ConvergEx Survey Finds 59% of Financial Markets Pros Think the FED Should Raise Rates

Just as the leading figures of global central banks are gathering in Jackson Hole for the annual "Economic Symposium", global brokerage and trading related services provider, ConvergEx, has released a survey aiming to decipher the investment community’s sentiment towards the Federal Reserve and current chair Janet Yellen.

The survey dubbed “U.S. Monetary Policy Survey” was performed by ConvergEx through an online quizzing of 219 financial industry participants between August 12th and August 14, 2014. Respondents included Buy-Side Buy-Side The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim of satisfying their client’s portfolio demands. Through the analysis and acquisition of underpriced assets, buy-side entities purchase these assets with the prediction that they will appreciate. Moreover, the largest buy-side participants include firms such as BlackRock, The Vanguard Group, and UBS Group to name a few. It is important to note that firms such as BlackRock are able to influence market prices as a result of placing large investments under single entities while the Securities and Exchange Commission (SEC) requires a quarterly 13-F filing for all holdings bought or sold by buy-side managers. What differentiates buy-side investors from other traders would be the advantages that are yielded to them. Buy-side investors not only have access to a much broader range of trading resources and market insight but also tend to possess decreased trading costs through large lot acquisitions. To sum up, firms work with buy-side analysts to provide research recommendations that are kept exclusive to those participants of the firm while all analysts are overseen by regulations set forth by the International Organization of Securities Commissions (IOSCO). The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim of satisfying their client’s portfolio demands. Through the analysis and acquisition of underpriced assets, buy-side entities purchase these assets with the prediction that they will appreciate. Moreover, the largest buy-side participants include firms such as BlackRock, The Vanguard Group, and UBS Group to name a few. It is important to note that firms such as BlackRock are able to influence market prices as a result of placing large investments under single entities while the Securities and Exchange Commission (SEC) requires a quarterly 13-F filing for all holdings bought or sold by buy-side managers. What differentiates buy-side investors from other traders would be the advantages that are yielded to them. Buy-side investors not only have access to a much broader range of trading resources and market insight but also tend to possess decreased trading costs through large lot acquisitions. To sum up, firms work with buy-side analysts to provide research recommendations that are kept exclusive to those participants of the firm while all analysts are overseen by regulations set forth by the International Organization of Securities Commissions (IOSCO). Read this Term firms among which asset managers and hedge funds and Sell-Side Sell-Side Those in the financial industry involved with the production, marketing, and the sale of bonds, forex, stocks, and other financial instruments constitute the sell-side.Products and services produced by the sell-side are geared towards those who on the buy-side. You can think of the sell-side and buy-side like a coin, you cannot have one side without the other. The sell-side is comprised of individuals, firms, fintech companies, and market makers, who are responsible for providing liquidity in the market.Providing analysis and market insight for the buy-side, the sell-side attempts to secure the highest price rates for every financial instrument supported while any entity that purchases stock resides within the buy-side. What Makes Up the Sell-Side?In the foreign exchange market, multinational banks like JP Morgan, UBS, and Citibank compose the sell-side while the trading rooms for these banks are segmented into two groups. The first group is made up of interbank traders who purchase or sell large currency sums of currency on the forward and spot markets.Conversely, the second group is comprised of marketers who sell securities to clients on the buy-side, such as mutual and hedge funds and large businesses. In the stock market sell-side, investment banks sell stocks to both institutional and retail investors, take trading positions, and underwrite stock issuance.This means that they raise investment capital in the form of both equity and capital debt for entities who issue securities. Initial public offerings (IPOs) are one of the most anticipated events for the sell-side of the stock market. Th bond market sell-side has been pretty much monopolized by investment banks such as Goldman Sachs and Morgan Stanley. Banks that underwrite and service bond issues is a joint commercial single holding company of both Bank of America Merrill Lynch and JP Morgan Chase, who also are the primary dealer of U.S. Treasury Bonds while these banks are quite active with the purchasing and trading of the bond market. Those in the financial industry involved with the production, marketing, and the sale of bonds, forex, stocks, and other financial instruments constitute the sell-side.Products and services produced by the sell-side are geared towards those who on the buy-side. You can think of the sell-side and buy-side like a coin, you cannot have one side without the other. The sell-side is comprised of individuals, firms, fintech companies, and market makers, who are responsible for providing liquidity in the market.Providing analysis and market insight for the buy-side, the sell-side attempts to secure the highest price rates for every financial instrument supported while any entity that purchases stock resides within the buy-side. What Makes Up the Sell-Side?In the foreign exchange market, multinational banks like JP Morgan, UBS, and Citibank compose the sell-side while the trading rooms for these banks are segmented into two groups. The first group is made up of interbank traders who purchase or sell large currency sums of currency on the forward and spot markets.Conversely, the second group is comprised of marketers who sell securities to clients on the buy-side, such as mutual and hedge funds and large businesses. In the stock market sell-side, investment banks sell stocks to both institutional and retail investors, take trading positions, and underwrite stock issuance.This means that they raise investment capital in the form of both equity and capital debt for entities who issue securities. Initial public offerings (IPOs) are one of the most anticipated events for the sell-side of the stock market. Th bond market sell-side has been pretty much monopolized by investment banks such as Goldman Sachs and Morgan Stanley. Banks that underwrite and service bond issues is a joint commercial single holding company of both Bank of America Merrill Lynch and JP Morgan Chase, who also are the primary dealer of U.S. Treasury Bonds while these banks are quite active with the purchasing and trading of the bond market. Read this Term firms like banks and broker-dealers, were complemented by answers from trading venues, service providers and other financial industry participants.

According to the findings, there is hardly any evidence that the financial industry thinks highly of the current monetary policy stance of the US Federal Reserve. Just a touch below 60% think that the Federal Reserve is behind the curve with its ultra easy monetary policy.

On the other side of the isle, 9% are of the opinion that policy measures should be even more stimulative than current levels, effectively dissenting from the ongoing tapering effort as rates remain at historical lows near zero, while just below 20% think that the monetary policy of the Fed is just in line with what needs to be done. At the same time, only 49% openly approve of the job the FED is doing, while 32% disapprove.

This is the first divergence revealed by the answers of the financial community participating in the survey. If 59% think that the FED is behind the curve, why do only 49% of the respondents believe that the monetary policy committee is doing a good job?

It gets even more interesting when we see the answers to the next question in the survey about the influence of the FED on capital markets. Respondents have been quite categorical in their answer that the FED has too much influence on capital markets, with 68% stating it, while 32% have replied that the central bank's influence is just about right. Financial markets professionals seem to be getting increasingly worried about the extent in which current monetary policy has been affecting the valuations on both the stock and bond markets.

The second divergence observed is that despite alleged not so "correct" FED policy, the Federal Reserve's Chair, Janet Yellen, is getting a B for her handling of monetary policy so far. 23% of the surveyed believe that she already deserves an A, while a total of 18 percent would give her a C or D. In 6 full months as Federal Reserve Chair, Janet Yellen has earned 6% of the votes among the respondents already classifying her tenure as a failure.

Wrapping up the survey is probably the most interesting question revealing what worries the respondents most. When asked who they think the Best Federal Reserve Chair of all time is, almost half of the respondents pointed out Paul Volcker, who defeated the "great inflation" in the 80's, as the number one man for the job.

He is followed by Ben Bernanke, who gets the approval of 31% of respondents for handling the "financial crisis", while Alan Greenspan has lost his credibility after his long tenure at the Federal Reserve, ending with the Federal Reserve's Market Open Committee chaired by him, inflating the biggest housing bubble ever, after keeping policy rates too low for a protracted period of time.

Only time will tell whether Janet Yellen will follow in the footsteps of Alan Greenspan and make the same mistake. However, as the 15th Chair of Federal Reserve, she has one of the toughest jobs in the history of monetary policy - removing a 5-year long stimulus which has been distorting capital markets prices all over the globe.

ConvergEx Group's Chief Market Strategist, Nicholas Colas, stated in the announcement accompanying the survey, “There’s tangible fear among investment professionals about the unwinding of Quantitative Easing and the painful increases in rates that will follow. Our survey shows that Ms. Yellen is seen as a strong leader, and investors don’t want to scrap the structure of the Fed, but there is real concern about what happens next.”