be called on yet again. Agree ordisagree, right or wrong, if the current environment persists, the Fedwill probably purchase more assets.

Richard Steinberg, Steinberg Global Asset Management: Thechallenge for the Fed will be the timing of further weakness in the

jobs outlook with the perceived proximity to the fall election cycleand the political wrangling that comes with it.

Robert Tipp, Prudential Fixed Income : You can't point at any onestatistic and say, 'Oh, that changed the outlook for Fed policy.' It'sclearly the confluence of events that should compel the Fed tocontinue nonstandard measures beyond June 2012: the slowereconomic data in both the U.S. and other key economies, the openended crisis in Europe, and the resulting severe downdraft in themarkets. If they ignore that constellation of signals and just winddown Operation Twist, we should expect market turbulence tocontinue, and the odds of a more serious global slowdown increase.

Scott Wren, Wells Fargo Advisors : I feel the Fed will almostcertainly extend Operation Twist (QE). I felt that was going tohappen well before today's disappointing employment report.Beyond that extension, the Fed will not sit on their hands for longwhen GDP is 2% (or less) and unemployment is stuck at 8% orhigher. The question is whether or not they want to appear political.(I am considering the extension of Operation Twist as more QE, FYI.)

Hugh Johnson, Hugh Johnson Advisors : It is hard to imaginethat there are any additional steps that the Federal Reserve shouldtake. Both short and longer-term interest rates are low. There areample reserves in the financial system to support a significantlyhigher level of lending and monetary growth. The extension of "Twist' may contribute to perception or have a positive impact onpsychology/expectations, but is unlikely to have a substantiveimpact beyond that. The issue is fiscal policy; not monetary policy. If


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there are reasons to worry it is because there is a global shift (or atleast a shift in Europe and a potential shift in U.S.) toward fiscalrestraint. As stated previously, policymakers should review theevents of 1938.

Beth Ann Bovino, Standard & Poor's : The disappointing jobsreport increases the chances that the Fed will be compelled to stayon easy street. Furthermore, given the Fed's inflation 2% target isnot a "ceiling", to quote Bernanke, inflation concerns won't likelyfactor in yet, giving them room to move, if need be. In short, thedoor to QE3 has opened wider.

Mark Luschini, Janney Montgomery Scott : Gold's reaction in jumping $53 today is a canary in the coal mine for further QE.

Barry Knapp, Barclays PLC : Investors will question the efficacy of additional stimulus and we continue to believe that a sustainabletrend where equities richen relative to Treasuries until the Fedbegins normalizing policy. Additionally, the data had bottomed andwas improving during QE2 and Operation Twist, so if they pull thetrigger too quickly they run the risk of exacerbating the expansion of the equity risk premium. The timing of policy responses in Europewill play a role as well which we don't believe can occur prior to theend of June and even then political constraints to stabilizing thebanking system and Spanish sovereign debt will be complex. Inother words, even with a favorable outcome in the Greek vote theproblems are much more complex.

John Augustine, Fifth Third Asset Management : One bad jobsreport should not cause an uproar over the Fed and monetary policy.It is fiscal policy that looms larger, and the Fed is already keeping tothat 2014 sentence in their statement to counter.

Ethan Harris, BofA Merrill Lynch Global Research : While QE3 isvery likely, the Fed can't fix the dysfunction in the rest of


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Washington. Fixing the fiscal cliff is the real priority.

Guy LeBas, Janney Montgomery Scott : The downright dismalperformance of the labor markets in May increases the odds of Fedaction dramatically. This is exactly the sort of downside risk thedovish policymakers were concerned about, as noted in the AprilFOMC minutes.

Mike Englund, Action Economics : The economy's primaryheadwind is business community fear about the imbalances beinggenerated by severely accommodative fiscal and monetary policy.Fed attempts to "do something" only make this headwind worse.Though Fed doves refuse to see this and may push through a furthereasing anyway, we assume that Fed hawks will be increasingly vocalas global conditions deteriorate, and a desire for consensus willrestrain further action.

Diane Swonk, Mesirow Financial : The Fed is likely to keep itspowder dry until whatever it does can leverage efforts by Europe tostabilize its banking system. Europe is shooting for early July ongetting funds into the banks. Let's hope they can last that long. Weneed an announcement of action, not just talk, from Europe soon, orthere won't be much left to fix.

Clare Zempel, Zempel Strategic : The market monetarist position is correct. Neither the Fed nor the ECB has eased effectivelyto date, as reflected in subpar nominal GDP expansion. This was truebefore the renewed "euro panic" and today's weak jobs report. It canonly be hoped that both central banks will abandon "inflationparanoia" and pursue faster nominal growth.

Marc Chandler, Brown Brothers Harriman: The crisis in Europehas, in effect, delivered a QE to the U.S. in terms of lower yields. Of all that ails the U.S. economy presently, interest rates do not seemto be high on the list.


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Robert Brusca, Fact and Opinion Economics: The problem maybe that rates are too low. At this low level, lenders do not want longterm exposure so they cut back and raise the criterion for lending.(Think high credit scores to refinance). This is beyond the Fed. Weneed a fiscal fix. We need to boost confidence by showing we canreduce our out-year federal deficits. We need to solve the fiscal cliff issue. We need representatives to act like leaders, election year ornot. Oh, never mind...

Subodh Kumar, Subodh Kumar & Associates : Central bankshave limits on what they can accomplish on their own. Both politicsand economics are key for the second half of 2012 & beyond. Onpolitics, the U.S. election has started but tough decisions are duealso for Europe and Egypt s elections and oil must not be overlooked.In markets, more realism is required on earnings, as this equity dropindicates. Even in rising, earnings are likely to be well belowconsensus into 2013. Quality is likely to be a long-serving attribute.

John Donaldson, Haverford Trust Co. : The employment reportmakes additional Fed action more likely. The only silver lining in thatcloudy report is that it may place more urgency on Congress to avoidthe "fiscal cliff."

Mike Dueker, Russell Investments : Note that nominal GDP inthe U.S. has not reached the desired trend rate of 4.5% since thesecond quarter of 2010 -- since the euro zone crisis became acutewith the first Greek bailout in May 2010. While we would like to seenominal GDP experience some catch-up growth above 4.5%, neitherthe second round of QE nor Operation Twist has been able to keepnominal GDP growth from falling below trend in the face of headwinds from Europe and fiscal uncertainty in the U.S. More QEshould follow.

Richard Sichel, Philadelphia Trust Co. : The markets and their


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reversion to risk have taken the place of the Fed in keeping ratesextremely low. It also shows me that U.S. debt is still the best thereis.

David Goerz, Highmark Capital : With Treasury yields at a recordlow, any additional monetary easing would have little to no effect onthe yield curve, and would only make it that much more difficult tounwind sometime in the future.

Lynn Reaser, Point Loma Nazarene University : The globaleconomy is now suffering from a massive loss of confidence. TheFed's only option is to flood the system with liquidity in hopes of reviving risk appetite, at least in a few corners.

Michael Painchaud, Market Profile Theorems : If you assume asecular bear market in the economy and equities, the employmentreport is not a surprise: some periods of improvement and some of decline against a persistent weak backdrop. The cyclical periodswithin the secular have started to demonstrate more volatility. (Thebest Q1 on a price performance basis since 1998 gets followed bythe weakest May in 8 years.) Equity prices will recover just fine, andthis is probably a good lower-risk price point at which to overweightthem. Buy and Hold is not the preferred equity strategy in such anenvironment, unless Dividend Yield is a strong component of theequity construction process. Otherwise, shorten holding periods.Active management wins here.

Hank Smith, Haverford Investments : The Fed may do more butthey won't call it QE3. But what the economy needs is better fiscalpolicy and the Fed has nothing to do with that. We need tax reformwith permanently lower rates and fewer deductions and we needregulatory reform (fewer regulations.) This applies to Europe as well.

Peter Tanous, Lynx Investment Advisory : More positivesurprises are likely than negative ones. Europe's calamities are


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known. Near-term possible upside surprises include: 1. QE3, 2.Greece stays in Euro, 3. EU announces European FDIC equivalent,taking pressure off banks.

Alan Kral, Trevor Stewart Burton & Jacobsen : The onlyimportant date is the election.

William Larkin, Cabot Money Management : The Fed at their nextmeeting might indicate that monetary policy is reaching its limits andeconomic prosperity can t return without more clarity from Congress.The House and Senate need to address the growing uncertaintyabout government spending, taxes, and most importantly, a solutionthat fosters political cooperation.

David Kotok, Cumberland Advisors : Policy is confusing.Investors see global issues while policy makers act and speak in adomestically centric way. International coordination seems lackingand indecisive.

Lee Hoskins, Pacific Research Institute : QE3 is a loser. It doesnothing for employment and raises the risk of a clean Fed exit fromits current policy. The Fed should not react to incoming data unlessthe forecast for inflation a year from now is far below the 2% target.

David Resler, Nomura : Fed policy will be driven by the euro crisismore than by the U.S. outlook. Initial response is likely to featuretargeted loan options (e.g. discount window, central bank currencyswaps, TAF-like programs.) IF new LSAPs are launched, the effect islikely to come mainly via portfolio substitution effects not via lowerrates.

Rob Morgan, Fulcrum Securities : This jobless recovery is just likethe one in the early 90s and early 2000s. The structural shift in theU.S. economy to a service economy from a manufacturing economyhas probably made this the norm for future recoveries. One silver


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lining: housing has been a drag for three years of this recovery, butif housing is indeed bottoming it could be additive going forward.

Brian Gendreau, Financial Network : The probability of QE3 hasrisen, but the Fed is likely to wait for evidence growth prospectshave deteriorated further before making what is certain to be acontroversial move.

Dean Baker, Center for Economic and Policy Research : Theprolonged period of high unemployment is by far the worst crisis theFed has faced in the last 60 years. It should be acting moreaggressively to counter it.

cnbc fed 'snap' survey results: june 4, 2012

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