FED SURVEY September 21, 2021 - The Colony Group
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FED SURVEY
September 21, 2021
These survey results represent the opinions of 32 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 September 16-18, 2021.
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.
Contents (Click on a question to go directly to the results)
1. At its September meeting, the 10. Please rank the following by
Federal Reserve will: how much risk they pose to the U.S.
2. After this month's meeting, will economy:
the Fed's next directional move be a 11. Where do you expect the S&P
hike or a cut? 500 stock index will be on …?
3. The Fed is currently purchasing 12. What do you expect the yield
about $120 billion in securities each on the 10-year Treasury note will be
month. The purchases are: on … ?
4. Over the next year, the first 13. Where do you expect the fed
change the Fed will make to its funds target rate will be on …?
monthly securities purchases is to: 14. What is your forecast for the
5. Once the Fed decides to taper, Q4/Q4 percentage change in real
by how much do you believe it will U.S. GDP for … ?
reduce its purchases each month: 15. What is your forecast for the
7. When do you believe economic year-over-year percentage change in
activity in the U.S. will be fully the headline U.S. CPI for …?
restored? 16. The recent increase in inflation
8. What is your q/q forecast for is most likely:
annualized GDP growth in: 17. Is inflation a serious enough
9. Relative to your forecasts for risk to the economy now that the
earnings and economic growth, stock Federal Reserve should raise interest
prices now are: rates now?
CNBC Fed Survey – September 21, 2021
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FED SURVEY
September 21, 2021
… should reduce asset purchases presidents show that some engaged
now? in multiple sales of individual stocks
18. At what level do you expect while others acquired or held assets
year-over-year U.S. headline the Fed itself was buying as part of
inflation to peak? its monetary policy. From what you
know of these transactions, they:
19. What do you expect the U.S.
unemployment rate will be for: 24. Should Fed officials be
prohibited from owning individual
20. The recent difficulty businesses stocks?
have had hiring workers is primarily:
25. Other than Treasurys and
Which of these factors is most Treasury bond funds, should Fed
responsible? officials be prohibited from buying,
21. Will Jay Powell be renominated selling, and owning the same assets
as Federal Reserve chair: the Fed is buying as part of its
22. Should Jay Powell be monetary policy?
renominated as Federal Reserve 26. What is your primary area of
chair? interest?
23. Recent disclosure statements Comments
from several Federal Reserve bank
CNBC Fed Survey – September 21, 2021
Page 2 of 32
FED SURVEY
September 21, 2021
1. At its September meeting, the Federal Reserve will:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Raise interest
rates 0%
Lower interest
rates 0%
Keep rates
unchanged 100%
Don't know/
unsure 0%
CNBC Fed Survey – September 21, 2021
Page 3 of 32
FED SURVEY
September 21, 2021
2. After this month's meeting, will the Fed's next directional move
be a hike or a cut?
Hike Cut Don't know
100%
90% 86% 100% 100%
97% 97% 97% 97%
91%
80% 86%
70% 78% 80% Hike
71%
60%
50% 53%
Don't know
40% 49%
30% 32%25% 24% Cut
20%
20% 15%
11% 3% 0% 3% 3%
9% 23% 0% 0% 3%
10% 20% 2% 5% 3% 4% 0%
6% 4% 0% 0% 0% 0%
5%
0%
Jan Mar Mar Apr Jun Jul Sep Dec Jan Mar Apr Jun Jul Sep
28 4 14 28 9 28 15 15 26 16 27 15 27 21
Number of months until average forecast of first hike
0 5 10 15 20 25 30 35
Jan 28 Mar '21
Mar 4 Sep '20
Mar 14 Mar '21
Apr 28 Jan '22
Jun 9 Jan '22
Jul 28 Aug '22
Sep 15 Feb '23
Dec 15 Dec '22
Jan 26 Dec '22
Mar 16 Nov '22
Apr 27 Dec '22
Jun 15 Nov '22
Jul 27 Oct '22
Sep 21 Dec '22
CNBC Fed Survey – September 21, 2021
Page 4 of 32FED SURVEY
September 21, 2021
3. The Fed is currently purchasing about $120 billion in securities
each month. The purchases are:
Needed to help Not needed to Don't know/unsure
markets function help markets function
100%
86% 94%
90% Help markets function
80%
68% 79%
70% 63%
60% 56% Not Needed
50%
48%
40% 34%
28% Needed
30%
21%
20% Don't know
9% 12%
10%
5% 10% 12% 6% 9% 3%
0% 9%
Dec 15 Jan 26 Mar 16 Apr 27 Jun 15 Jul 27 Jul 28
Needed to help Not needed to Don't know/unsure
the economy help the economy
100%
89%
90%
Help the economy 91%
80%
85%
70% 63% 65%
Not Needed
60% 52%
50% 51%
44%
40%
42%
30%
Don't know 33% Needed
20% 29%
12%
7% 6% 9%
10% 5% 6%
5% 3% 3% 3%
0%
Dec 15 Jan 26 Mar 16 Apr 27 Jun 15 Jul 27 Sep 21
CNBC Fed Survey – September 21, 2021
Page 5 of 32FED SURVEY
September 21, 2021
4. Over the next year, the first change the Fed will make to its
monthly securities purchases is to:
Increase Decrease Halt It won't make Don't
purchases purchases purchases any change know/
altogether over the unsure
next year
100%
94% 94% 94%
90% 91%
Decrease
80%
70%
65%
60% 59%
50% Avg response for when the decrease will be announced: November
Avg response for when the decrease will happen: December
46%
40%
31%
30%
30%
28%
No change
20%
18% Halt altogether
Increase
10% 9% 6%
5% 9% 6%
6%
5% 0% 0% 0% 0%
0% 0% 0%
Dec 15 Jan 26 Mar 16 Apr 27 Jun 15 Jul 27 Sep 21
CNBC Fed Survey – September 21, 2021
Page 6 of 32FED SURVEY
September 21, 2021
5. Once the Fed decides to taper, by how much do you believe it
will reduce its purchases each month:
$25
$21.8
$20
$17.8
$15
Billions of dollars
$14.1
$10
$5
$0
Jun 15 Jul 27 Sep 21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 7 of 32FED SURVEY
September 21, 2021
6. By how much has the recent spread of the Delta variant
CHANGED your view for the entire year for:
Average
Response
(pct. points)
GDP -0.65
Inflation +0.07
Unemployment +0.08
7. When do you believe economic activity in the U.S. will be fully
restored?
For the first time in this series, an option to select "It has already been
restored" was provided. It was chosen by 52% of the respondents.
For the 48% of those who did chose a future date:
Average Response: By the end of …
2021 2022
Survey Dates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 Apr 28
Jun 9
Jul 28
Sep 15
Dec 15
2021 Jan 26
Mar 16
Apr 27
Jun 15
Jul 27
Sep 21
CNBC Fed Survey – September 21, 2021
Page 8 of 32FED SURVEY
September 21, 2021
8. What is your q/q forecast for annualized GDP growth in:
Q3-2021 Q4-2021 Q1-2022 Q2-2022
8%
Q3-2021
7% +6.8%
+6.6% +6.6%
+6.2%
6%
+5.4% +5.3%
+5.3%
+5.1%
+4.9%
5%
+4.5% Q4-2021 +4.4%
+4.1% +4.0% +4.3%
+4.0%
4% +4.2%
Q1-2022 +3.9% +3.8%
Q2-2022
3%
2%
1%
0%
Sep 15 Dec 15 Jan 26 Mar 16 Apr 27 Jun 15 Jul 27 Sep 21
'21 Survey Dates
CNBC Fed Survey – September 21, 2021
Page 9 of 32FED SURVEY
September 21, 2021
9. Relative to your forecasts for earnings and economic growth,
stock prices now are:
Extremely/somewhat high About right Extremely/somewhat low
100%
88% 89%
90%
Extremely/somewhat high
80%
79%78% 72%
70%69%
70% 67%66%
68%
60%
53% 60% 58%
56%
50%
39%
40%
About right
Somewhat low/
31% 32% extremely low
30% 28% 34%
25% 25%
27%
23%
20%
21% 16% 15% 21%
13%
6%
10%
9% 5% 6%
5%
2% 3% 0% 3%
2% 3% 6% 0% 6%
0%
Dec Jan Mar Apr Jun Jul Sep Dec Jan Mar Apr Jun Jul Sep
12 28 14 28 9 28 15 15 26 16 27 15 27 21
'20 Survey Dates '21
CNBC Fed Survey – September 21, 2021
Page 10 of 32FED SURVEY
September 21, 2021
10. Please rank the following by how much risk they pose to
the U.S. economy:
Weighted Score
0 50 100 150 200 250 300 350 400 450
Number in parenthesis is rank in previous survey
1. COVID pandemic (2) 399
2. Inflation (1) 379
3. Failure to take the vaccine (3) 353
4. Global economic weaknesses (4) 289
5. Geopolitical risks (7) 277
6. Rise in interest rates (6) 273
7. Overvaluation of equities (8) 252
8. Loose monetary policy (5) 221
9. Slow job growth (9) 217
10. Protectionist trade policies (10) 162
11. Deficits (11) 155
12. Terrorist attacks in the U.S. (12) 134
13. Other (14) 117
14. Climate change (13) 82
15. Deflation (15) 79
Other responses:
• We are riding a knife's edge; if COVID continues to disrupt supply chains more than growth, inflation will linger
longer. If demand is disrupted more than expected, inflation will dissipate and healing in labor markets will be
delayed.
• China Minsky moment
• Tax hikes on companies could deter investments
• Tax policy
• By "overvaluation of equities," I assume you mean the correction of that overvaluation.
• Fiscal policy gridlock
• Tax increases and regulation
• Policy Cliff for 2022 -- end of additional monetary & fiscal juice
• COVID, COVID, COVID, COVID!
• Supply constraints in the product and labor markets
• Obfuscation by central banks is a risk
• Biden's tax hikes
CNBC Fed Survey – September 21, 2021
Page 11 of 32FED SURVEY
September 21, 2021
11. Where do you expect the S&P 500 stock index will
be on …?
December 31, 2021 December 31, 2022
5000
4765
4713
4519 4507
4500
4411
4327
4247
4156
4000
4082
3961 4037
3918
3720
3838
3714
3566
3500 3414 3387
3287 3299 3388
3228 3215
3140
3141
3000
2500
Sep Oct Dec Jan Mar Mar Apr Jun Jul Sep Nov Dec Jan Mar Apr Jun Jul Sep
17 29 12 28 4 14 28 9 28 15 5 15 26 16 27 15 27 21
'20 '21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 12 of 32FED SURVEY
September 21, 2021
12. What do you expect the yield on the 10-year
Treasury note will be on … ?
December 31, 2021 December 31, 2022
3.0%
2.5% 2.43%
2.39%
2.31% 2.29%
2.24% 2.37%
2.32%
1.98%
2.05% 1.96% 2.13%
2.0%
2.08%
1.90%
1.85%
1.75%
1.60%
1.58% 1.65%
1.5%
1.56%
1.41%
1.30% 1.30%
1.23% 1.24%
1.0%
0.5%
0.0%
Sep Oct Dec Jan Mar Apr Jun Jul Sep Nov Dec Jan Mar Apr Jun Jul Sep
17 29 12 28 14 28 9 28 15 5 15 26 16 27 15 27 21
'20 '21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 13 of 32FED SURVEY
September 21, 2021
13. Where do you expect the fed funds target rate will
be on …?
December 31, 2021 December 31, 2022
3.0%
2.67%
2.49%
2.5% 2.44%
2.36%
2.09%
2.0%
1.92%
1.65%
1.71%
1.62%
1.5% 1.48%
1.10%
1.0%
0.80%
0.48%
0.45% 0.41%
0.5% 0.43% 0.33%
0.38% 0.40% 0.39%
0.35% 0.17% 0.15%
0.20%
0.23% 0.15% 0.12% 0.12%
0.18%
0.11% 0.11%
0.0%
Dec Mar Jun Sep Dec. Mar Apr Jul Nov Jan Apr Jul
18 20 18 17 12 4 28 28 5 26 27 27
'21
CNBC Fed Survey – September 21, 2021
Page 14 of 32FED SURVEY
September 21, 2021
14. What is your forecast for the Q4/Q4 percentage
change in real U.S. GDP for … ?
2021 2022
7.0%
6.66%
6.53%
6.43%
6.0% 6.09%
5.71%
5.0%
4.70%
4.11%
4.01% 4.23%
4.0%
3.71%
3.64%
3.88%
3.59%
3.44%
3.43%
3.0% 3.30% 3.23%
3.04%
2.05% 2.08% 2.27%
2.0%
2.02% 2.02%
1.0%
0.0%
Sep Oct Dec Jan Mar Apr Jun Sep Dec Jan Mar Apr
Jul Jun Jul Sep
17 29 12 28 14 28 9 2815 15 26 16 27 15 27 21
'20 '21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 15 of 32FED SURVEY
September 21, 2021
15. What is your forecast for the year-over-year
percentage change in the headline U.S. CPI for …?
2021 2022
5.0%
4.5% 4.37%
4.25%
4.0%
3.88%
3.5%
3.13%
3.0%
3.01%
2.76% 2.98%
2.5% 2.39% 2.39% 2.51%
2.25%
2.14% 2.10% 2.10%
2.16% 2.25%
2.39%
2.0%
2.08% 2.06% 2.05%
1.89% 1.93% 2.01%
1.5%
1.0%
0.5%
0.0%
Sep Oct Dec Jan Mar Apr Jun Jul Sep Dec Jan Mar Apr Jun Jul Sep
17 29 12 28 14 28 9 28 15 15 26 16 27 15 27 21
'20 '21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 16 of 32FED SURVEY
September 21, 2021
16. The recent increase in inflation is most likely:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
29% Jun 15
Permanent 29%
31%
Jul 27
60% Sep 21
Temporary 61%
63%
11%
Don't know/unsure 10%
6%
17. Is inflation a serious enough risk to the economy
now that the Federal Reserve should raise interest rates
now?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
17% Jun 15
Yes 10%
19% Jul 27
74% Sep21
No 84%
72%
9%
Don't know/unsure 7%
9%
… should reduce asset purchases now?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
63%
Yes 58%
78%
31%
No 36% Jun 15
22%
Jul 27
6%
Don't know/unsure 7% Sep 21
0%
CNBC Fed Survey – September 21, 2021
Page 17 of 32FED SURVEY
September 21, 2021
18. At what level do you expect year-over-year U.S.
headline inflation to peak?
10%
9%
8%
7%
6% 5.5%
5% 5.3% 5.4%
4%
3%
2%
1%
0%
Jun 15 Jul 27 Sep 21
For the first time in this series, an option to select "Inflation has
already peaked" was provided. It was chosen by 72% of the
respondents.
For the 28% of those who did chose a future date:
Number of months until headline inflation peaks
0 1 2 3 4 5 6 7 8 9 10 11 12
Jun 15 Nov '21
Jul 27 Nov '21
Sep 21 Dec '21
CNBC Fed Survey – September 21, 2021
Page 18 of 32FED SURVEY
September 21, 2021
19. What do you expect the U.S. unemployment rate will
be for:
2021 2022
8%
7.49%
7.27%
7.18%
7%
6.60%
6%
5.92%
5.65%
5.04% 4.99%
4.92% 4.83%
5% 5.09%
4.88%
4.79% 4.28%
4.10%
4% 4.35%
4.03% 4.05% 4.10% 4.17%
4.07%
3.84% 3.75%
3%
2%
1%
0%
Sep Oct Dec Jan Mar Apr Jun Jul Sep Dec Jan Mar Apr Jun Jul Sep
17 29 10 28 14 28 9 28 15 15 26 16 27 15 27 21
'20 '21
Survey Dates
CNBC Fed Survey – September 21, 2021
Page 19 of 32FED SURVEY
September 21, 2021
20. The recent difficulty businesses have had hiring
workers is primarily:
Jun 15 Jul 27 Sep 21
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Temporary, 77%
the result of
pandemic-relief
programs, 68%
child-care issues,
and health concerns 63%
Permanent, 21%
the result of
broader structural 29%
and demographic
changes
34%
3%
Don't know/unsure 3%
3%
CNBC Fed Survey – September 21, 2021
Page 20 of 32FED SURVEY
September 21, 2021
Which of these factors is most responsible?
(Respondents could select up to two factors):
Jun 15 Jul 27 Sep 21
0% 20% 40% 60% 80% 100%
Child-care concerns, 43%
with some schools closed
45%
47%
High level of 63%
unemployment benefits
58%
41%
Mismatch between job skills 20%
and job locations
26%
34%
11%
Workers' health concerns 19%
31%
Employers' reluctance 26%
to pay higher wages
29%
19%
9%
Other 13%
16%
Don't know/ 3%
unsure
0%
3%
Other:
• Mass retirement
• Immigration and border constraints
• I wish I could select all of the above instead of just two.
• WFH dynamic may change people's attitude toward in-office employment
• Shrinkage of working age population as found in FRED database
CNBC Fed Survey – September 21, 2021
Page 21 of 32FED SURVEY
September 21, 2021
21. Will Jay Powell be renominated as Federal Reserve
chair:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Yes 71%
91%
No 16%
3% Jul 27
Sep 21
Don't 13%
know 6%
For those answering "no" - Who will be nominated?
• Janet Yellen if she wants the job. Lael Brainard otherwise.
22. Should Jay Powell be renominated as Federal
Reserve chair?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
84%
Yes
81%
13%
No
16% Jul 27
Sep 21
Don't 3%
know 3%
CNBC Fed Survey – September 21, 2021
Page 22 of 32FED SURVEY
September 21, 2021
23. Recent disclosure statements from several Federal
Reserve bank presidents show that some engaged in
multiple sales of individual stocks while others acquired
or held assets the Fed itself was buying as part of its
monetary policy. From what you know of these
transactions, they:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Do constitute a conflict of interest 69%
Do not constitute a conflict of interest 16%
Don't know 16%
24. Should Fed officials be prohibited from owning
individual stocks?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Yes 66%
No 28%
Don't know/unsure 6%
25. Other than Treasurys and Treasury bond funds,
should Fed officials be prohibited from buying, selling,
and owning the same assets the Fed is buying as part of
its monetary policy?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Yes 81%
No 16%
Don't know/unsure 3%
CNBC Fed Survey – September 21, 2021
Page 23 of 32FED SURVEY
September 21, 2021
26. What is your primary area of interest?
Other
28%
Currencies Economics
0% Fixed 53%
Income
9%
Equities
9%
Comments
Steven Blitz, Chief US Economist, TS Lombard: Focus is on taper
(plans announced at Sep meeting) but should be on AIT promise --
that the Fed runs a policy that does not put a bid under the dollar
and thereby pulls the rug out from underneath investments in
domestic tradeable goods and services industries. Inflation is not the
problem, return of imported deflation is.
Peter Boockvar, Chief Investment Officer, Bleakley Advisory
Group: The Fed's focus on employment ahead of inflation is
backwards. You can't have maximum employment unless you have
stable prices, which we clearly don't. Now they have another
problem because there is no way I see they can avoid a market
tantrum as they start on the path of tightening and yes, tapering is
tightening.
CNBC Fed Survey – September 21, 2021
Page 24 of 32FED SURVEY
September 21, 2021
Kathy Bostjancic, Chief US Financial Market Economist,
Oxford Economics: We expect policymakers to announce tapering
plans at their November policy meeting and to start tapering in
December or January. However, the challenge for officials will be
continuing to delink the timing of tapering from eventual rate liftoff
amid splintering views within the FOMC as a new round of interest
rate dot plot estimates will be released.
Robert Brusca, Chief Economist, Fact and Opinion Economics:
This whole snit about Fed officials trading is contrived. Progressives
are looking to tar and damage and replace as many Fed officials as
possible. I worked at the Fed and I know that rules exist and from
what I can see these people FOLLOWED THE RULES. If you don't like
the rules, change them. But you do not fire the people that followed
them. They also are transactions by people I hold in high regard for
their ethical standards. In some cases, these people are already
wealthy and would not need to nickel and dime whatever information
the Fed has to trade on it. The Fed has macro data and trading
stocks is micro — and idiosyncratic! I was at the NY Fed when an
acting president forced the resignation of an employee for trading 'to
protect the integrity of the organization' - it was a bogus dismissal.
The Fed simply does not have the kind of information to facilitate
'insider trading' unless it is poised to do something extremely
dramatic. No Fed official would get out and trade ahead of that.
Politics is ruining the country and the Fed. The pressure from
progressives is a constant burr in the saddle of policymakers. The
Fed is responsible for racial justice, climate control and God knows
what else. I think Congress should shut up and made fiscal policy
instead of trying to strong arm the Fed to do the fiscal things it
cannot pass legislation to do. The Fed is in charge of monetary
policy, not climate and not racial justice, and that job is hard enough
by itself. Or maybe — just maybe — the Fed should conduct open
market operations in a such a way as to cure COVID??? How about
that? Maybe Anthony Fauci should be the next head of the Fed?
CNBC Fed Survey – September 21, 2021
Page 25 of 32FED SURVEY
September 21, 2021
Thomas Costerg, Senior US Economist, Pictet Wealth
Management: No crutches needed anymore. The U.S. consumer is
fine and will continue to do well, in my view. This is the big picture
and this is what matters most now.
John Donaldson, Director of Fixed Income, Haverford Trust
Co.: If there is as much as $1 trillion in liquidity that has no
investment opportunity other than placing with the Fed to earn a
paltry 0.05%, there is sufficient liquidity that the Fed does not need
to inject an additional $120 billion each and every month.
Neil Dutta, Head of Economic Research, Renaissance Macro
Research: Revisions will likely have a stagflationary feel. Growth
estimates will be revised down while inflation will be revised up.
There is a strong chance the median dot creeps into 2022. Powell
likely disagrees with the message that will send so the press
conference will be crucial.
Robert Fry, Chief Economist, Robert Fry Economics LLC: 16.
The appropriate question is not whether the recent increase in
inflation is permanent or temporary; unless you expect inflation to
remain above 5% forever, the increase is, by definition, temporary.
The appropriate question is whether inflation can be brought back
down to the Fed's 2% target without a recession. I don't think it
can. 25. You'd probably get better monetary policy if the only
financial assets that Fed officials were allowed to own were those
included in M2. (lol) The second best would be to require Fed officials
to hold the same mix of stocks, bonds, and cash -- in index funds --
as the average American.
CNBC Fed Survey – September 21, 2021
Page 26 of 32FED SURVEY
September 21, 2021
Jack Kleinhenz, Chief Economist, National Retail Federation:
While the Fed is facing a carousel of third quarter macroeconomic
factors that are slowing growth — including tapering off of
government stimulus, elevated COVID-19 infections, ongoing supply
chain challenges in the form of shortages of labor and goods, and
inflation, the Fed is keeping a close eye on the pace of employment.
Payrolls are heading in the right direction and I expect the Fed to
begin to taper later this year.
Barry C. Knapp, Managing Partner Director of Research,
Ironsides Macroeconomics LLC: If the FOMC passes on tapering
this week they will have to significantly shorten the process and will
miss a window when issuance has slowed, real rates and fixed
income implied volatility are low. Additionally, while reopening-
related inflation appears to have peaked, supply chain-related
inflation persists, the deadweight sectors (health care, housing and
education) are negatively contributing but are likely to reverse and
Powell's inflation process (faster wage growth driving expectations
higher) is underway. Failing to start slowing asset purchases this
week would be a policy mistake.
CNBC Fed Survey – September 21, 2021
Page 27 of 32FED SURVEY
September 21, 2021
Subodh Kumar, President, Subodh Kumar & Associates:
Obfuscation by central banks appears to be increasing, which risks
confusion. The BIS considers near-term pressures, the evolution of
quantitative ease and the need to focus upon deficits as fiscal
programs rise sharply. About massive quantitative ease, the
information content emerging from Jackson Hole has been slipping.
Close scrutiny awaits the IMF annual of October 11, 2021 and its
accompanying releases. Central banks, like the BoC, the RBA and
RBNz, have signaled exit from unfettered quantitative ease.
Alongside shifting goal posts, the Federal Reserve has mixed
commentaries about the tapering of asset purchases and rate
increases. The ECB has both denied tapering and raised the potential
for reducing pandemic-oriented asset purchases. Slicing and dicing
from subprime mortgages to collateralized loan obligations to likely
collateralized debt obligations (some supercharged with leverage)
has led to risk being shifted into obscure corners, which then
requires government rescue - hardly a free capital market facet.
Capital markets are unlikely to be able to ignore geopolitical and
political economy issues. For millennia, the maritime and land routes
around the Indian Ocean have been crucial. The Indo-Pacific cannot
be neatly allocated boxes. The concomitant and now new AUKUS
maritime and defense alliances will likely have counter moves. The
same holds for Europe with a new German leader amid a more
aggressive Russia. Also, loom real delivery on climate investment
ahead of November 2021 Glasgow COP26. Other challenges include
trade and tariffs, such as between China and the United States.
Potential risks seem to be flaring in finances, even in changes that
otherwise seem minute. The rising percentile of deficits seems likely
to be unstable. Public examples and households have demonstrated
that spending on borrowings has to be paid for - or worse follows.
Notwithstanding currency market stability and momentum favor for
now junk bonds, risks seem elevated. Cash and precious metals as
well as shorter duration in fixed income are called for. In business,
purveyors of luxury like haute couture and accessories seem to be
returning to controlling availability to protect premium pricing now,
CNBC Fed Survey – September 21, 2021
Page 28 of 32FED SURVEY
September 21, 2021
interestingly, including in automobiles. Again, as during earlier cost
stress periods, for more prosaic items appear considerations of
maintaining the size of packaging and unit pricing while also
reducing the mass of the contents. Higher expenses and logistics
challenges may not be globally transitory. Operations are likely to
not deliver the consensus of sustained 12% per annum S&P 500
earnings growth. Valuation and momentum likely has further
evolution in favor of quality and diversification. We favor industrial
over consumer cyclicals, balance Healthcare and Information
technology in growth and see the Financials as crucial.
Guy LeBas, Chief Fixed Income Strategist, Janney
Montgomery Scott: The pace of tapering bond buys has become
the more important variable than the onset of tapering. If, for
example, the Fed elects to taper at a $5bln in the first month, the
markets will assume it will then take 24 months to get to zero net
bond buys, and therefore at least 24 months before a first rate hike
can happen -- which is later than the markets are currently pricing.
So, a taper of less than $10bln is actually *more* stimuluative for
the markets and economy, a taper of about $10bln is neutral, and a
taper of more than $10bln is defacto policy tightening as compared
to what's currently priced.
John Lonski, President, Thru the Cycle: Don't fear the taper. The
taper is distinct from quantitative tightening (QT), or when the Fed
becomes a net seller of bonds. Financial markets and the economy
held up fairly well during the previous taper. However, when the Fed
cut its holdings of Treasury bonds from Q2-16's then record-high of
$2.8 trillion to Q2-19's $2.3 trillion, the 10-year Treasury yield
jumped up from July 2016's 1.5% to October 2018's 3.15%. A drop
in interest-sensitive home sales helped to end QT.
CNBC Fed Survey – September 21, 2021
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September 21, 2021
Rob Morgan, Senior Vice President and Market Strategist,
MOSAIC: The Fed may have been on track to announce its taper
strategy as this meeting, but after employers added only 235,000
jobs in August that pushed the announcement back by at least a
month.
Chad Morganlander, Portfolio Manager, Stifel Nicolaus
(Washington Crossing Advisors): Risk in the financial system is
misunderstood. Today, asset inflation and historically tight credit
spreads should be a clear warning sign to the Federal Reserve. We
believe investors should own quality assets and reduce leverage.
Joel L. Naroff, President, Naroff Economics LLC: The Fed is not
looking three months into the future when considering when to taper
and raise rates. It is, or should be, concerned about where the long-
term rate settles down to. If inflation expectations show further signs
of becoming unmoored, it could move to taper and especially raise
rates sooner than the markets expect.
Jim Paulsen, Chief Investment Strategist, The Leuthold
Group: I think the Fed should reassure investors and economists by
emphasizing that both the growth in QE and the M2 money supply
have "tapered" significantly since the end of Feb. For example, the
annual growth in QE has already declined from about 80% in Feb. to
under 20% currently. The fact that tapering has already been
occurring for months could help calm inflation fears and anchor
inflation expectations, which is a stated goal of the Fed.
Lynn Reaser, Chief Economist, Point Loma Nazarene
University: Inflation risks could be mounting as competition for
workers may empower wage demands. Yet, the Fed will want more
data to assess Delta's toll. Policymakers are navigating a narrow
channel.
CNBC Fed Survey – September 21, 2021
Page 30 of 32FED SURVEY
September 21, 2021
John Ryding, Chief Economic Advisor, Brean Capital, LLC: The
Federal Reserve needs to more clearly explain the rationale as to
how asset purchases are helping the Fed achieve its dual mandate.
It also needs to provide more specificity as to how inflation targeting
is working (e.g. the period over which the Fed seeks to average
inflation at 2%). The 5-year average inflation rate is above 2% and
the one-year rate is above 4%. Inflation expectations of the public
have surged for the year ahead (in the NY Fed survey, the
Conference Board and University of Michigan) and yet Chair Powell
and others are playing down the rise. Meanwhile there are 1.3
unfilled jobs per unemployed worker. The Fed's easing risks
cementing in an inflation rate above 2% that would be costly to
reverse while providing no benefit to job creation (the jobs are
already there but not being filled for labor supply reasons). However,
a majority on the FOMC appear willing to continue easing at the pace
of $120 billion per month for an additional two months because the
willingness of potential workers to fill open positions was not as high
in August as was expected. The Fed is falling further behind and
could be making a major policy error at this point in time.
Richard I Sichel, Senior Investment Strategist, The
Philadelphia Trust Company: Now that those extra government
checks are going away and corporations are voluntarily increasing
wages, shortages and delays should be alleviated. We do need to be
wary of inflation though, which may be more than transitory. We can
hope for a real infrastructure deal unencumbered by politics. Let's
hope that tax increases are less onerous than originally planned. The
Fed should finally begin to taper. When the variant subsides we can
all breathe easier and get closer to normal, which will keep the stock
market attractive.
Allen Sinai, Chief Global Economist/Strategist, Decision
Economics, Inc. (DE): The U.S. economy is on solid footing with
inflation permanently higher.
CNBC Fed Survey – September 21, 2021
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September 21, 2021
Hank Smith, Head of Investment Strategy, Haverford Trust
Company: If in fact the Delta variant has peaked and added federal
unemployment benefits have expired, the economy should re-
accelerate into year-end. Higher taxes and increased regulations are
the biggest headwinds going into 2022.
Richard D. Steinberg, CFA, Chief Market Strategist, The Colony
Group: Investors will have a keen eye on the Federal Reserve's
messaging for weaning ourselves off of the massive bond purchasing
program. Pace matters. With a slow and steady message, equities
markets may take it in stride and long bond yields will still remain
uncompetitive for risk assets.
Diane Swonk, Chief Economist, Grant Thornton: Powell's
toughest job may be explaining the dot plots, which add more
confusion than clarity to Fed decision making. He needs to pivot the
discussion on tapering from employment thresholds to financial
stability thresholds, which the Fed has achieved.
CNBC Fed Survey – September 21, 2021
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