EFTA01146378.pdf

From: US O1O Cus.gitmorgan.com> To: Undisclosed recipients:; Subject: JPM View 10.12.2012 Date: Fri, 12 Oct 2012 20:58:44 +0000 Attachments: JPM_View_10.12.2012-pdtzip Inline-Images: image003.png J.P. Morgan Global Asset Allocation 12 ockter 2012 The J.P. Morgan View Patience during political season • Asset allocation — No changes in our medium-tom value-focused strategy to Gloom Asset Allocation be long assets with high risk premia. equities. credit and carry trades. even as Jan Loeys AC upcoming political events milady create shorter-term volatility. 0212163-0574 on ben OP~pan can • Economics — No major forecast changes. although increasing uncertainty JPL1Aew Chase IkrA NA around US fiscal cliffposturing creates downside risk on US Q4 and Q1. John Normand • Fixed Income — We prefer Gentian Bends to US Treasuries. osadot 71)1.1810 NMsonn.wc111hP~1.ceen • Equities —US earnings season favors ckosesnealtronenied stocks and US JP. Marian SWM*, cie Financials NikOlaraS Panipinzoolou (44.20)7134-O415 • Credit — We expect further spread tightening in US MG as the lack of credit Sia°5.04~20013~JA can supply brought about by QE3 is nor fully priced in J.P. Mc.», 3*os~ pie • Currencies — We launch a Chinese Economic Stopilse Index. Seamus Mac Gorain (44.20) 7134.7761 • Commodities — Stay long Brent time spreads on Middle East uncertainty. seamtArnacf.1~9PAPPN J P. Mown ~an plc • Equity markets are trading heavy, and are giving back most of their gains of Matthew Lehmann the past 1-2 weeks. despite no clear change in fundamentals. Other risk markets. (44.2011114.7.1) such as credit. commodines. and the euro periphery. are not following equities ~thew" NhenA M9Prieeoa this time. indicating we are largely seeing profit taking after the hefty rally in J.P. Monipn 5PoareAl pie stocks over the last four months. Leo Evans • There are no meaningful changes in growth forecasts this week. except for (44.20, 7`42.2537 leonard a vonse~ga11 tan rowing I% in growth from Qi to Q3 in the Euro area. due to better II data in Q3 which we do not think will last. But as a result. global growth in Q4 at 2% is J • Martian Sewn», pee now barely different from the previous two quarters. In GDP terms, there is not 'CD returns through Oct 11 as much sign of a rebound as we had hoped, even as the underlying PMI orders eiuroes allge cdot. and inventory data do hint at this coming rebound St.P500 • We are only at the beginning of the Q3 earnings season. but what we have is in E1AB/S line with subdued expectations for mull op drops. Profit margins then hit new EMSCary lughs and world growth has since fallen below potential. But global equities are TtSItufr Year up 10%. Why? We have argued that equities and other risk markets can rally 1tSCI AC World' despite lackluster growth as they offer high risk memo against events that will LISCIEnt' not all come through. Hence, if the world turns out less ugly and volatile than Goar what most feared. as is our view. then investors will over tune god/wily switch some of their defensive holdings into better-return. but tuber asset classes. laSCI EM US Hno, Gale • This risk-prenuum- focused strategy into equities, credit and earn' assumes Crape Feed bre• volatility will remain subdued and markets will be buffeted by only modest Ell EX adverse shocks We don't we huge volatility from data or earnings surprises, Elllocated*" with macro volatility having collapsed over the past 2 years, and aggregate OSCI TR earnings now also showing almost no movement anymore. Tins leaves us with US Rea incorne the political surprise factor. Here we have to tread can carefully ac the next %bat Crod3onelen few weeks will see another EU Surnemt US elections, and Chinese leadership Tested change. each of winch with potentially momentous impact LIScase See page 7 for analyst certification and important disclosures. San. JP. Morgan, suikert. See blue haw page 2 lot descapn www.morganniarketssom EFTA01146378 This email is confidential and subject lo impertant disclaimers andconditions including an oilers per the purchase or sale o( securities. accuracy and corripleteness of information. vinnes. confidentiality. legal privilege. and legal entity disclaimers. available at hltp:/Avnuipmorgan.compages,disclosureaemail. EFTA01146379