In a significant change, 63 percent believe that some countries will be ejected or leave the euro zone in the next five years, up from 52 percent in the October survey.
"While everyone is focused on raising money, the real issue is how to restore competitiveness," said Robert Brusca of Fact and Opinion Economics. "And that is hard to fix without a depreciation of the currency, and that can't be done without leaving the euro zone."
Mark Zandi of Moody’s Analytics was more upbeat on Europe. He wrote, "It won't be a break-out year for the (U.S.) economy, but 2012 will be better than 2011. Europe remains the most serious threat to this optimism, but with the ECB's recently aggressive actions, it is receding as a threat."
More than two-thirds of the market participants approved of the Fed’s decision to publish its members’ forecasts of the fed funds rate. That begins Wednesday. But there was skepticism about its effects on markets and the economy. About a third said it would lead to higher stock prices and lower bond yields. Just 20 percent believe it will help with job creation.
Still, the move has its supporters because it will increase the clarity of monetary policy. "The publication of the interest rate assumptions behind the FOMC forecasts will make the forecasts easier to interpret," wrote John Ryding of RDQ Economics. "At the present time we have forecasts based on unpublished policy assumptions, which makes the forecasts for the out years difficult to interpret."
James Paulsen, Wells Capital Management holds the opposite view: "I fail to understand how 'diverse interest rate forecast' and constant 'chatter' by 12 members of the Fed with 'diverse views' provides clarity to the financial markets and businesses."
While the Fed has forecast it will keep rates low through mid-2013, 48 percent of survey respondents actually see the Fed’s first rate increase in 2013; 41 percent don’t forecast a rate hike until after 2014. There are also strong divisions on the outlook for the balance sheet: 48 percent believe the Fed will take action to reduce the total assets it holds before the end of 2013; 46 percent put the date after 2014. But the biggest single group, 18 percent, don’t see the Fed taking steps to reduce its balance sheet until 2015 or later.
Finally, David Kotok of Cumberland Advisors responded to the survey from Chile, noting, “Fly fishing is more predictable than economic outcomes. More fun, too.”