EFTA01152975.pdf

From: US GIO To: Undisclosed recipients:; Subject: Eye on the Market, March 10, 2011 Date: Thu, 10 Mar 2011 20:07:13 +0000 Attachments: 03-10-11_ EOTM - Printing_Press_Revisited.pdf Inline-Images: image001.png Please join us next Tuesday, March 15, at 11:00 am ESTfor a conference call on the "Ides of March" topics discussed last week (see box). Vali Nam Professor of International Politics at The Fletcher School of Law and Diplomacy, will join us. Mr Nasr, a specialist on political and social developments in the Muslim world, is a Senior Advisor to the US. State Department on South Asia. You can get the dial-in information for the webcastfrom your coverage team. As shown in the table below, as March began, the world was benefitting from a global recovery that was broadening and deepening. This recovery has run headlong into a series of events that were both foreseen and unforeseen. The eruption of political risk across the Arab world has been something of a surprise, although conditions leading to it were well understood for years. As for problems in the European Monetary Union and the impact of tightening policy in Asia, they have been familiar refrains around here for months, and were central to our 2011 Outlook. The whole point of the cover of the 2011 Eye on the Market was that removal of the stimulus tsunami was never going to be that simple, that parts of the recovery were very stimulus-dependent; and that the tsunami itself led to a variety of disruptions (e.g. rapidly rising commodity prices, particularly in the wake of the Fed's August 2010 Jackson Hole speech) whose regressive consequences were troubling. Instead of the traditional EoTM commentary, this week I wanted to share the attached charts on oil, Europe, China, equity markets and monetary policy that speak mostly for themselves (see attached PDF file). They are part of our rationale for holding less equity risk than what you might normally associate with a period of elevated profit margins, low PIE multiples in the developed world and a global rebound in both manufacturing and services. We continue to believe that certain styles of hedge funds (e.g., macro, merger arbitrage, credit), diversified commodity exposure and various forms of private lending (e.g. purchases of distressed European bank loans, well-collateralized loans to commercial property borrowers) are important complements to equities for the foreseeable future. The Ides of March Global Recovery in the Works March 3 Protests in Qat f. East Province of Saudi Arabia % of Countries Growing Faster than 3 Months Prio March 9 Irish Parliament reconvenes with mandate to revisit EU/IMF bailout 3-Mar-11 Nov-1 March 10 Moody's downgrades Spain to Aa2 World 79% March 11, 20 Days of Rage, Saudi Arabia 38% March 11 Eurozone summit (Heads of state) Developed World 83% 17% March 14, 15 Eurogroup meeting (Ministers of Finance) March 15 Federal Reserve Open Market Committee Meeting Asia 88% 50% March 17 Bundestag vote on consultation requirement Central & Eastern Europe 75% 25% March 24, 25 Main EU leaders meeting to finalize a deal March 1 -30 Central Bank meetings in Brazil, Mexico, Norway, Latin America 60% 60% Indonesia, India, Taiwan, Korea, etc Source: Bridge-iv ater Associates Source: J.P kbrgan Priate Bank Michael Cembalest Chief Investment Officer The material containedherein is intended as a general market commentary. Opinions expressed herein are those ofMichael Cembalest and may differfrom those of other J.P. Morgan employees and affiliates. This information in no way constitutes J.P. Morgan research and. houldnot be treated as such. Further, the views expressed herein may differ from that containedin J.P. Morgan research reports. The above summary/prices/quotesistatistics have been obtainedfrom sources deemed to be reliable, but we do not guarantee their accuracy or completeness, any yield referenced is indicative and subject to change. Past performance is not a guarantee offuture results. References to the performance or character ofour portfolios generally refer to our BalancedModel Portfolios constructed by AP Morgan. It is a proxy for client performance andmay not represent actual transactions or investments in client accounts. The modelportfolio can be implemented across brokerage or managed accounts depending on the unique objectives ofeach client and is serviced through distinct legal entities licensedfor specific activities. 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