EFTA01981558.pdf

J.P. Morgan Global Asset Allocation 11 July 2014 Click play to view video The J.P. Morgan View What if we are in a 2% world? • Asset allocation — We investigate the risk scenario that global growth Global Asset Allocation stays with a 2% handle, instead of the rebound to 3% plus we project. Jan Loeys AC Impact would make us favor income over growth assets and for the moment keep us OW EM. • Economics — Further cuts in Q2 Euro area and Japan bring global growth JPMergan Chase Bank NA to 1.9%, after already dismal 1.4% in Ql. John Normand • Fixed Income — Despite weaker near-term data, our medium-term growth outlook for the Euro area improves, keeping us long periphery vs. core. J.P. Morgan Securities plc • Equities — Divergent macro and flow momentum keep us OW EM. Nikolaos Panigirtzoglou • Credit — The US HG sector that has lagged the broader HG market most is 30yr single A non-Financials. JP. Morgan Securities plc • FX — We still expect the USD index to rise 1% in Q3, plus 1.5% in Q4. Mika Inkinen • Commodities — Oil price to average $115/bbl and $120/661 in 2015-16. • Click here for video. J.P. mown Securities plc • Risk assets are down from the peaks reached only last week, and bonds Matthew Lehmann rallied on little news beyond problems with a Portuguese bank. EM outperformed DM in equities and currencies. The move does underline that many investors expect a pullback in risk markets after the almost J.P. Morgan Secuntes LLC straight-line rally of the last few months if not years. But most of these Nandini Srivastava same market participants also say they plan to buy on pullbacks. • We are less worried about near-term disturbances and flows and more J.P. Morgan Securities Mc about the medium-term outlook for economic growth. Over the past YTO returns through Jul 10 three years. the world economy has grown only at a 2.5% pace, below %, equities are in lighter color. potential and thus not able to make up for what we lost in the recession. Gold Each year, we keep forecasting that growth will rise to a 3% handle, but EMBIG have been steadily disappointed. Until last year, we had at least clear EM Stomp. explanations for this, largely from fiscal tightening in Europe and the US S4P500 and fading productivity growth in EM. This year, though, growth has MSCIEle collapsed even more, to a 1.6% pace in HI, with even fewer explanations USHigh Grade aside from the Japanese tax hike. USHigh Yield MSCI AC Wald• • The forecast remains that growth rebounds to over 3% from this quarter on, Europe Fixedlnc• but as investors, we need to investigate the risk scenario that we may GoisiGav Bonds- instead be in a, say, 2% growth world. The trending behavior of forecast USFixed Income revisions, and thus surprises, would suggest there is more down than upside MSCI Europe• risk on growth assumptions (chart p. 2), even as surveys do not confirm EM Local Bonds•• • this. This is not to say that we can eliminate upside risk of growth rising to GSCI TR a 4% handle, as the 1990s US experience similarly saw steady up grades in US cash EM EX the second half of the cycle, after downgrades in the first (same chart). Topix' • With the consensus steadily projecting 3% US and global growth, this view -5 0 5 10 15 should be in the price and instead a 2% growth pace should thus be a surprise that requires asset repricing. We see two broad drivers of weak Source: J.P. Morgan, Bloomberg. growth — weak demand and/or weak supply — and both have similar Nom: Ram in USD *Local currency. "Hedged market implications: they favor income over growth assets. mto USD. Euro rued income is Bcox Omni Index 11511G. HY. EMBIG and EMS Corp ale JP1A See page 7 for analyst certification and important disclosures. maims. Em FS is DIC1M t. www.jpmorganmarkets.com EFTA_R1_00470160 EFTA01981558  Jan L Global Asset Allocation .J.P.Morgan The J.P. Morgan View 111/v2014 • Weak demand would essentially reflect unfinished post-crisis balance sheet Cumulative consensus US GDP forecast changes %. Blue line = cumulative sum of current and next full- delevering by households, banks and governments. The market impact would year forecast changes. Grey bars are US recessions. be relatively easy to judge as it is very close to, though not as bad as, what happened in Japan post its leverage boom and bust over twenty years ago. 8 Economic growth in Japan fell to less than I% above population growth, 6 deflation set in, bond yields fell, credit spreads went to nothing, and equities 4 saw no capital gains throughout. We have argued here that low growth keeps 2 both volatility and policy rates low and is thus bullish for risk assets. But we 0 also mentioned that growth can become so low as to depress earnings and to create deflation, inducing investors to prefer bonds, as happened in Japan. -2 -4 • If indeed economic agents continue to delever balance sheets, then monetary policy has no further impact on growth, as we learned in Japan. Only fiscal policy, supply side reform, and/or time can redress growth. G4 central banks -8 would indefinitely delay rate hikes; bond yields would fall again; the search -10 for yield would intensify; equities would at best perform on par; Value and Jan-90 Jul-94 Jan-99 Jul-03 Jan-08 Jul-12 income stocks would outperform. Scarce &Pe Chp Economise. J P Mogan • A weak supply side, from low labor supply, a low supply of new capital, and low productivity growth, is an alternative driver of a 2% growth risk scenario. And indeed, we have seen these forces at work already in this cycle. Our economists have lowered their estimates of potential global growth by 0.5% since 2008. Taking out the effect of the growing share ofEM, which has higher potential, the drop in global potential is over 1%. So far, this did not prevent global asset price inflation. If we continue to see lower growth than what we expect and it all seems due to a fall back in potential. then we create neither price deflation nor inflation. It will, though, significantly reduce the return on capital, and with that, equilibrium real interest rates. In the US, it would likely keep fed funds well below 2% for years. • What do we do about these risks? Both weaker demand and supply have in common that they would boost income assets — better yielding fixed income and income stocks again growth assets, primarily cyclical stocks. In our mind, it should boost the currencies and assets issued by countries that pursue better supply side reform. For the moment, this analyst thinks it should still support an OW of EM assets, as they are better yielding and better valued, would escape the threat of fast Fed tightening, and at least this year have relatively better macro momentum. Fixed Income • DM bonds rallied this week, with 10yr yields 6-14bp lower in the US, Euro area and the UK, on weaker than expected macro data and negative headlines surrounding the parent company of a Portuguese bank. On the latter, we think a lot of bad news has been priced on this story, and do not see major negative implications on the Portuguese sovereign. • The weaker than expected industrial production data in the Euro area this week led our economists to revise down their expectations for Euro area GDP More details in .. growth for 2Q14 and 3Q14 by 0.75% and 0.5% respectively to 1.0% and Global Data Watch. Bruce Kasman, David Hensley and 1.5%. However, while these growth revisions reflect a more moderate near Joe Lupton Global Markets Outlook and Strategy. Jan Loeys el al. term profile, medium-term we continue to see a broadening of Euro area US Fixed Income Markets, Mad Jozoff, and Alex Roever growth across sectors and countries. Indeed, we revise our growth forecast for Global Fixed Income Markets. Fabio Bassi et al. next year from 2QI5 to 4QI 5 from 2.0% to 2.25% as drags from fiscal Emerging Markets Outlook and Strategy. Luis Oganes tightening, weak credit and a high exchange rate fade (Taking stock ofEuro and Holly Huffman area grotoh: 2014 (lotto, 2015 up, Greg Fuzes' et al, Jul I I). Key trades and risk: Emerging Market Equity Strategy, • US headline inflation has bottomed out and has been rising over the first Adrian !dowel et al. half of 2014, driven by rising core prices and a pickup in food and energy European Equity Strategy, Mislay Matejka., et at. Flows & Liquidity, Nikos Panigidzoglou et al. 2 EFTA_R1_00470161 EFTA01981559  Jan L Global Asset Allocation .J.P.Morgan The J.P. Morgan View 11 lAv2014 inflation. We expect US inflation to moderate over the second half, to around EM vs. DM relative equity performance and growth 2.4%, while our economists do not expect core inflation in the Euro area to forecasts pick up until 2015 at the earliest. We remain bullish on 10yr US TIPS, and Ratio of MSCI EM (MXEF) vs. MSCI DM (MXWO) on the left hold 10yr TIPS breakeven wideners, on a view that both inflation axis and the ratio of JP. Morgan EM vs. DM 2014 GDP growth forecasts on the light axis expectations and risk premia priced in the TIPS curve should be higher (see 0.8 3.3 Monthly Inflation Outlook, Francis Diamond et al, Jul 10). — EM vs. DM equity • Taking together the outlook in the Euro area for weaker near-term growth, but — EM vs. OM growth 3.1 stronger and broader medium-term growth, subdued inflation and support forecast from the ECB's upcoming TLTROs, we retain our medium-term view for 0.7 2.9 tighter periphery spreads and stay long 10yr Spanish government bonds vs. German Bunt, despite the near-tent noise. 2.7 Equities 06 2.5 • EM equities were about flat this week, while DM equities were down 1.5%. 2.3 Our DM economic growth expectations have been lowered significantly over the past two weeks. We have lowered Q2 US growth from 3% to 2.5%, 2.1 0.5 Q2 Euro area growth from 1.75% to 1% on the slump in May IP and PMIs, Jan-13 Jul-13 Jan-14 Jul 14 and in Japan, weaker than expected consumption and capex made us revise Scum JP. Morgan down our Q2 GDP -6.5% from -4.5%. • In EM. economic data have improved, especially relative to DM. EM Asia looks particularly constructive, supporting our OW in Asia within EM. We have revised up our Q2 GDP growth forecast for China from 6.8% to 7.2% given the positive momentum in PMIs. This lift is expected to build into the rest of EM Asia this quarter (GDW, July 3). Additionally, flows into EM equities remain steady. In the week to July 9. there were net inflows of S1.3bn into EM equity funds, greater than S0.7bn into US equity funds. • Euro area core and peripheral equities fell this week, driven by bank stocks. Sentiment remains negative on banks given recent litigation and the events unfolding in Portugal. These developments support our recent exit from the peripheral equity and bank trades and our refocus on DAX within euro area equities. Credit • Credit spreads arc wider this week, with HY underperforming, especially in Europe. FIG spreads are about flat on the week. Comparing current spreads for different market segments to the trading range over the past 10 years, our US HG credit strategists identify opportunities within HG credit where spreads have not rallied as much as the broader market. Using this approach, the tenor/rating bucket that has lagged the most is 30yr single A non- Financials. Next cheapest is 30YR BBB non-Financials. 10YR non-Financials have also lagged, but less than 30YR. The short end in non-Financials is very tight, at or very close to 10YR tights (Ct/OS, Beinstein et al., Jul 7). • As discussed in the commodity section below, our oil strategists have raised their price forecasts. Higher oil prices arc likely to be a net negative on EM More details in . corporates as a whole due to the relatively low weight of oil companies as US Credit Markets Outlook and Strategy. Eric Beinstein well as the high weight ofnet oil importing countries. The oil & gas sector et at accounts for 18.4% of the CEMBI Broad, but not all of the issuers in the EM Corporate Weekly Monitor, Yang-Myung Hong el at sector arc beneficiaries of higher oil prices. Only about 22% of the CEMBI High Yiefd Credit Markets Weekly. Peter Acciavatti el at Broad is made up of issuers in countries that are net oil exporters and European Credit Outlook & Strategy, Stephen Dulake et where the economy would benefit from higher oil prices (JPI/ E tl al. Corporate Cross-Product Daily, Hong and Beinstein, Jul 7). Emerging Markets Cross Product Strategy Weekly. Eric Foreign Exchange Beinstein et al. • Today we published the monthly Key Currency Views detailing our forecast 3 EFTA_R1_00470162 EFTA01981560  Jan h Global Asset Allocation .J.P.Morgan The J.P. Morgan View 11 aty2014 rationale across currencies. There are no significant forecast changes this Weekly FX returns month. We still expect the USD index (JPMQUSD) to rise 1% in Q3 and % vs. the USD. another 1.5% in Q4, with significant dispersion across pairs. Those 0.8% currencies that should fall by year-end include (Q4 target in parenthesis) EUR (1.30), JPY (106), CAD (1.12), AUD (0.91), NZD (0.85). BRL (2.35), RUB 0.6% - (35.46), and IDR (12,100). Those that should rise include MXN (12.80), CNY 0.0% (6.15), KRW (1000), and INR (57.5). 0.2% • Aside from the bottoming out of global inflation little has occurred at the 0.0% systemic level over the past month to affect the baseline view. We have -0.2% - always held tame targets for the dollar index in 2014 given that Fed tightening -0.4% was more than a year away, thus leaving the dollar in that awkward phase this year between the hope of being a high-yielder at some point and the reality of 8.6% - being a low yielder now. Relative to the historical norm over the past four Fed -0.8% - tightening cycles in 87, 94, 99 and 04, the current lead up to end of easy -1.0% money is proving just as erratic. The precondition for that rate normalisation USD JPY EUR G8P CHF CAD AUD is consistent US economic growth each quarter and price pressures sufficient TWI Scone: Noonan to shift Fed expectations. That story is unfolding, but at a tediously slow pace. • On a pairwise basis, dollar strength was and remains projected mainly against 610 currencies where central banks are easing (JPY, EUR, SEK) or likely to lag the Fed (AUD, CAD). For currencies whose central banks lead the Fed now (NZD) or will do so in early 2015 (GBP), forecasts show limited movement to convey a range. (The cable rate declines only because the EUR/USD forecast does; otherwise sterling outperforms most currencies). For the emerging markets, poor balance of payments positions were the core driver for most of our bearish forecasts, such as for ZAR, RUB and TRY. • Importantly over the past two months, inflation appears to have bottomed globally and in the majority of countries. For currencies, inflation as a stand- alone variable isn't inherently good or bad. What matters is the real interest rate environment created by central bank policy as that inflation trend evolves. From this perspective, US real rates look low now since the Fed seems committed to another year of zero policy rates while inflation is turning up, but should firm later since the front end of the US bond market is so mispriced versus the Fed dots (about 75bp for December 16). We expect this repricing higher in real rates to occur by year end and support the dollar, but are less confident near-term while inflation ticks higher and the Fed talks dovish. Commodities • This week, our commodity strategists raised their oil price forecasts from $105/bbl in Q3 and Q4 to $115/bbl and $1 I 2/bbl, respectively. Forecasts for the average price in 2015 and 2016 arc $115/bbl and S I20/bbl. respectively. More details in . Oil price volatility is also expected to return to more normal levels over FX Markets Weekly. John Normand et al. this period. The move higher in price over the coming two years should be Commodity Markets Outlook .4 Strategy. driven by higher global demand as the global economy expands at a faster Colin Fenton et al. growth rate as well as weaker supply growth, largely in Iraq and Libya. Oil Markets Monthly. Cohn Fenton et al. • Recent reports of a peace agreement in Libya between the rebels and the Natural Gas Weekly. Scott Speaker and Shikha government caused Brent to fall by around 5%. We think a quick and full Chaturvedi recovery in production is unlikely and we also think overall production Metals Monthly. Natasha Kaneva et al. capacity is now lower due to damage to the oil fields. We also lower our Agriculture Weekly. Conc.( O'Malley expectation for Iraqi supply because increased operational risks to foreign oil companies mean investment in production will now likely be lower. In 2017, the oil team assumes a global recession arrives, and expects Brent to average between S60/bbl and $70/bbl depending on the severity of the recession (Oil Market Monthly: Sweet Sixteen. Sour Seventeen, Fenton et al., Jul 9). 4 EFTA_R1_00470163 EFTA01981561  Jan L Global Asset Airoc .J.P.Morgan The J.P. Morgan View 11 July 2014 Forecasts & Strategy Interest rates Current Sep-14 Dec-14 Mar-15 Jun-15 Investment themes and impacts Unded States Fed funds rate 0.125 0.125 0.125 0.125 0.125 Low growth means money stays easy 10.year raids 2.52 2.90 3.00 3.10 120 The current US recovery is the slowest since Euro area Refi rate 0.15 0.10 0.10 0.10 0.10 WWII. Global growth will barely exceed 10-year yields 1.20 1.35 1.50 1.60 1.70 potential. Easy money stays for a long time. United ICmgdom Repo rate 0.50 0.50 0.50 0.75 1.00 Low macro vol drives carry trades 10-year yields 2.60 2.80 3.05 3.20 3.35 ZIRP and low macro vol make earning risk Japan Overnight call rate 0.05 0.05 0.05 0.05 0.05 premia and carry very attractive 10-year yields 0.54 0.55 0.55 0.65 0.70 Rotate risk from over-owned and -valued Emerging markets GBI-EM - Yield 6.53 7.04 ... to better valued and less owned risk assets. Credit OWs are now small, and exposure is Credit Markets moved to equity. EM and commodity roll. US high grade (bp over UST) 124 110 OW EM across asset classes Euro high grade (asset swap sprd) 89 75 Relative macro momentum is switching to EM. USI) high yield (bp vs. UST) 412 375 EM growth expectations are stabilizing while Euro high yield (bp over Bonds) 325 315 those in DM have come down badly. Investors EMIG (bp vs. UST) 281 275 seem UW EM, while it offers better value. OW EM Corporates (bp vs. UST) 331 300 EM across bonds, FX, credit and equities. Foreign Exchange Avoid and hedge what is suspect EUR/USD 1.36 1.34 1.30 1.30 1.28 Our UWs are not just based on value and USD/JPY 101 102 106 107 107 macro momentum but also on what seems uncertain, coming from event risk, such as the GBP/USD 1/1 1.71 1.67 1.68 1.66 Middle East and China, or from the unexplained AUD/USD 0.94 0.92 0.91 0.90 0.91 (fall in U-rate and 01 GDP). Hedges include oil USIVEIRL 2.22 2.30 2.40 2.45 2.50 futures, UW US FI vs EU, (1W US equity vs USCUCNY 6.15 6.20 6.15 6.15 6.15 EM. USD/KRW 1021 1000 1000 995 985 Past half-time in the global business cycle USO/TRY 2.12 2.15 2.15 2.15 2.15 June marks the 5th anniversary of the recovery. Quarterly Averages Working hypothesis is an 8-year recovery. That Commodities Current 14Q3 14Q4 1501 15Q2 keeps equity rally on track, but makes the credit Brent (Sibbl) 106 115 112 105 110 rally mature. Gold ($/oz) 1337 1260 1285 Sows JP. Morgan. CMOS, Jul 2.2014 Copper (S/metric ton) 7178 6750 6950 Tactical overview YID Equity Sector Performance' US Europe Japan EMS Direction Country Sector Energy 12.2% 8.4% VW 6.0% UW 4.7% UW Asset Bullish risk EM OW Equities, HY Materials 8.5% 5.1% OW -5.7% UN, 2.2% UW allocation vs bonds. Industrials 3.5% -1.6% OW 1.8% OW 5.5% OW Discretionary 1.3% 0.9% N -6.1% OW 8.6% N Semiconductors: J Equities Long EM, Dax REITs; cyd's Staples 6.6% 4.3% UW 6.7% OW 3.8% UW Healthcare 11.8% 10.1% N 2.0% UW 11.2% N Flat EU vs. US, rmancials 4.6% -0.7% OW -13.7% OW 6.7% N Bonds Duration in UK. OW, Information Tech. 9.8% -3.7% OW 2.6% UW 17.6% OW DM; long in NI, Spain; Telecormimications 6.7% -1.2% UW -5.7% OW 0.7% UW EM AU, Brazil Credit Small OW EU HY, FINs. EM. Utilities 15.7% 14.7% N -3.7% UW 15.5% N Carry from: Overall 7.5% 3.6% -2.2% 7.8% Long SEK. NOK FX COP, •Lawdaneturrn as el Al 10.2014 Long co zAvs.REUR:stions cNy, PHP, Sauce: J.P. Wigan ua NGN vs. Energy on carry: Cornell Small OW Copper on better demand from China. Sauce'. J P. Morgan 5 EFTA_R1_00470164 EFTA01981562 Jan Loeys Global Asset Allocation The J.P. Morgan View .J.P.Morgan 11 My 2014 Global Economic Outlook Summary Real GDP Real GDP Consumer prices %owxayear ago %aerawfous peed. isar %wain* 2013 2014 2015 4Q13 1Q14 2014 3014 4014 1Q15 4Q13 2014 4014 4015 United States 1.9 1.4 2.9 2.6 -2.9 2.5 3.0 3.0 3.0 12 2.1 2.4 1.9 Canada 2.0 2.2 2.6 2.7 12 22 2.5 2.7 2.8 0.9 2.5 t 2.3 2.0 4 Latin America 2.5 1.6 2.9 1.5 01 1.4 2.1 28 3.1 4.5 5.0 5.1 4.7 Argentina 2.9 -1.5 3.0 4.8 42 S4: .4.6 -1.4 4.0 10.7 34.0 40.0 45.0 Brazil 2.5 1.1 1.8 1.8 0.7 Q,2 1.8 2.7 22 5.8 6.3 6.3 6.3 Chile 4.1 2.5 3.5 -0.4 3.0 21 4.0 2.8 3.2 2.5 4.5 4.2 4 3.0 Colombia 4.7 5.0 45 31 9.7 21 4.0 4.0 5.0 1.8 2.8 3.2 3.0 Ecuador 4.5 3.3 4.0 4.7 2,0 1.5 2.0 2.5 35 2.3 3,4 t 3.5 t 4.0 Mexico 1.1 2.9 3.8 0.5 1.1 4,Q 3.9 3.7 3.6 33 3.7 4.1 3.1 Peru 5.8 4.2 55 6.9 0.3 I§ 6.0 7.0 5.5 3.0 32 3.0 2.5 Uruguay 4.7 3.0 4.0 6.4 -1.8 A4 t 6.0 t 40 t 3.0 4 8.6 81 75 7.3 Venezuela 1.3 -1.0 2.5 2.3 41 0.0 2.5 2.0 25 52.9 572 58.2 35.0 Asia/Pacific 4.6 4.5 1 4.8 IS 5.3 22 4 5.3 t 50 4.8 32 3.3 29 33 Japan 1.5 1.3 4 1.4 4 0.3 6.7 41 4 3.0 t 2.0 2.0 IA 38 3.1 2.5 Australia 2A 3.0 32 32 45 LI 3.1 4.3 2.9 2.7 2.9 2.0 2.6 New Zealand 2.8 32 2.8 41 4.0 OA 1.9 4.7 4.8 1.6 18 1.6 2.0 EM Asia 6.2 61 6.4 6.4 48 Id t 6.5 6.3 4 62 40 3.1 2.9 3.7 China 7.7 72 72 7.6 5.9 12 7.6 7.4 7.1 2.9 1.9 1.1 3.1 India 4.7 5.3 65 42 5.0 6_,Q t 5.5 5.0 4 6.0 4 10.6 8.6 8.6 7.0 EM Asia ex Chinaandia 4.0 4.0 4.6 5.1 2.3 4A t 4.7 4.6 4.4 3.3 32 3.0 3.5 Hong Kai 2.9 2.8 2.6 3.6 0.8 11 4.2 42 20 4.3 3.6 3.4 3.5 Indonesia 5.8 49 SI 6.0 4.1 5.,Q 5.0 45 5.3 54 62 4.6 4.6 Korea 3.0 38 40 3.6 3.8 21 t 4.7 4.0 4.0 IA 1.6 t 2.3 2.9 Malaysia 4.7 55 5.1 7.6 3.3 Ill 5.5 5.5 50 30 3.3 3.5 5.2 Philippines 7.2 6.0 6.4 6.1 4.9 LA 5.7 5.7 65 3.5 4.0 3.6 3.8 Ssigapore 3.9 4.4 SA 69 2.3 91 4.9 6.6 49 2.0 3.0 2.3 2.3 Taiwan 2.1 35 38 7.6 1.9 g 4.0 4.2 3.8 0.6 12 1.6 1.9 Thailand 2.9 11 42 0.5 42 3.5 4.0 4.0 42 1.7 2.6 2.9 3.8 Western Europe 0.1 1.4 4 22 1.6 t 12 T IA 4 1.8 4 2.2 22 10 OS 0.9 1.3 Euro area -0.4 19 4 2.0 12 t 0.8 t 1.0 4 1.5 4 2.0 20 0.8 06 0.8 1.1 Germany 05 2.0 4 2.3 1.5 3.3 Qa 4 2.0 4 25 2.5 t 1.3 09 1.1 17 France 0.4 OA 4 1.7 4 0.7 01 LI 4 1.0 4 1.5 2.0 0.8 OS 0.7 1.1 Italy 4.8 0.0 4 1.3 1 0.5 -0.5 09 4 1.0 4 1.5 1.5 0.7 OA 05 09 Spain -12 1.3 t 22 t 0.7 IS 21 t 2.0 20 20 02 02 0.0 0.0 Norway 2.0 1.9 2.3 2.0 1.9 2.0 1.9 2.1 2.3 2.3 18 1.6 2.2 Sweden 1.6 2.2 25 6.5 -0.3 Z3 25 2.5 25 01 41 0.2 15 United Kingdom 1.7 3.0 30 2.6 3.3 12 3.0 t 3.0 30 4 2.1 1.6 1.6 2.1 EMEA EM 20 1.8 2.7 32 0.6 02 2.4 2.3 2.9 51 5.6 4 5.1 4.2 Czech Reputio -0.9 2.8 2.8 6A 32 jj) 2.0 2.3 42 1.1 0.2 4 1.6 4 1.5 Hungary 1.1 30 25 2.7 45 21 2.0 2.5 30 03 -OA 4 0.6 4 2.9 t Israel 3.4 3.3 3.8 32 2.7 3.2 3.6 45 32 1.9 1.0 1.3 1.9 Pdand IS 32 32 2.8 45 21 3.0 35 35 0.7 -01 As 1.8 4 Romania 35 3.2 3S 5.6 t 0.7 t Ig 2.0 2.8 t 3.6 4 1.8 1.0 1 2.3 1 2.6 1 Russia 1.3 0.5 18 28 -3.4 j5 2.3 2.0 20 6.4 74 6.1 4.4 South Ahica 1.9 18 32 39 -0.6 Q9 4.5 3.8 2.9 5.4 6.5 6.5 1' 5.8 t Turkey 4.0 3.0 4.1 3.5 7.0 AA 1.2 OS 4.1 75 9.1 81 6.3 Global 2.4 2.5 4 3.3 2.9 IA 19 4 3.3 3.4 3.4 2.3 2.6 26 2.6 Developed markets 12 1.5 4 2.4 1.9 OS 91 4 23 26 2.5 1 12 1.9 1.9 18 Emerging markets 4.6 4.3 49 4.7 2g 4.1 t 4.8 4.8 49 4.3 4.0 3.8 4.0 Souroe J P Morgan 6 EFTA_R1_00470165 EFTA01981563 Jan Loeys Global Asset Allocation The J.P. 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Morgan Representative or visit the OCC's website at imp o ‘ 14/ ‘ ,..oplionsCitaring.CollipublIcalionsirisk‘ osksroklxh Legal Entitles Disclosures US.: JPMS is a member of NYSE, FINRA. SIPC and the NFA. JPMorgan Chase Bank. N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A.. London Branch. is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street. London, El4 SIP. South Africa: J.P. 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Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited (Corporate Identity Number - U67120M111992FTC068724), having its registered office at I.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz - East, Mumbai - 400098. is a member of the National Stock Exchange of India Limited (SEW Registration Number - INB 23067523111NF 230675231/INE 230675231) and Bombay Stock Exchange Limited ISEB1 Registration Number - INB 010675237/1NF 010675237) and is regulated by Securities and Exchange Board of India. Telephone: 91-224157 3000. Facsimile: 91-22-6157 3990 and Website: v. u Wjpillipl corn. For non local research reports. this material is not distributed in India by 1.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Lid., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission and its registered address is 3rd Floor. 20 North Sathom Road. Silom. Bangrak. Bangkok 10500. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the O1K a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Velem% Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Boise, S.A. de C.V., J.P. Morgan Grupo Financier° is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) (MCI (P) 199/03)2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Secunties Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) antkor IPMorgan Chase Bank. N.A.• Singapore branch IJPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act. Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising fnam. or in connection with. the document. Japan: JPMorgan Securities Japan Co.. Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Ballad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Stoking (Psi.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent. arranging. advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor• A I-Faisaliyah Tower, King Fahad 7 EFTA_R1_00470188 EFTA01981564 Jan Loma Gl