EFTA01146215.pdf

From: US GIO <us.gio@jpmorgan.com> To: Undisclosed recipients:; Subject: JPM View 10.26.2012 Date: Fri, 26 Oct 2012 20:13:56 +0000 Attachments: JPM_View_10.26.2012-pdtzip Inline-Images: image003.png EFTA01146215  a.Morgan Global Asset Allocation 26 OdOber 2012 The Morgan View Lower fiscal uncertainty needed to unleash capital • Asset allocation — Value dictates that long-term investors start snitching from Global Asset Allocation credit to equities. but low growth fiscal uncertainties. still attractive credit Jan Loeys AC spreads. and little sign of worsening credit fundamentals keep us overweight 041211344174 both equity and credit vs government debt especially in higher-yield. • Economics — Bottom in global growth is now 3-quarters wide. Rebound in Q1 Jent erase Bank Na requires lifting of fiscal risks m the US. in our view. John Normand (an), 7134.1$10 • Fixed Income — Favor EM local bonds over Mt pon neananajkomegoan tan • Equities —UW US equities against Europe and EM Asia. E Morgan Soeunots pk PlikOlaOS Paniginzogiou • Credit — E.MBIG year-end spread target is lowered to 250bp. from 275bp. and (44.20i 7+34.7115 CEMBI to 300óp. from 325bp. ~445 4344 45545104CIP.4 493. COM • Currencies — We re long the yen. as the sell off appears overdone. ▪ mon,..•s•••"'"'"'` • Commodities — Low oil inventories and high uncertainty in the Middle East Seamus Mac Gorain (44.20, 7134.770 keep us long Brent time spreads n‘sotrnnernocosn own • Risk markets continue to yo-yo. with this week being down, while last week ■ Morgan S•cootmi pc was up. Bond markets are sitting out the last wiggle. with government yields matthew Lehmann barely changed on the week and corporate bonds only a few hips wider. Most (44.30p 7134.7113 assets remain in their 2-month trading range. • Range trading is hiding a lot of anxiety in markets and economies, recently a Mort Swoon pie focused on the US. We have argued that world growth is in a bottom formation. Leo Evans but the low part of this pattern keeps getting longer and is up to 3 mutters now (44.201 7741-2537 (Q2-to Q4). The expected rebound has been pushed out now to Q I. and is softer than we originally thought. There are a whole host of forces holding back ` Mogan senates of growth. but one negative that we believe explains both weaker corporate VTD serum, I h ',fug ti Oct )5 spending and still massive capital flows into fixed income mug be nabes we "IOW Woe fundamental uncertainty about govt policies. The consumer has not been affected much, but ow reading of institutional and company- managers is that EUBIG many have simply postponed major investments in real and financial capital EM $ Can until the fog lifts around the US and European fiscal crises, and the direction of SdP5)0 China's economy. US HO Veld • The recent rebound in European and Chinese equities suggests investors have Al XI AC IsArte become less worried about these two regions. It is probably too early to see the IASCI EUIC{X impact on apex, but we do expect this to show up in coming months and to USCI EM' support a growth rebound in Q1. The US fiscal crisis is now tight upon us. with US ligt Grade the Nov 6 elections letting voters express their views on tax hikes versus cuts in Beopeniellee spending. Congress then needs to act urgently to avoid a fiscal tightening caused ode recession in January, and needs to continue next year on a 10-year fiscal plan, or Simpson Bowles Take 2. in our view. Our best estimate is that the elections do EIllocallkads" not provide a clear mandate for either side, that Congress does act to bring 2013 Ell FX fiscal drag down to 2% of GDP, instead of 3.7% without action. but that a Tope longer-term plan remains elusive, keeping a tab on investing by both investors US F aed !rimer* and companies. If we were to get a US long-term fiscal plan next year. then it Giabai Gov Bcack- would surely create upside on stock markets. and be supportive to growth both US each US and globaL in our view. Wet TR 4 5 15 IS See page 7 for analyst certification and important disclosures. Source.. skagen. Bloomberg. See blue boxen 9 This email ix confidential and subject to important disclaimers and conditions includio on offers for the • orchase or sale of %ocarina. accuracy and completeness of information. viruses. confidentiality. legal privilege. and legal entity disclaimers. available at EFTA01146216