FED SURVEY

December 13, 2016

These survey results represent the opinions of 46 of the nations top money managers, investment
strategists, and professional economists.

FED SURVEY

They responded to CNBCs invitation to participate in our online survey. Their responses were collected on
December 8-10, 2016. Participants were not required to answer every question.

April 30,

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 December meeting, the Federal Reserve will:

0%

10%

20%

Keep rates unchanged

Don't know/unsure

0%

4%

0%

CNBC Fed Survey December 13, 2016

Page 1 of 30

40%

50%

60%

70%

80%

90%

96%

Raise interest rates

Lower interest rates

30%

100%

FED SURVEY

December 13, 2016

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

FED SURVEY

Raise interest rates

Lower interest rates

Move to negative interest rates

Launch new quantitative easing

April 30,

100%

100%
94%

90%

88%

95%

90%

98%
92%

100%
95%

Raise interest rates

80%

70%

60%

50%

40%

30%

20%

Launch new quantitative easing

10%

Lower interest rates

10%

10%

4%

5%

3%

2%

5%
0%

0%
Jan 27

Mar 15

Apr 26

Jun 14

CNBC Fed Survey December 13, 2016

Page 2 of 30

Jul 26

Aug 24

Sep 20

Nov 1

Dec 13

FED SURVEY

December 13, 2016

(For the 100% answering the next move will be to raise rates)

When will FED

the Federal
Reserve take this action?
SURVEY
April 30,
50%

44%

45%

Average:
May 2017

40%

35%

30%

26%
25%

20%

15%

11% 11%
10%

5%

4%

4%
0%

0%

Dec

Jan Feb
2017

0% 0% 0% 0% 0%
Mar

Apr

CNBC Fed Survey December 13, 2016

Page 3 of 30

May

Jun

Jul

Aug

Sep

Oct After
Oct
2017

FED SURVEY

December 13, 2016

How many times will the Federal Reserve hike rates in 2017?

FED SURVEY

April0.50
30, 1.00
0.00

1.50

Average
2.50

3.00

1.97

Survey Dates

Nov 1

2.00

Dec 13

CNBC Fed Survey December 13, 2016

Page 4 of 30

2.50

3.50

4.00

4.50

5.00

FED SURVEY

December 13, 2016

3. How will President-elect Donald Trump's economic policies
affect: (Decrease a lot=-2, Decrease somewhat=-1, Have no effect=0, Increase

FED SURVEY

somewhat=+1, Increase a lot=+2)

April 30,

No effect

Decrease a lot
-2.0

-1.5

-1.0

Overall growth

Employment

-0.5

+0.0

Increase a lot
+0.5

+1.0

+1.5

+1.02

+0.65

+1.39

Deficits

Inflation

Stocks

Bond yields

CNBC Fed Survey December 13, 2016

Page 5 of 30

+2.0

+1.00

+0.84

+1.19

FED SURVEY

December 13, 2016

4. Please rate President-elect Donald Trump's economic policies
in the following areas: (Very negative=-2, Somewhat negative=-1, Neutral=0,

FED SURVEY

Somewhat positive=+1, Very positive=+2)

April 30,

Very negative
-2.0

-1.5

-1.0

+0.0

+0.5

+1.0

+1.5

+2.0

+1.44

Bus. tax cuts

-0.96

Reduce bus. regs

CNBC Fed Survey December 13, 2016

Page 6 of 30

-0.5

+0.87

Indiv. tax cuts

Trade

Very positive

Neutral

+1.33

FED SURVEY

December 13, 2016

President-elect Trump has threatened to place a 35 percent tariff on
imports of companies that have moved jobs and production from
FEDcountries.
SURVEY
the US to other
April 30,
5. Will Mr. Trump be able to impose the tariff he's threatening?
0%

Yes

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

13%

60%

No

27%

Don't know

6. If the tariff he's proposing is actually imposed, what effect will

it have on overall growth?
100%
90%
80%

64%

70%
60%
50%
40%
30%

21%

20%
10%

7%

9%

Have no
effect

Increase it
somewhat

0%

0%

Decrease it a Decrease it
lot
somewhat

CNBC Fed Survey December 13, 2016

Page 7 of 30

Increase it a
lot

FED SURVEY

December 13, 2016

7. Mr. Trump will likely make several appointments to the Federal
Reserve Board of Governors. The people he will appoint are
SURVEY
likely toFED
support:
April 30,
100%
90%

80%

70%

60%

50%

50%
46%

40%

30%

20%

10%

5%

0%

Faster rate hikes

Slower rate hikes

CNBC Fed Survey December 13, 2016

Page 8 of 30

Rate hikes at about

the same pace as other
FOMC members

FED SURVEY

December 13, 2016

8. Will Mr. Trump reappoint Fed Chair Janet Yellen?
100%

FED SURVEY
April 30,

90%

82%
80%

70%

60%

50%

40%

30%

20%

11%
7%

10%

0%

Yes

CNBC Fed Survey December 13, 2016

Page 9 of 30

No

Don't know

FED SURVEY

December 13, 2016

9. If Ms. Yellen is not reappointed, who will Mr. Trump nominate
to replace her:

FED SURVEY
April 30,

0%

10%

20%

30%

50%

38%

John Taylor

22%

Don't know

14%

Kevin Warsh

Donald Trump Jr.

3%

Glen Hubbard

3%

Jared Kushner

3%

Jerome Powell

3%

John Allison

3%

Knut Wicksell (1851-1926)

3%

Larry Lindsey

3%

Non-academic

3%

Richard Fischer

3%

Someone unqualified

3%

CNBC Fed Survey December 13, 2016

Page 10 of 30

40%

60%

70%

80%

90%

100%

FED SURVEY

December 13, 2016

10.
100%

Will Mr. Trump reappoint Fed Vice Chair Stanley Fischer?

FED SURVEY
April 30,

90%

80%

70%

60%

49%

50%

40%

31%
30%

20%

20%

10%

0%

Yes

CNBC Fed Survey December 13, 2016

Page 11 of 30

No

Don't know

FED SURVEY

December 13, 2016

11.
Should Congress force the Fed to adopt a rule to guide the
making of monetary policy?
100%

FED SURVEY
April 30,

90%

84%
80%

70%

60%

50%

40%

30%

20%

11%
10%

4%
0%

Yes

CNBC Fed Survey December 13, 2016

Page 12 of 30

No

Don't know

FED SURVEY

December 13, 2016

12.
100%

Recent stock market gains appears to be mostly driven by:

FED SURVEY
April 30,

90%

82%
80%

70%

60%

50%

40%

30%

20%

18%

10%

0%

0%

Solid economic
fundamentals,
including a better
corporate profit
outlook

Expectations for policy

changes from the new
administration

CNBC Fed Survey December 13, 2016

Page 13 of 30

Don't know/unsure

FED SURVEY

December 13, 2016

13.
The stock market's expectations for Trump administration
policy changes are:

FED SURVEY

100%

April 30,

90%

80%

70%

60%

56%

50%

42%
40%

30%

20%

10%

2%
0%

Too optimistic

Realistic

CNBC Fed Survey December 13, 2016

Page 14 of 30

Too pessimistic

0%
Don't
know/unsure

FED SURVEY

December 13, 2016

14.
?

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

FED SURVEY
April
30,
December
31, 2016

December 31, 2017

December 31, 2018

2,600

2480

2,500
December 31, 2018
2,400

2357
2311

2,300

2296

2293
2254

2247 2259

2158

2166
2159

2183
2174
2149 2160

2140
2107

2000
1,900

1,800

Survey Dates

CNBC Fed Survey December 13, 2016

2114
2088

2035

2,000

Page 15 of 30

2196 2242

2200

2,200

2,100

2234

2223

2264
2275
2249
2255
2244

FED SURVEY

December 13, 2016

15.
What do you expect the yield on the 10-year Treasury note
will be on ?

FED SURVEY
April
30,
December
31, 2016

December 31, 2017

December 31, 2018

4.0%

December 31, 2018

3.52%
3.5%

3.14%
3.0%

3.44%

3.24%
3.17%
3.09%
2.88%
2.83%

3.04%
2.89%

2.88%

2.67%

2.58%

2.67%
2.5%

2.90%

2.43%
2.51%

2.54%

2.34%

2.25%

2.24%
2.26% 2.28%

2.11%
2.10%

2.0%

1.75%
1.5%

1.0%

Survey Dates

CNBC Fed Survey December 13, 2016

Page 16 of 30

1.91%

1.76%

1.78%

FED SURVEY

December 13, 2016

16.
?

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

FED SURVEY
Dec 31, 2017

Dec 31, 2016

April 30,

3.0%

Dec 31, 2018

Dec 31, 2019

2.67%

2.5%

2.04%

2.0%
1.99%

1.93%

1.87%

1.84%

1.56%

1.61%

1.5%
1.46%
1.41%

1.78%
1.61% 1.62%
1.60%

1.17%

1.12%

1.81%
1.69%

1.49%
1.43%

0.0%

CNBC Fed Survey December 13, 2016

1.26%

1.22%
1.18% 1.16%

0.88%
0.84%
0.91% 0.90%
0.78%
0.74%
0.85%
0.61%

0.5%

Page 17 of 30

2.10%

2.07%

1.75%

1.0%

2.22%

2.17%

2.13%

0.59%

1.09%

0.63%
0.61%

0.59%

FED SURVEY

December 13, 2016

17.
At what fed funds level will the Federal Reserve stop
hiking rates in the current cycle? That is, what will be the
SURVEY
terminalFED
rate?
April 30,
4.0%

3.5%
3.30%
3.20%
3.16%
3.0%

3.17%
3.11%
3.06%
3.04%

2.98%

2.92%
2.73%

2.85% 2.79%

2.65%

2.69%
2.5%

2.65%
2.58%

2.64%

2.48%

2.56%
2.42%

2.44%

2.29%

2.0%

Survey Dates

CNBC Fed Survey December 13, 2016

Page 18 of 30

FED SURVEY

December 13, 2016

18.

When do you believe fed funds will reach its terminal rate?
Survey Date

FED SURVEY

August
survey
April2030,

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

Mar 15 survey

Q3 2018

Apr 26 survey

Q4 2018

Jun 14 survey

Q4 2018

Jul 26 survey

Q4 2018

Aug 24 survey

Q4 2018

Sep 20 survey

Q4 2018

Nov 1 survey

Q1 2019

Dec 13 survey

Q2 2019

CNBC Fed Survey December 13, 2016

Page 19 of 30

Forecast

FED SURVEY

December 13, 2016

19.
What is your forecast for the year-over-year percentage
change in real U.S. GDP for ?

FED SURVEY
April 30,

2016

2017

2018

3.0%
+2.88%
+2.84%
+2.81%
+2.78%

2.8%

2018
2.76%

+2.80%
+2.70%
+2.64%
+2.60%

2.6%

+2.43%

2.4%

2.57%

+2.45%
+2.41%

+2.31%

2.2%

+2.17%

+2.25% +2.26%

+2.24%

+2.21%

+2.14%

+2.05%

+2.28%

+2.16%

+2.08%

2.0%
+1.88%

+1.95%

1.8%

+1.82%

1.6%
Dec
16

Jan
27,
'15

Mar
17

April
28

Jun
16

Jul 28

Sept
16

Oct
27

Dec
15

Jan
26
'16

Mar
15

Apr
26

Jun
14

Jul 26

Aug
24

1.90%

+1.81%

Sep
20

Nov 1

Dec
13

2016 +2.88 +2.80 +2.84 +2.81 +2.78 +2.70 +2.64 +2.60 +2.45 +2.17 +2.14 +1.95 +2.05 +2.08 +1.88 +1.82 +1.81 1.90%
2017

+2.43 +2.31 +2.41 +2.21 +2.25 +2.26 +2.24 +2.28 +2.16 2.57%

2018

2.76%

CNBC Fed Survey December 13, 2016

Page 20 of 30

FED SURVEY

December 13, 2016

20.
What is your forecast for the year-over-year percentage
change in the headline U.S. CPI for ?

FED SURVEY
April 30,

2016

2017

2018

2.8%

2018
2.64%

2.6%

2.36%

2.4%

2.2%

2.17%
2.17%

2.24%
2.17%

2.08%
2.0%

2.13%
2.07%

1.96%

2.16%
2.12%

2.12%

2.07%

2.20%

2.09%
2.02%

1.88%

1.89%

1.8%

1.72%

1.75%
1.63%

1.75%

1.55%

1.66%

1.6%

1.57%
1.4%

1.50%
1.45%

1.2%

1.0%

Survey Dates

CNBC Fed Survey December 13, 2016

Page 21 of 30

1.51%

FED SURVEY

December 13, 2016

21.
When do you expect the Fed to allow its balance sheet to
decline?

FED0% SURVEY
5%
April 30,

Jan '17
Feb

0%

Jul

0%

Aug

2%

Sep

2%
2%
14%

Jan '18

5%
0%

Mar

10%

Apr

0%

May

0%

Jun

10%

Jul

0%

Aug

0%

Sep

0%

Oct

0%

Nov

0%
2%

2019 or later
Never

CNBC Fed Survey December 13, 2016

Page 22 of 30

35%

0%

Dec

Dec

30%

2%

Jun

Feb

25%

5%
0%

Nov

20%

0%

May

Oct

15%

2%

Mar
Apr

10%

31%
12%

FED SURVEY

December 13, 2016

20%
15%
8%
4%
8%
5%
7%
10%
3%
12%
6%
31%
40%
0%
6%
3%
3%
6%
0%
0%
0%
0%
5%
0%
0%
2%
3%
0%
3%
5%

31%
28%
30%
27%
29%
32%
21%
23%
26%
29%
26%
18%
14%
13%
14%
11%
17%
21%
16%
8%
10%
10%
21%
22%
28%
20%
19%
16%
27%
9%

20%
20%
22%
22%
24%
29%
30%
26%
21%
12%
29%
15%
14%
9%
0%
8%
3%
9%
2%
5%
5%
5%
3%
2%
5%
7%
3%
11%
8%
2%

0%
3%
0%
2%
3%
2%
2%
3%
3%
6%
6%
3%
3%
0%
3%
3%
0%
0%
0%
3%
0%
0%
0%
2%
3%
2%
3%
3%
0%
7%

2%
3%
2%
0%
3%
0%
0%
5%
5%
3%
3%
3%
6%
0%
6%
0%
0%
0%
4%
8%
0%
3%
0%
2%
0%
2%
0%
0%
3%
0%

2%
0%
2%
4%
3%
2%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%

10%
18%
8%
15%
12%
5%
8%
12%
6%
10%
3%
6%
6%
6%
14%
12%
0%
8%
8%
0%
5%
0%
3%
2%
3%
0%
8%
7%

18%
12%
11%
8%
14%
16%
8%
11%
25%
6%
8%
13%
10%
5%
5%
7%
0%
10%
3%
3%
3%
7%

41%
28%
28%
22%
29%
45%
41%
44%
44%
33%
36%
28%
22%
31%
30%
32%
19%

6%
17%
8%
6%
9%
8%
10%
5%
8%
5%
9%
8%
7%
3%
8%
3%
0%

3%
0%
0%
0%
0%
0%
3%
5%
0%
2%

3%
7%
5%
7%
6%
5%
0%
7%

Other responses:

China crisis/severe growth slump weakening yuan/capital flight

Policy mistake (monetary, fiscal or both)

CNBC Fed Survey December 13, 2016

Page 23 of 30

13%
7%
14%
8%
5%
28%

11%
13%
14%
7%
13%
2%
21%
18%
13%
12%
11%
8%
3%
16%
14%
19%
11%
9%
14%
5%
15%
23%
21%
11%
10%
7%
11%
11%
8%
5%

Don't know/
unsure

Other

Protectionist trade
policies

Outcome of US
presidential election

Terrorist attacks in the

U.S.

Slow wage growth

Global econ weakness

Debt ceiling

Deflation

Inflation

Slow job growth

Survey
Date
Apr 30
Jun 18
Jul 30
Sep 17
Oct 29
Dec 17
Jan 28 '14
Mar 18
Apr 28
Jul 29
Sep 16
Oct 28
Dec 16
Jan 27 '15
Mar 17
April 28
Jun 16
Jul 28
Sept 16
Oct 27
Dec 15
Jan 26 '16
Mar 15
Apr 26
Jun 14
Jul 26
Aug 24
Sep 20
Nov 1
Dec 13

Tax/
regulatory policies

April 30,

Geopolitical risks

European recession/
financial crisis

FED SURVEY

Rise in interest rates

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

0%
0%
4%
2%
0%
2%
0%
0%
0%
3%
3%
3%
0%
0%
0%
3%
0%
0%
2%
0%
0%
3%
0%
2%
0%
2%
0%
0%
0%
2%

FED SURVEY

December 13, 2016

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

36.1%
35%
34.0%

30%

28.8%

28.5%

26.0%
25.9%

25.3%

25.5%

25%

24.4%
23.5%
22.9%

24.1%

22.1%

20%

20.6%

20.3%

20.4%

15%

22.2%
21.6%
21.1%

18.4%

18.2%
19.1%
17.6%

23.2%

17.3%
16.9%
16.2%

16.9%

16.4%

17.4%

18.1%

15.1%

16.2%
15.2%

18.6%

15.1%

15.3%

15.0%
14.6%
13.6%

14.7%

10%

Aug 11,
Sep 19
Oct 31
Jan 23,
Mar 16
Apr 24
Jul 31
Sep 12
Dec 11
Jan 29,
Mar 19
Apr 30
Jun 18
Jul 30
Sep 6
Oct 29
Dec 17
Jan 28 '14
Mar 18
Apr 28
Jul 29
Sep 16
Oct 28
Dec 16
Jan 27 '15
Mar 17
April 28
Jun 16
Jul 28
Sept 16
Oct 27
Dec 15
Jan 15 '16
Jan 26
Mar 15
Apr 26
Jun 14
Jul 26
Aug 24
Sep 20
Nov 1
Dec 13

13.0%

CNBC Fed Survey December 13, 2016

Page 24 of 30

FED SURVEY

December 13, 2016

24.

What is your primary area of interest?

FED SURVEY
April 30,

Currencies
0%

Other
16%

Fixed Income
9%

Equities
23%

Economics
52%

Comments:
Marshall Acuff, Silvercrest Asset Management: Expectations in
the stock market are beginning to run ahead of reality.
John Augustine, The Huntington National Bank: Having the
100-day agenda focus on tax, regulatory and fiscal stimulus policy
(including profit repatriation) will be the key to keeping the gains in
the stock market in the first half of 2017. Implementation of the
agenda will be the key to keep stocks moving higher in the second
half of 2017.
Jim Bianco, Bianco Research: Economic data has not really
changed since the September FOMC meeting. What has changed is
expectations. How much will the Fed's forecast change based on
expectations over data?

CNBC Fed Survey December 13, 2016

Page 25 of 30

FED SURVEY

December 13, 2016

Peter Boockvar, The Lindsey Group: The 2017 trade-off will be
between the economic positives of low taxes and regulation on one
FED SURVEY
hand but the growing
likelihood of a sharp rise in interest rates and
April
30,
inflation on the
other.
Lou Brien, DRW Trading Group: A lot of assumptions are being
made on the effect Trump has on the economy, but for my taste
there is too much uncertainty, seeing as how he has not yet been
sworn in. For one thing, I think trade policy will be a key aspect of
Trumponomics and it's possible this acts as a headwind in the short
and medium term, at the very least. The art of a trade deal is in eye
of the beholder and if new deals take time to be agreed to this could
be problematic for economic growth.
Robert Brusca, Fact and Opinion Economics: What a change in
events post-Trump. Hard to answer the risk question since there is
so much at risk in Europe - risk to EMU and EU, with China as it is
losing its most effective stimulus tools (debt and a weaker currency,
as both are less effective) - with big political event upcoming. ECB
monetary policy is still ineffective. Weidmann is already chomping at
the bit to hike rates: Europe may be more at risk to a classical
economic cycle that to a political blow-up.
John Canally, LPL Financial: Watch the deficit. Should ask about
views of deficit in the next survey.
Thomas Costerg, Standard Chartered Bank: The Fed is likely to
turn much more hawkish in coming years as Trump appoints more
'conservative' board members. However, the risk is that his
ambitious fiscal spending plan could get materially more expensive
to fund as interest rates rise more quickly. This is one of the many
inconsistencies in Trump's platform.

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FED SURVEY

December 13, 2016

Robert Fry, Robert Fry Economics: I think the Fed should adopt a
rule to guide monetary policy. I don't think Congress should FORCE
them to do so.FED SURVEY
April 30,
Stuart Hoffman, PNC Financial Services Group: Trumper
tantum is far from over in the fixed income markets. Trump
administration unlocks "animal spirits" from their "regulatory cages."
Along with a corporate tax cut and repatriation, this is all very
positive for business investment.
Art Hogan, Wunderlich Securities: The market is certainly willing,
right now, to view all of the pro-growth, pro-business, less regulation
proposals as market positive, while ignoring any chance that
protectionism could be an unmitigated economic disaster.
Timothy Hopper, TIAA-CREF: The adage that you should take
Trump seriously, but not literally, held true through the election.
Since then, markets are reacting as if that adage still holds true, and
I think they may be right. If so, it will translate to significant upside
for markets and economic growth.
Jack Kleinhenz, NRF Chief Economist: Theres no easy way to
measure the impact of Trump's policies and its only a speculative
exercise at this time. His opposition to the TPP, NAFTA and
suggested tariffs on imports could drive up the price of goods
retailers rely on. Tax reform and rebuilding of infrastructure are
positive moves and could reduce bottlenecks for the retail supply
chain. Impact on consumers will not be known until hard data is
available many months/years from now.
David Kotok, Cumberland Advisors: Massive regime change is
underway. We are all currently guessing about it. By mid-2017
things may be clearer.

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December 13, 2016

Subodh Kumar, Subodh Kumar & Associates: Capital market
valuations in equities and fixed income remain elevated, in part due
FED SURVEY
to massive quantitative
easing but also due to investor complacency.
April
30,
Robust economic
confrontation,
such as on trade, would elevate risk
as history shows. Geopolitical pressures remain high. Central bank
options are limited, compared to 2008. As such, correction risk
remains high and on the order of over 10%. Despite US GDP growth
being stronger at 3.2% for Q3/2016, growth elsewhere is weak with
global levels of 3% annual GDP growth rates. Corporations are
unlikely to be able to rely on share buybacks to report higher
earnings. We stress quality of balance sheets and of business
execution as crucial. Financial stocks will likely be key for market
direction. Overall, on restructuring, we favor energy especially.
Guy LeBas, Janney Montgomery Scott: The economic impact of
single-party control and a Trump push for fiscal stimulus is that it
effectively eliminates the chance of recession in 2017 or even 2018-even an extra $200 billion of fiscal stimulus would do that
arithmetically. That gives Fed policymakers room to raise rates
more safely in 2017, but does little to alter the neutral level of
interest rates.
Donald Luskin, Trend Macrolytics: Like the Supreme Court in
FDR's second term, the Fed will reveal itself in 2017 to be very afraid
of the power of a charismatic president, and will therefore
collaborate with Trump. Don't worry about any punchbowls being
taken away.
Rob Morgan, Sethi Financial Group: The dramatic drop in the
unemployment rate in the latest jobs report, coupled with the
dramatic rise in oil prices from the OPEC production cut the same
week, will force Chairman Yellen's hand and prompt a rate hike at
the December FOMC meeting.

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December 13, 2016

Joel Naroff, Naroff Economic Advisors: Starting in February,
when Trump actually has to write down what his policies are, reality
is likely to setFED
in as SURVEY
they cannot be as good for growth as the
Aprilthink.
30,
markets currently
James Paulsen, Wells Capital Management: The biggest
potential surprise and risk for policy officials in 2017 is a decline in
the US dollar. This would boost commodity prices, worsen wage and
consumer price inflation, worry bond vigilantes more and would
make the Fed appear much more behind the curve and out of touch.
Lynn Reaser, Point Loma Nazarene University: The plan for a
gradual rise in interest rates has been seriously challenged.
Financial markets are now leading the Fed instead of the reverse.
The prospects of fiscal stimulus, faster growth, higher inflation, rising
stock prices, and a larger deficit suggest that the reign of ultra-low
interest rates is over.
John Roberts, Hilliard Lyons: While President-elect Trump's
cabinet appointments so far have been reasonable and well received
by the markets we worry that his unpredictability and rashness could
hurt markets down the line. Markets dislike uncertainty and this is
likely to prove to be the most unpredictable president of modern
times. The potential for conflicts of interest, unpredictable tweets,
potential terrorism around Trump businesses, etc., all could create
future uncertainty that is unlikely to be positive for the markets.
Merrill Ross, Wunderlich: I am concerned about civil unrest that
could result from Trump's "bait and switch" campaign tactics. The
office of the president really can't produce 4% GDP growth, or build
a wall, or force jobs to stay in the US when labor is cheaper
elsewhere. And if it was possible to deport illegal immigrants, it
would have been done already. There is no magic wand.

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FED SURVEY

December 13, 2016

Allen Sinai, Decision Economics: Including Trumponomics, risk
growing of "boom bust."

FED SURVEY

April
30,Swonk & Associates: One of the most
Diane Swonk,
Diane
profound impacts the new administration can have is on the
functioning of the Federal Reserve; the attacks are bipartisan and
the incoming president has given us no reason to have faith he
would veto a bill to curb the Fed's independence. To the contrary, his
behavior suggests a throwback to a time when presidents
aggressively attempted to bully Fed chairs, such as the Nixon era,
which helped to seed the stagflation of the 1970s.
Mark Vitner, Wells Fargo: Look for more volatility. There will be
more uncertainty surrounding nearly every Fed move. One of the
greatest risks is that the Fed may try to get ahead of expected fiscal
policy changes and tighten too much too soon. Recessions tend to be
caused by exogenous shocks, which we cannot predict, or policy
mistakes. The chances of making a policy mistake go up whenever
you start making major policy changes.
Scott Wren, Wells Fargo Investment Institute: Looking for the
high in the S&P 500 next year to be at or very near the top end of
our 2230-2330 year-end 2017 target range. From where we are
today, the S&P 500 total return is likely in the low to mid-single digit
range. The new administration's pro-growth proposals including
infrastructure spending, lower taxes and less regulation/red tape are
going to take time to detail, refine, debate and implement. We
stand by our long-held stance that the new president, and really any
new president, has only a slim chance of changing the trajectory of
the economy during their first 12 months in office (and likely even
longer). We would further argue that underlying fundamentals have
brought the S&P 500 to current levels and it would likely have been
trading here whoever had won the election.

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