Jp Littlebook 2Q13 CDN

8/14/2019 Jp Littlebook 2Q13 CDN

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As of March 31, 2013

i h M rk


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Table of Contents

EQUITIES

ECONOMY

4

7

INTERNATIONAL

ASSET CLASS

9

56

U.S. Market Strategy Team

Dr. David P. Kelly, CFA [email protected]

Joseph S. Tanious, CFA [email protected]

-. . . .

Anastasia V. Amoroso, CFA [email protected]

Brandon D. Odenath [email protected]

David M. Lebovitz [email protected]

Gabriela D. Santos [email protected]

2

. . . .

Past performance is not indicative of future returns.


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Page Reference

4. Returns by Style

5. Returns by Sector

6. S&P 500 Index at Inflection Points

35. Credit Conditions

36. High Yield Bonds

37. Municipal Finance

38. Emerging Market Debt

Equities

7. Stock Valuation Measures: S&P 500 Index

8. Earnings Estimates and Valuations by Style

9. Corporate Profits

10. Sources of Earnings per Share Growth

11. Confidence and the Capital Markets

12. Interest Rates and Equities

13. De lo in Cor orate Cash

39. Global Equity Markets: Returns

40. Global Equity Markets: Composition

41. Global Economic Growth

42. The Importance of Exports

43. The Impact of Global Consumers

44. Soverei n Debt Stresses

14. Broad Market Lagged Price to Earnings Ratio

15. P/E Ratios and Equity Returns

16. Equity Correlations and Volatility

17. Economic Growth and the Composition of GDP

45. Global Manufacturing Wages

46. Global Monetary Policy

47. Europe: Economic Growth

48. Europe: Inflation and Unemployment

49. Eurozone: Sovereign Bond Yields50. China: Growth and Economic Policy

Economy

.

19. The Aftermath of the Housing Bubble

20. Consumer Finances

21. Corporate Finances

22. Federal Finances: Outlays and Revenues

23. Federal Finances: Deficits and Debt

24. Trade and the U.S. Dollar

.

52. Japan: Economic Snapshot

53. Global Equity Valuations Developed Markets

54. Global Equity Valuations Emerging Markets

55. Emerging Market Equity Composition

Asset Class

.

26. Employment and Income by Educational Attainment

27. Consumer Price Index

28. Oil and the Economy

29. Global Energy Supply

30. Consumer Confidence and the Stock Market

.

57. Correlations: 10-Years

58. Mutual Fund Flows

59. Yield Alternatives: Domestic and Global

60. Global Commodities

61. Gold

62. Historical Returns by Holding Period

3

31. Fixed Income Sector Returns32. Interest Rates and Inflation

33. Fixed Income Yields and Returns

34. The Fed and the Money Supply

63. Diversification and the Average Investor

64. Annual Returns and Intra-year Declines65. Cash Accounts

66. Corporate DB Plans and Endowments

67. Stock Market Since 1900


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Returns by Style

1,600

S&P 500 Index1Q 2013 2012

Charts reflect index levels (price change only). All returns and annotations reflect total return, including dividends.

Value Blend Growth Value Blend Growth

1,350

1,400

1,450

1,500

1,550

Equ

ities

+10.6%

Large

12.3% 10.6% 9.5%Large

17.5% 16.0% 15.3%

Mid 14.2% 13.0% 11.5% M

id 18.5% 17.3% 15.8%

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13

1,250

1,300

S&P 500 Index

2012: +16.0%

Since 10/9/07 Peak:Since Market Low (March 2009)Since Market Peak (October 2007)

Small

11.6% 12.4% 13.2%Small

18.1% 16.3% 14.6%

Value Blend Growth Value Blend Growth

1,000

1,200

1,400

, .

Since 3/9/09

Large

6.2% 13.2% 23.5%Large

164.7% 153.0% 151.8%

M

id

25.6% 25.9% 24.5% Mid

220.8% 203.8% 187.8%

Dec-06 Mar-08 Jun-09 Sep-10 Dec-11 Mar-13600

800

Source: Russell Investment Group, Standard & Poors, FactSet, J.P. Morgan Asset Management.

Low: +153.0%

Small

17.9% 21.6% 24.7%Small

191.6% 193.2% 194.2%

4

, . ,market returns since the most recent S&P 500 Index high on 10/9/07. Since Market Low represents period 3/9/09 3/31/13, illustrating market returns since the S&P500 Index low on 3/9/09. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with the exception of thelarge blend category, which is reflected by the S&P 500 Index. Past performance is not indicative of future returns.

Data are as of 3/31/13.


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6/70

S&P 500 Index at Inflection Points

1,600

Index level 1,527 1,565 1,569P/E ratio (fwd.) 25.6x 15.2x 13.8x

S&P 500 Index

Mar. 24, 2000P/E fwd. = 25.6x

Mar. 31, 2013P/E (fwd.) = 13.8x

1,569

Oct. 9, 2007P/E (fwd.) = 15.2x

Characteristic Mar-2000 Oct-2007 Mar-2013

1,400

. . .10-yr. Treasury 6.2% 4.7% 1.9%

Equ

ities

1,527,

1,200

-49% -57% +132%

+106%

800

1,000

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

600

Source: Standard & Poors, First Call, Compustat, FactSet, J.P. Morgan Asset Management.

ct. ,P/E (fwd.) = 14.1x

777

. ,P/E (fwd.) = 16.0x

741

Mar. 9, 2009P/E (fwd.) = 10.3x

677

6

v en y e s ca c u a e a s e annua ze v en r a e v e y pr ce, as prov e y ompus a . orwar r ce o arn n gs a o s a o om-up ca c u a on a se

on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates.Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of futurereturns.



7/70

Stock Valuation Measures: S&P 500 Index

S&P 500 Index: Valuation Measures Historical Averages

Valuation

Measure Description Latest*

1-year

ago

3-year

avg.

5-year

avg.

10-year

avg.

15-year

avg.

Equ

ities P/E Price to Earnings 13.8x 13.0x 12.6x 12.9x 14.2x 16.6x

P/B Price to Book 2.4 2.2 2.1 2.1 2.5 3.0

P/CF Price to Cash Flow 9.4 8.9 8.5 8.4 9.7 11.0P/S Price to Sales 1.4 1.2 1.2 1.1 1.3 1.5

PEG Price/Earnings to Growth 1.5 1.3 1.0 2.1 1.7 1.7

50x9%

10%

S&P 500 Shiller Cyclically Adjusted P/EAdjusted using trailing 10-yr. avg. inflation adjusted earnings

S&P 500 Earnings Yield vs. Baa Bond Yield

S&P 500 Earnings Yield:(Inverse of fwd. P/E) 7.3%

Div. Yield Dividend Yield 2.2% 2.2% 2.2% 2.3% 2.1% 1.9%

20x

30x

40x

5%

6%

7%

8%

1Q13:22.6x

Average: 19.0x

'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100x

10x

'94 '96 '98 '00 '02 '04 '06 '08 '10 '123%

4% Moodys Baa Yield: 4.8%

Source: (Top) Standard & Poors, FactSet, Robert Shiller Data, J.P. Morgan Asset Management.Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Price to Book is price divided by book value per share. Data

-

7

.

months. Price to Sales is calculated as price divided by consensus analyst estimates of sales per share for the next 12 months. PEG Ratio is calculated as NTM P/E divided byNTM earnings growth. Dividend Yield is calculated as consensus analyst estimates of dividends for the next 12 months divided by price. All consensus analyst estimates areprovided by FactSet. (Bottom left) Cyclically adjusted P/E uses as reported earnings throughout. *Latest reflects data as of 3/31/2013.(Bottom right) Standard & Poors, Moodys, FactSet, J.P. Morgan Asset Management.Data are as of 3/31/13.


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Earnings Estimates and Valuations by Style

28x

S&P 500 Index: Forward P/E Ratio Current P/E vs. 20-year avg. P/E

12.5 13.8 15.5

Value Blend Growth

ge

16x

20x

Average: 16.2xEqu

ities

13.9 16.2 20.9

14.1 15.5 17.6

14.0 16.3 21.8

Lar

Mid

'94 '96 '98 '00 '02 '04 '06 '08 '10 '128x

12x

S&P 500 Operating Earnings Estimates

Mar. 2013: 13.8x

Current P/E as % of 20-year avg. P/EE. .: Lar e Ca Blend stocks are 14.8%

14.2 15.6 17.4

14.2 17.1 21.3Small

Value Blend Growth

Large

89.7% 85.2% 74.0%$80

$100

$1201Q13: $114.15

Consensus estimates of the next twelve months rolling earnings cheaper than their historical average.

Mid 100.7% 95.2% 80.5%

Small

99.5% 91.4% 81.6%$0

$20

$40

$60

8

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Source: (Top and bottom left) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Right) Russell Investment Group, IBES, FactSet.Earnings estimates are for calendar years and taken at quarter end dates throughout the year. Forward Price to Earnings is price divided byconsensus analyst estimates of earnings per share for the next 12 months. P/E ratios are calculated and provided by Russell based on IBESconsensus estimates of earnings over the next 12 months except for large blend, which is the S&P 500.Data are as of 3/31/13.


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Corporate Profits

$26

S&P 500 Earnings Per ShareOperating basis, quarterly

Adjusted After-Tax Corporate Profits (% of GDP)Includes inventory and capital consumption adjustments

11% 4Q12:4Q12: $23.16

2Q07: $24.06

$20

$23

Equ

ities

9%

10%

.

$14

$17

7%

8%

$8

$11

5%

6%

50-yr. avg.: 6.2%

-$1

$2

3%

4%

9

'12'10'08'06'04'02 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10

Source: Standard & Poors, Compustat, BEA, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. Most recently available data is 3Q12 as 4Q12 are Standard & Poors estimates with 99.8% ofcompanies reported.Past performance is not indicative of future returns.



10/70

Sources of Earnings per Share Growth

50%

S&P 500 Year-Over-Year EPS GrowthGrowth broken into revenue growth and margin expansion, quarterly

30%

40%

Equ

ities

Revenue Share of EPS Growth

10%

20%

-20%

-10%

-40%

-30%

4Q124Q104Q084Q064Q044Q024Q004Q984Q964Q94

10

Source: Standard & Poors, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. Most recently available data is 3Q12 as 4Q12 are Standard & Poors estimates with 99.8%of companies reported. Past performance is not indicative of future returns. 4Q2008, 1Q2010 and 2Q2010 reflect -101%, 92% and 51% growth inoperating earnings, and are adjusted on the chart.



11/70

Confidence and the Capital Markets

120

24x

26x

Multiple Expansion and Contraction

Consumer SentimentForward P/E

S&P 500 forward P/E based on consensus EPS estimatesEst. impact of a 10pt. rise in sentiment: +2.0 multiple points*

80

90

100

16x

18x20x

22x

Equ

ities

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

50

60

10x

12x

14x

Sentiment & Real Yields*

Correlation Coefficient: 0.75

100

110

120

4%

5%

6% Consumer SentimentReal 10-year Yield

Real yield based on nominal 10-yr. yield minus year-over-year core CPI. .

60

70

80

0%

1%

2%

Correlation Coefficient: 0.68

11

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '1250-1%

Source: (Top) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Bottom) U.S. Treasury, BLS, University of Michigan, J.P. MorganAsset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next twelve months. Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core inflation for that month. *Estimated impact based oncoefficients from regression analysis. Data are as of 3/31/13.


12/70

Interest Rates and Equities

0.8

Correlations Between Weekly Stock Returns and Interest Rate MovementsWeekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, 1963-2013

When ields are

0.4

0.6

Equ

ities

Positiverelationshipbetween yieldmovements and

below 5%, risingrates aregenerally

associated withrising stockprices

0

0.2

stock returns

relatio

nCoefficient

-0.4

-0.2 Negativerelationshipbetween yieldmovements andstock returns

Co

-0.8

-0.6

0% 2% 4% 6% 8% 10% 12% 14% 16%

10-Year Treasury Yield

12

Source: Standard & Poors, US Treasury, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends.



13/70

Deploying Corporate Cash

Corporate Cash as a % of Current AssetsS&P 500 companies cash and cash equivalents, quarterly

30%

Corporate Growth

Capital Expenditures M&A Activity

$bn, nonfarm nonfinancial capex, quarterly value of deals completed$1,600$1,300

Equ

ities

20%

22%

24%

26%

28%

$600

$800$1,000

$1,200

,

$900

$1,000

$1,100

,

Cash Returned to ShareholdersDividend Payout Ratio'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

14%

16%

18%

$0

$200

$400

$600

$700

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$120

$140

$160

$27

$30

$33

50%

60%

S&P 500 companies, rolling 4-quarter averages, billions USDS&P 500 companies, LTM

Dividends per Share

$40

$60

$80

$18

$21

$24

30%

40%

Share Buybacks

13

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12Source: Standard & Poors, FRB, Bloomberg, FactSet, J.P. Morgan Securities, J.P. Morgan Asset Management.

(Top left) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Top right) M&A activity is the quarterly value of deals completed andcapital expenditures are for nonfarm nonfinancial corporate business. (Bottom left) Standard & Poors, FactSet, J.P. Morgan AssetManagement. (Bottom right) Standard & Poors, Compustat, FactSet, J.P. Morgan Asset Management. Data are as of 3/31/13.


14/70

Broad Market Lagged Price to Earnings Ratio

35x

Lagged P/E Ratio All U.S. CorporationsRatio of market value of all U.S. corporations to adjusted after-tax corporate profits for prior four quarters

25x

30x

Equ

ities

Avg. During Recessions 12.6x

Avg. During Expansions 13.9x

P/E Ratios

20x Mar. 31, 2013*:

14.4x

March 31, 2013 14.4x

10x

15x Average: 13.7x

0x

5x

' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '

14

Source: BEA, Federal Reserve Board, Wilshire Associates, J.P. Morgan Asset Management.

*The March 31, 2013 price is a J.P. Morgan Asset Management estimate based on the daily value of the Wilshire 5000 Total Market Index.



15/70

P/E Ratios and Equity Returns

60%60%

P/E and Total Return Over 5-yr. Annualized PeriodsP/E and Total Return Over 1-yr. PeriodsQuarterly, 1Q 1952 to 4Q 2007Quarterly, 1Q 1952 to 4Q 2011

Current P/E: 14.4 Current P/E: 14.4

40%40%

3/31/13

Implied Annual Return 11.9%Standard Error 5.7%

3/31/13

Implied Annual Return 12.9%Standard Error 17.2%

Equ

ities

20%20%

0%5x 10x 15x 20x 25x 30x

0%5x 10x 15x 20x 25x 30x

-40%

-

-40%

-20%

15

Source: BEA, FRB, J.P. Morgan Asset Management. Prices are based on the market value of all U.S. corporations and include quarterlydividends. Valuation based on long-term P/E ratio.

Note: Orange line denote results of linear regression with R-squared of 0.15 for 1-yr. returns (left) and 0.35 for 5-yr. returns (right).



16/70

Equity Correlations and Volatility

70%

Large Cap StocksCorrelations Among Stocks

Sovereign DebtCrisis

LehmanGreat Depression /

30%

40%

50%

Equ

ities

Tech Bust & 9/11

1987 Crash

OPEC Oil

Crisis

Cuban Missile Crisis

0%

10%

20%

'26 '32 '38 '44 '50 '56 '62 '68 '74 '80 '86 '92 '98 '04 '10

Average: 26.7% Mar. 2013: 34.5%

2.5%

3.0%

3.5%

60

75

90Volatility Measure 08 Peak Average LatestDJIA (Left) 3.30% 0.72% 0.45%VIX (Right) 80.9 20.4 12.7

DJIA vol. shownin 3-month

moving average

0.5%

1.0%

1.5%

.

15

30

45

16

'30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100.0% 0

Source: (Top) Empirical Research Partners LLC, Standard & Poors, J.P. Morgan Asset Management. Capitalization weighted correlation of top750 stocks by market capitalization, daily returns, 1926 Mar. 31, 2013. (Bottom) CBOE, Dow Jones, J.P. Morgan Asset Management. DJIAvolatility are represented as three-month moving averages of the daily absolute percentage change in the Dow Jones Industrial Average.

Charts shown for illustrative purposes only. Data are as of 3/31/13.


17/70

Economic Growth and the Composition of GDP

$18,00010%

Real GDP% chg at annual rate

20-yr avg. 4Q12

Components of GDP4Q12 nominal GDP, billions USD

12 000

$14,000

$16,000

4%

6%

8%

y

Real GDP: 2.5% 0.4%

10.6% Investment ex-housing

19.2%Govt Spending

. ous ng

$625 bn ofout ut lost

$8,000

$10,000

0%

2%

Econo

$2,000

$4,000

$6,000

-6%

-4%

- .Consumption

n ooutput

recovered

-$2,000

$0

'04 '06 '08 '10 '12

-10%

-8%

Source: BEA, FactSet, J.P. Morgan Asset Management.

- 3.3% Net Exports

17

va ues s own n egen are c ange vs. pr or quar er annua ze an re ec .



18/70

Cyclical Sectors

24

Millions, seasonally adjusted annual rateLight Vehicle Sales

$150

Change in Private InventoriesBillions of 2005 dollars, seasonally adjusted annual rate

4Q12: 13.3

14

1618

20

y Average: 15.2

Feb. 2013:15.3

$-50

$0

$50

Average: 28.7

'94 '96 '98 '00 '02 '04 '06 '08 '10 '128

10

12

Econo

Real Capital Goods Orders

Housing Starts

'95 '00 '05 '10$-200

$-150

-

$6 0

$6 5

$7 0

$7 5

1,600

2,000

2,400

- . , ,ousan s, seasona y a us e annua rae

Average: 57.2

Feb. 2013:57.6

'00 '02 '04 '06 '08 '10 '12$4 0

$4 5

$5 0

$5 5

'95 '00 '05 '100

400

800

, .917

,

18

Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, FactSet, J.P. Morgan Asset Management. (Bottom left) Census Bureau,FactSet, J.P. Morgan Asset Management. (Bottom right) Census Bureau, FactSet, J.P. Morgan Asset Management.Capital goods orders deflated using the producer price index for capital goods.



19/70

The Aftermath of the Housing Bubble

$1,100160

Monthly Rent vs. Monthly Mortgage PaymentVacant propertiesIndexed to 100, seasonally adjusted

Home Prices

-

$500

$650

$800

$950

140

150

y

1Q13*:$726

on yMortgagePayment

FHFA Purchase Only

Average Existing Home

$200

$350

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12130

Econo

Home Inventories

1Q13*: $507Monthly Rent

3.5

4.0

4.5

110

120 ons, annua rae, seasona y a us e

'94 '96 '98 '00 '02 '04 '06 '08 '10 '121.5

2.0

2.5

.

'03 '04 '05 '06 '07 '08 '09 '10 '11 '1290

100

Feb. 2013: 2.2

19

Sources: (Left) National Association of Realtors, Standard & Poors, FHFA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, J.P. Morgan Asset Management.Monthly mortgage payment assumes a 20% down payment at prevailing 30-year fixed-rate mortgage rates; analysis based on median asking rent and median mortgage paymentbased on asking price. (Bottom right) Census Bureau, National Association of Realtors, J.P. Morgan Asset Management. *1Q13 rent and mortgagepayment values are J.P. Morgan Asset Management estimates.



20/70

Consumer Finances

$80

15%

Household Debt Service RatioDebt payments as % of disposable personal income, seasonally adjusted

3Q07:

Consumer Balance SheetTrillions of dollars outstanding, not seasonally adjusted

Total Assets: $79.5tn 2Q-07 Peak: $81.5tn

$60

$70

12%

13%

14%

y 1Q80:

.

Homes: 25%

- .

$40

$50'80 '85 '90 '95 '00 '05 '10

10%

11%

Econo

.

1Q13*:10.4%

Household Net WorthBillions USD, saar 1Q13*:

Deposits: 10%

Pension Funds: 18%

Other Tangible: 7%

$20

$30

$50,000

$60,000

$70,000

$80,000 $69,2103Q07:$67,413

Revolving (e.g.: credit cards): 6%Non-revolving: 14%Other Liabilities: 8%

$0

$10

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12$10,000

$20,000

$30,000

$40,000Total Liabilities: $13.5tn

Assets: 41%

Mortgages: 71%

20

Source: (Left) FRB, J.P. Morgan Asset Management. Data includes households and nonprofit organizations. (Right) BEA, FRB, J.P. Morgan Asset

Management. *1Q13 household debt service ratio and household net worth are J.P. Morgan Asset Management estimates. Values may not sum to100% due to rounding.



21/70

Corporate Finances

240%$1,600

Corporate Financing GapNonfarm nonfinancial corporate business, billions USD

Total Internal Funds

Total LeverageS&P 500, ratio of total debt to total equity, quarterly

200%

220%

$800

$1,000

$1,200

$1,400 Total Capital Expenditures

y

Companiesmustborrow

180%'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

$400

$600

Econo Companies

can fundinternally

Interest Coverage Ratio (EBIT / Net Interest)

Average: 173%

140%

160%

5x

6x

7x

8x

9x

, quar ery3Q12:

7.2x

100%

120%

' ' ' ' ' ' ' ' ' '0x

1x

2x

3x

4x

4Q12 : 108%

21

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Source: Federal Reserve, Compustat, Standard & Poors, FactSet, J.P. Morgan Asset Management.

(Top Left): All data is from the Feds Flow of Funds tables report Z.1, F.102 lines 9 and 11. Total internal funds equals retained earnings plusdepreciation.



22/70

Federal Finances: Outlays and Revenues

$4.0 26%

The 2013 Federal BudgetCBO Baseline forecast, trillions USD

Federal Outlays and Receipts1960 2013, % of GDP

$3.0

$3.5

24%

y

Total Spending: $3.6tn

Other

$448bn (13%)

Net Int.: $224bn (6%)

Borrowing:$845bn (24%)

2013:23.3%

$2.0

$2.5

20%

22%

Econo

Defense:$751bn (21%)

on- e ense sc.:$461bn (13%)

Average: 20.6%Social Insurance:

$952bn (27%)

Other: $241bn (7%)

$1.0

$1.5

18%Social Security:$810bn (23%)

Average: 17.9%

2013:17.8%Corp.: $251bn (7%)

$0.0

$0.5

Total Government Spending Sources of Financing

14%

16%

1960 1970 1980 1990 2000 2010

Medicare & Medicaid:$858bn (24%)

Income:$1,264bn (36%)

RevenuesOutlays

22

Source: U.S. Treasury, BEA, OMB, CBO, J.P. Morgan Asset Management.

2013 Federal Budget is based on the CBOs February 2013 Baseline Scenario.Note: Years shown are fiscal years (Oct. 1 through Sep. 30).



23/70

Federal Finances: Deficits and Debt

-12% 100%

Federal Budget Surplus/Deficit Federal Net Debt (Accumulated Deficits)% of GDP, 1990 2022 % of GDP, 1990 2022

ForecastForecast

-10%

-8%

80%

y

ase ne

2012 actual: 72.5%

2013 CBO Baseline

2022: 76.0%

ase ne

2013 CBO Baseline

-6%

-4%

60%

Econo

2022: 58.3%

-2%

0%

20%

2%

4%1990 1994 1998 2002 2006 2010 2014 2018 2022

0%1990 1994 1998 2002 2006 2010 2014 2018 2022

Source: U.S. Treasury, BEA, CBO, J.P. Morgan Asset Management.

23

. . . . outlays). Federal net debt comprises all financial liabilities of the Federal government (gross debt) minus all intra-government holdings as assets. Deficitand debt scenarios are based on CBO budget forecasts from August 2012 and February 2013, which include the American Taxpayer Relief Acts costestimates.



24/70

Trade and the U.S. Dollar

115-8%

Current Account Balance, % of GDP U.S. Dollar IndexNominal trade-weighted exchange index: major currencies

105

110

-6%

:-6.5%

y

90

95

100

-4%Econo

80

85

-2%4Q12:-2.8%

.84.0

Mar. 2013:76.1

' ' ' ' ' ' ' ' ' '65

70

75

' ' ' ' ' ' ' ' ' '

0% Mar. 2008: 70.3

24

Source: BEA, FactSet, J.P. Morgan Asset Management.


Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.



25/70

Employment

60012%

Civilian Unemployment Rate Employment Total Private PayrollSeasonally adjusted Total job gain/loss (thousands)

200

400

10%

11%

y 8.8mmjobs lost

-200

0

8%

9%

Econo

Feb. 2013: 7.7%6.4mmjobs

-600

-400

6%

7%

-1 000

-800

3%

4%

5 50-yr. avg.: 6.1%

25

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12'70 '80 '90 '00 '10

Source: BLS, FactSet, J.P. Morgan Asset Management.




26/70

Employment and Income by Educational Attainment

$87,981$90,00018%

Average Annual Earnings by Highest Degree EarnedFull-time workers aged 18 and older, 2011, USD

Unemployment Rate by Education Level

$70,000

$80,000

14%

16%

y

+29K

Feb. 2013:

Less than High School Degree

High School No College

Some CollegeCollege or Greater

$59,415

$50,000

$60,000

10%

12%

Econo

+24K

Feb. 2013:7.9%

.

$32,493

$30,000

$40,000

6%

8

Feb. 2013:6.7%

$0

$10,000

,

0%

2%

Feb. 2013:3.8%

26

High School Graduate Bachelor's Degree Advanced Degree'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Source: Census Bureau, J.P. Morgan Asset Management.Source: BLS, FactSet, J.P. Morgan Asset Management.

Unemployment rates shown are for civilians aged 25 and older.



27/70

Consumer Price Index

15%

CPI and Core CPI50-yr. Avg. Feb. 2013

Headline CPI: 4.2% 2.0%

% change vs. prior year, seasonally adjustedCPI

Components

Weight in

CPI

12-month

Change

Food & Bev. 15.3% 1.7%

12%

y

Core CPI: 4.1% 2.0%Housing 41.0% 2.0%

Apparel 3.6% 2.0%

Transportation 16.8% 3.7%

6%

9%

Econo Medical Care 7.2% 3.3%

Recreation 6.0% 0.8%

Educ. & Comm. 6.8% 2.0%

Other 3 4% 1 7%

0%

3%

. .

Headline CPI 100.0% 2.0%

Less:

Energy 9.6% 4.4%

'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-3%


Food 14.3% 1.7%

Core CPI 76.1% 2.0%

27

CPI used is CPI-U and values shown are % change vs. 1 year ago and reflect February 2013 CPI data. CPI component weights are as of December 2012 and 12-monthchange reflects non-seasonally adjusted data through February 2013. Core CPI is defined as CPI excluding food and energy prices.



28/70

Oil and the Economy

$160 $4.50

4%

WTI Crude Oil & Retail Gasoline Prices

Oil Gas12/31/00 3/31/13Oil $26.72 $97.23

Economic Drag From Oil PricesU.S. petroleum imports as a % of GDP

3Q08: 3.8%

$120

$140

$3.50

$4.00

2%

3%

y

. .

$80

$100

$2.50

$3.00

'70 '75 '80 '85 '90 '95 '00 '05 '10

0%

1%

Econo 1Q13*: 2.7%

Total U.S. Ener Net Im orts

$40

$60

$1.50

$2.00Energy Spending by Income Level% of after-tax income

25%

30%

35%

% of total energy consumption

EIAforecast

0

$20

0.50

$1.00

5%

10%

15%

28

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12.

Source: U.S. Department of Energy, FactSet, J.P. Morgan Asset Management. Price ofgas based on U.S. retail national average of all formulations and WTI for crude.Imports are mostly crude oil, petroleum and natural gas while consumption includes oil,gas, coal, nuclear, hydropower and bio-fuels.


Source: (Top) BEA, FactSet, J.P. Morgan Asset Management.(Bottom) EIA, J.P. Morgan Asset Management.*1Q12 drag on growth is a J.P. Morgan

Asset Management estimate.

'90 '95 '00 '05 '10 '15 '20


29/70

Global Energy Supply

30

U.S. Natural Gas ProductionTrillions of cubic meters, USD EIA

forecast

Kuwait

Middle East Energy Production & Chokepoints

Percent of global liquid fuel production, 2011

10

15

20

25

yOther

Shale Gas

Iran4.9%

Iraq3.0%

3.1%yr a

0.5%Suez Canal

2.2%

0

5

1990 1995 2000 2005 2010 2015 2020 2025Econo Libya

0.6%Egypt0.8% Saudi Arabia

12.8%

Strait ofHormuz Natural Gas Prices b Countr

u an0.5%

UAE3.6%

.

Bab el-Mandeb

USD per mmBTU*

$13.70 $14.10

$10

$12

$14

$16

3.4%

Major Producers Major Consumers

Percent of global total, 2011 Percent of global total, 2011

Saudi Arabia 13% China 5% United States 22% India 4%

Russia 12% Iran 5% China 10% Saudi Arabia 3%

$4.03

$10.11

$2

$4

$6

$8

29

Source: EIA, J.P. Morgan Asset Management.Forecasts are from the EIA Annual Energy Outlook 2013. *mmBTU represents 10,000 million British thermal units. Natural gas prices are as of June2012.


United States 12% Canada 4% Japan 5% Brazil 3% $0

United States United Kingdom China Japan


30/70

Consumer Confidence and the Stock Market

130

Consumer Sentiment Index University of Michigan

Average 12-month S&P 500 index return

110

120

y

Jan. 2000

-2.0%

Jan. 2004+4.4%

. . .

90

100

Average: 85.3

Econo

.+13.5%

May 1977+1.2%

.-6.2%

Jan. 2007-4.2%

60

70

Oct. 1990

Mar. 2003+32.8% Oct. 2005

+14.2%

' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '40

50

Feb. 1975+22.2%

May 1980+19.2%

+29.1%

Nov. 2008+22.3%

Aug. 2011+15.4%

30

Source: University of Michigan, FactSet, J.P. Morgan Asset Management.

Peak is defined as the highest index value before a series of lower lows, while a trough is defined as the lowest index value before a seriesof higher highs. Subsequent 12-month S&P 500 returns are price returns only, which excludes dividends.



31/70

Fixed Income Sector Returns

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13 Cum. Ann.

High Yield EMD EMD High Yield TIPS Treas. High Yield High Yield TIPS EMD High Yield EMD EMD

29.0% 11.9% 12.3% 11.8% 11.6% 13.7% 58.2% 15.1% 13.6% 17.9% 2.9% 200.3% 11.6%

10-yrs '03 - '12

EMD High YieldAsset

Alloc.EMD Treas. MBS EMD EMD Muni High Yield Muni High Yield High Yield

26.9% 11.1% 3.6% 10.0% 9.0% 8.3% 34.2% 12.8% 10.7% 15.8% 0.3% 174.3% 10.6%

Asset

Alloc.TIPS Muni MBS

Barclays

Agg

Barclays

AggCorp. Corp. Treas. Corp.

Asset

Alloc.

Asset

Alloc.

Asset

Alloc.

9.7% 8.5% 3.5% 5.2% 7.0% 5.2% 18.7% 9.0% 9.8% 9.8% 0.1% 94.3% 6.9%

TIPSAsset

Alloc.TIPS

Asset

Alloc.MBS

Asset

Alloc.

Asset

Alloc.

Asset

Alloc.

Asset

Alloc.

Asset

Alloc.MBS TIPS TIPS

8.4% 6.3% 2.8% 5.1% 6.9% -1.4% 15.8% 7.6% 8.9% 7.8% 0.0% 90.4% 6.7%

Corp. Corp. Treas. MuniAsset

Alloc.

TIPS MuniBarclays

Agg

Corp. TIPS Corp. Corp. Corp.

8.2% 5.4% 2.8% 4.8% 6.2% -2.4% 12.9% 6.5% 8.1% 7.0% -0.1% 84.7% 6.3%com

e

Muni MBS High Yieldarc ays

AggEMD Muni TIPS TIPS

arc ays

AggMuni

arc ays

Agg

arc ays

Agg

arc ays

Agg

5.3% 4.7% 2.7% 4.3% 5.2% -2.5% 11.4% 6.3% 7.8% 6.8% -0.1% 65.7% 5.2%

Barclays

AggMuni MBS Corp. Corp. Corp.

Barclays

AggTreas. EMD

Barclays

AggTreas. Muni Muni

4.1% 4.5% 2.6% 4.3% 4.6% -4.9% 5.9% 5.9% 7.0% 4.2% -0.2% 64.5% 5.1%

FixedI

MBS Agg

Agg

Treas. Muni EMD MBS MBS MBS MBS TIPS MBS MBS

3.1% 4.3% 2.4% 3.1% 3.4% -14.7% 5.9% 5.4% 6.2% 2.6% -0.4% 64.1% 5.1%

Treas. Treas. Corp. TIPS High Yield High Yield Treas. Muni High Yield Treas. EMD Treas. Treas.

2.2% 3.5% 1.7% 0.4% 1.9% -26.2% -3.6% 2.4% 5.0% 2.0% -1.5% 59.0% 4.7%

Source: Barclays Capital, FactSet, J.P. Morgan Asset Management.

31

Past performance is not indicative of future returns. Fixed income sectors shown above are provided by Barclays Capital and are represented by: Barclays Capital U.S. Aggregate

Index; MBS: Fixed Rate MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond Index; Emerging Debt: Emerging Markets USD Index; High Yield: Corporate High YieldIndex; Treasuries: Barclays Capital U.S. Treasury; TIPS: Barclays Capital TIPS. The Asset Allocation portfolio assumes the following weights:10% in MBS, 20% in Corporate, 15% in Municipals, 10% in Emerging Debt, 10% in High Yield, 25% in Treasuries, 10% in TIPS.

Asset allocation portfolio assumes annual rebalancing.



32/70

Interest Rates and Inflation

20%

Nominal and Real 10-year Treasury Yields

15%

ep. , :15.84%

Average 3/31/13

Nominal Yields 6.42% 1.87%Real Yields 2.55% 0.09%

10%

com

eNominal 10-yearTreasury Yield

5%

FixedI Mar. 31, 2013: 1.87%

Real 10-year

-

0%

Mar. 31, 2013: 0.09%

Rising Rate Corp. Bonds S&P 5001958-1981 3.0% 8.6%Ann. Inflation 5.0% 5.0%Ann. Real Return -2.0% 3.5%

Falling Rate Corp. Bonds S&P 5001982-2012 10.1% 11.0%Ann. Inflation 3.1% 3.1%Ann. Real Return 6.8% 7.7%

32

'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10

-

Source: Federal Reserve, BLS, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core inflation for that month except for March 2013, wherereal yields are calculated by subtracting out February 2013 year-over-year core inflation. All returns above reflect annualized total returns, which includereinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance.Data are as of 3/31/13.


33/70


34/70

The Fed and the Money Supply

Money MultiplierM2 / Monetary Base

Feds Balance Sheet: Assets$ trillions

10.0x$3.5tn

5.0x

6.0x

7.0x

8.0x

.er

U.S. Treasuries

Agency MBS

Mar. 2013:$1.5tn

$2.0tn

$2.5tn

. n

Feds Balance Sheet: Liabilities

com

e

Federal Funds Rate & FOMC Interest Rate Projections

'03 '04 '05 '06 '07 '08 '09 '10 '11 '122.0x

3.0x

4.0x.

$0.0tn

$0.5tn

.

'03 '04 '05 '07 '08 '09 '10 '12

6%

8%

10%

12%

$2.0tn

$2.5tn

$3.0tn

r ons

FixedI

Minimum Reserves

Long-term Fedprojection

0%

2%

4%

'84 '88 '92 '96 '00 '04 '09 '12 '14'03 '04 '05 '06 '07 '08 '09 '10 '11 '12$0.0tn

$0.5tn

$1.0tn

. Mar. 31, 2013:

0.0%-0.25%

34

Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.

Monetary base is defined as the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits heldin the central bank's reserves. Money multiplier defined as M2 divided by the monetary base. Long-term Fed projection is based on averageexpectations of FOMC members.



35/70

Credit Conditions

760 60%

Commercial & Industrial Loan DemandNet percent of banks reporting stronger demand

Lending Standards for Approved Mortgage LoansAverage FICO score based on origination date

Feb. 2013: 747

700

720

740

-

-20%

0%

20%

40% 19%

15%

660

680

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

Delinquency Rates

com

e

Common Equity as a % of Total Assets

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12-80%

-60%

-

Large & Medium Firms

Small Firms

10%

12%

14%

8%

10%

12%

Consumer Loans

Residential Mortgages

an s, seasona y a use

FixedI

Commercial and Industrial Loans 10.1%

,

2011:

11.1%

4%

6%

8%

' ' ' ' ' ' ' ' ' ' ' ''92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

2%

4%

6%

1.2%

2.6%

Average: 7.6%

35

Source: (Top left) McDash, J.P. Morgan Securitized Product Research, J.P. Morgan Asset Management. (Top right) Federal Reserve, FactSet, J.P. Morgan Asset

Management. (Bottom left): Federal Reserve, FactSet, J.P. Morgan Asset Management. (Bottom right) FDIC, J.P. Morgan Asset Management.

All data reflect most recently available releases.



36/70

High Yield Bonds

20%Average Latest

HY Spreads 5.9% 5.0%Lev. Loan Spreads 5.1% 4.5%

High Yield Spreads and Defaults

HY Spreads

5%

10%

. .ev. oan prea s

HY Default Rates

0%'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

com

e

Historical High Yield Recovery RatesHi h ield bonds cents on the dollar

Annual Flows into High Yield and Leveraged Loan FundsMutual funds & ETFs, billions USD

$20

$30

$40

$50

50

60

70

80

90

FixedI

Average: 42.1

.

High Yield

Leveraged Loans

-$20

-$10

$0

$10

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '130

10

20

30

40

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

36

Source (Top chart): U.S. Treasury, J.P. Morgan, Strategic Insight, J.P. Morgan Asset Management. Default rates are defined as the par value percentage of the total market

trading at or below 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. (Bottom left): J.P Morgan, Fitch, J.P. Morgan AssetManagement. (Bottom right): Strategic Insight, J.P. Morgan Asset Management. Spreads indicated are benchmark yield to worst less comparable maturity Treasury yields.

2013 recovery rate is a weighted average number as of February 28, 2013. Yield to worst is defined as the lowest potential yield that can be received

on a bond without the issuer actually defaulting and reflects the possibility of the bond being called at an unfavorable time for the holder.

Flows include ETFs and are as of February 28, 2013. Past performance is not indicative of comparable future results.



37/70

Municipal Finance

8%

State & Local Government Debt Service% of current expenditures

Muni/Treasury RatioRatio of Barclays 10-year Municipal Bond yield to 10-year Treasury240%

6%

7%

200%

220%

4Q12: 5.2%

4%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

com

e

Municipal Bond Issuance*Billions USD revenue and GO issues

160%

180%

FixedI

100%

120%

$300bn

$400bn

$500bn

'00 '02 '04 '06 '08 '10 '1260%

80% Mar. 31, 2013:110%

$0bn

$100bn

$200bn

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

37

Source (Left chart): Barclays Capital, U.S. Treasury, FactSet, J.P. Morgan Asset Management. (Top right) BEA, J.P. Morgan Asset Management. (Bottom right) SIFMA,J.P. Morgan Asset Management.

*Excludes maturities of 13 months or less and private placements. 2013 issuance data is as of February 2013.



38/70

Emerging Market Debt

12%

Emerging Markets Debt SpreadsSpread to Treasuries of USD-denominated debt, percent

Index Breakdown USD Denominated EMDMiddle East &

Africa 7%

Middle East &Africa 13%

100%

Index Average Spread

4%

6%

8%

Asia 41%

Europe 33%

Europe 16%

Latin America43%

Latin America29%

20%

40%

60%Sov. 3.8% 3.1%

Corp. 3.3% 3.4%

0%

2%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

com

e

Annual Flows into EMD Mutual Funds & ETFsBillions USD

Emerging Market Debt Credit RatingEMBIG average monthly credit rating, inverse scale

Asia 17%0%

Sovereigns(EMBIG)

Corporates(CEMBI)

$15

$20

$25

$30

FixedI e . : -

BB+

BBB-

BB

BB-

: .

'93 '95 '97 '99 '01 '03 '05 '07 '09 '11

-$5

$0

$5

10

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

B-

B

B+

38

Source: J.P. Morgan, MorganMarkets, FactSet, Strategic Insight, J.P. Morgan Asset Management.

Spreads measure the credit risk premium over comparable maturity U.S. Treasury bonds. The J.P. Morgan EMBI Global (EMBIG) Index is a USD-denominated external debt index tracking bonds issued by sovereigns and quasi-sovereigns in developing nations. The J.P. Morgan Corporate EmergingBond Index (CEMBI) is a USD-denominated external debt index tracking bonds issued by corporations in developing nations. Flow data is as of February2013. Past performance is not indicative of comparable future results.Data are as of 3/31/13.


39/70

Global Equity Markets: Returns

MSCI EAFE Index: Return Needed to Reach 2007 Peak

Analysis as of Mar. 31, 2013, implied average annualized total return

46.9%1 YrCountry / Region

1Q13 2012

Local USD Local USD

23.2%

16.1%

2 Yrs

3 Yrs

Regions / Broad Indexes

USA (S&P 500) - 10.6 - 16.0EAFE 9.8 5.3 17.9 17.9

MSCI EME Index: Return Needed to Reach 2007 Peak

12.8%

10.8%

4 Yrs

5 Yrs

- . . . . . .

Pacif ic ex-Japan 7.0 7.0 22.6 24.7

Emerging Markets -0.4 -1.6 17.4 18.6

MSCI: Selected Countries

o

nal

Analysis as of Mar. 31, 2013, implied average annualized total return

21.1%

11.5%

1 Yr

2 Yrs

United Kingdom 9.7 2.5 10.2 15.3

France 3.3 0.6 20.9 22.8

Germany 2.9 0.3 30.1 32.1

Internati

8.5%

7.0%

3 Yrs

4 Yrs

. . . .

China -4.4 -4.5 22.9 23.1

India -3.3 -2.6 30.0 26.0

Brazil -2.3 -0.8 10.1 0.3

39

Source: Standard & Poors, MSCI, IMF, FactSet, J.P. Morgan Asset Management.

All return values are MSCI Gross Index (official) data. Definition of emerging markets is based on MSCI data. Data assume dividend yields as of

3/31/13 (MSCI EAFE: 3.3% and MSCI EM: 2.7%). Chart is for illustrative purposes only. Past performance is not indicative of future results. Please

see disclosure page for index definitions.

Data as of 3/31/13.

.Russia -1.8 -3.2 9.7 14.4


40/70

Global Equity Markets: Composition

14%

16%

Weights in MSCI All Country World Index% global market capitalization, float adjusted

-

Share of Global Market Capitalization% global market capitalization, float adjusted

6%

8%

10%

12%

UnitedStates47%

U.K.15%

U.K. 8%

EmergingMarkets

EM Market

0%

2%

4%

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Share of Global GDP

Japan8%

Emerging Market Share of MSCI ACWI Earnings

o

nal

Emer in

OtherDeveloped

5%

Europe ex-U.K.16%

U.K. 3%

,

10%

12%

14%

16%

Canada 2%Internati Markets

51%

UnitedStates19%

Japan 6%

2%

4%

6%

8%

40

Source: MSCI, IMF, FactSet, J.P. Morgan Asset Management.

Share of global market capitalization is based on float adjusted MSCI data. Share of global GDP based on purchasing power parity (PPP) ascalculated by the IMF for 2013. Definition of emerging markets is based on MSCI and IMF data sources.Percentages may not sum to 100% due to rounding.Data as of 3/31/13.

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12


41/70

Global Economic Growth

Year-over-year % chg. forecasts from JPMSIEmerging Market Country Real GDP Growth

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

Historical

4Q13

JPMSI Forecast

10%

0%

2%4%

6%

Developed Market Country Real GDP Growth

-4%

-2%

Emerging Markets China India Mexico Russia South Africa Korea Brazil

4%

6%

8%

10%

Year-over-year % chg. forecasts from JPMSI

o

nal

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

4Q13

-4%

-2%

0%

2%

DevelopedCountries

U.S. Canada Germany Japan U.K. France Italy

Internati

41

Source: J.P. Morgan Global Economic Research, J.P. Morgan Asset Management.

Forecast and aggregate data come from J.P. Morgan Global Economic Research.



42/70

The Importance of Exports

Goods exports onlyExports as a % of GDP 2011

4.5%

2.0%

1.0%

4.4%

3.1%

2.1%

1.7%

2.3%

2.2%

15.5%

10.2%

4.9%

26.1%

17.6%

10.3%

China

India

Brazil . . urozone t er

2.2%

.

1.7%

1.5%

.

4.0%

1.4%

.

6.2%

6.9%

.

14.0%

9.8%

.

Japan

U.S.

o

nal

1.4%

1.1%

1.9%

12.4%

12.7%

10.0%

2.0%

1.5%

1.3%

7.6%

5.8%

4.8%

23.4%

21.1%

18.0%

Italy

France

U.K.

Internati

2.2%

19.2%

21.8%

2.5%

4.2%

1.6%

10.7%

2.8%

38.9%

26.0%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Germany

Canada

42

ource: , . . organ sse anagemen .

Numbers represent exports of goods only and would be higher if services were included. Values may not sum to total exports due to rounding.Data are as of 3/31/13.


43/70

The Impact of Global Consumers

40% 40%

Share of Global Nominal Consumption Foreign Sales, % of Total Sales

35%

30%

35%

Mega Cap (Russell Top 200)

25%

30%

25%

Lar e Ca Russell 1000

20%15%

20%

o

nal U.S. Consumption % of Global

EM Consumption % of Global

15%1990 1995 2000 2005 2010

10%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Source: FactSet, Compustat, Russell, J.P. Morgan Global Economics Research, J.P. Morgan Asset Management.Foreign sales as a percentage of total sales is calculated as an unweighted average of individual index constituent companies reported sales figuresand does not ca ture all index members due to differences in re ortin ractices.

Internati

43



44/70

Sovereign Debt Stresses

Bubble size = 10-yeargovernment bond yield

GDP Growth, Gross Debt to GDP and Borrowing Costs

China

10%

013F)

Turkey

India

Indonesia

Malaysia

10%

5%

6%

8%

row

th(20112

Brazil

South Africa

Mexico

U.S.

Korea

France

Germany

Japan

Russia Singapore

EU

Aust ralia

U.K.0%

2%

RealGDP

o

nal

Italy

Spain

Portugal

-4%

-2%

Developed Markets

Emerging Markets

240%

Internati

Greece

-8%

-6%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180%

44

ross e - o- a os

Source: IMF, FactSet, Bloomberg, J.P. Morgan Economics, Barclays, J.P. Morgan Asset Management.

Growth and debt data are based on the October 2012 World Economic Outlook.Borrowing costs based on local currency debt. EU overall borrowing cost based on Barclays Capital Euro-Aggregate 7-10 year treasury. South Africasborrowing cost is based on 7-year government bond yield due to data availability.

Data as of 3/31/13.


45/70

Global Manufacturing Wages

Manufacturing WagesNominal, average USD per month

Developed Countries Emerging Countries

$3,885

$3,716

$1,500

$1,750

,

$3,000

$3,500

,

Latest2001*

$2,942

$2,089 $2,077

2,958

$1,000

$1,250

$2,000

$2,500

$866

$455

$500

$750

$1,000

$1,500

o

nal

$309

$74$139 $112 $52

$323

$193$148

$0

$250

$0

$500

Source: ILO (International Labor Organization), U.S. Bureau of Labor Statistics, Ministry of Labor-Mexico, EM Advisors Group, Thailand National Statistical Office, General

Internati

Brazil Mexico China Thailand Vietnam IndonesiaU.S. Germany Japan

45

, , , , . . .Chinese wages are those of rural migrant workers as a proxy. *Data begins in 2005 for Vietnam due to availability of data.Data is from 2012 for Mexico, China, and Thailand; 2011 for United States, Vietnam (preliminary), and Indonesia (preliminary);and 2010 for Brazil, Germany, and Japan.

Data as of 3/31/13.


46/70

Global Monetary Policy

Central Bank Assets Percent of Nominal GDP Real Policy Rates Monthly

30%

35%

3%

4%

European Central Bank

Bank of Japan

10%

15%

20%

25%

-1%

0%

1%

2%

Developed Markets

Country Level Monetary Policy and Inflation

Emerging Markets

Inflation Rate Real Polic RateTar et Polic Rate

U.S. Federal Reserve

0%

5%

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

-3%

-2%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

o

nal

0.0%

2.5%

5.0%

7.5%

10.0%

Internati

-5.0%

-2.5%

HongKong

U.K.

Euroarea

U.S.

Canada

Japan

Australia

Turkey

India

Taiwan

Russia

Thailand

SouthAfrica

Mexico

Poland

Korea

Colombia

Indonesia

Brazil

China

46

Source: J.P. Morgan Global Economics Research, J.P. Morgan Asset Management.(Top charts) Emerging and Developed Economy GDP growth and real policy rates represent GDP weighted aggregates estimated by J.P. MorganGlobal Economics Research. (Bottom chart) Target policy rates are the short-term target interest rates set by central banks. Inflation rates shownrepresent year-over-year quarterly rates for 4Q12. Real policy rates are short-term target interest rates set by central banks minus year-over-yearinflation.Data are as of 3/31/13.

Developed Markets Emerging Markets


47/70

Europe: Economic Growth

6%

Europe Real GDPYear-over-year % change

Avg. Since1999

4Q12

Latest GDP Growth Rates for European Countries4Q12, year-over-year % change

2.1%Norway

4%

Real GDP 1.5% -0.5%

0.5%

0.7%

1.4%

1.4%

Germany

Austria

Switzerland

Sweden

0%

2%Average:

1.5%

-0.4%

-0.3%

0.0%

0.2%

Belgium

France

Ireland

U.K.

-2%

o

nal

-1.9%

-1.4%

-1.0%

-0.9%

- .

Spain

Finland

Denmark

Netherlands

-6%

-4%

'99 '01 '03 '05 '07 '09 '11

Internati

-5.7%

-3.8%

-2.8%

-8% -6% -4% -2% 0% 2% 4%

Greece

Portugal

Italy

47

Source: Eurostat, Bloomberg, FactSet, J.P. Morgan Asset Management.



48/70

Europe: Inflation and Unemployment

27%

Europe InflationYear-over-year % change

Unemployment RateAvg. Since

1999Feb. 2013

Greece and Spain5%

21%

24%Headline CPI 2.1% 1.8%

Core CPI 1.7% 1.4%

U.S.Italy

German

Euro area

4%

15%

18%

2%

3%

9%

12%

1%

o

nal

3%

6%

'99 '01 '03 '05 '07 '09 '11'99 '01 '03 '05 '07 '09 '11

0%

Internati

48

Source: (Left) ECB, FactSet, J.P. Morgan Asset Management. (Right) Note: Greece,and Spain unemployment rate is weighted average of each countrys harmonisedunemployment rate based on population size. Latest data January 2013 except US which is February 2013. Source: Eurostat, FactSet, J.P. Morgan Asset Management.



49/70


50/70

China: Growth and Economic Policy

16% 12%

InflationYear-over-year % change

Avg. sinceJan. 2000 Feb. 2013

Headline CPI: 2.3% 3.2%

-

China GDP ContributionYear-over-year % change

Investment

Consumption

12%4%

8%

. .

9.1%

10.4%

4.5%

8.1%

5.5% 4.5%

3.9%

8%-4%

0%

'00 '02 '04 '06 '08 '10 '12

Monetary Policy Rates

9.6% 9.3%

7.8%

4.2%4.6%

4.5% 5.2%4.1%

4%

15%

20%

25%

7%

8%

Working Capital Rate

Mar. 2013:20%

o

nal

0.9%

-3.5%

0.4%

-0.4% -0.2%

0%

5%

10%6%

Mar.2013:

6%Internati

50

-

2008 2009 2010 2011 2012 '00 '02 '04 '06 '08 '10 '12

Source: National Bureau of Statistics of China, The Peoples Bank of China, FactSet, CEIC, J.P. Morgan Asset Management.

Values may not sum to 100% due to rounding. RRR represents the reserve requirement ratio.



51/70

China: Cyclical Indicators

690%

Merchandise Trade GrowthYear-over-year % change

Chinese CurrencyRenminbi per US Dollar (inverted scale)

Mar. 2013: 6.22

7

30%

60% Imports

Feb. 2013:

21.8%

Jun. 2005 Jul. 2008:

+17.4% May 2010 Mar. 2013:+9.0%

8

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

RMB per USD (Spot)

-30%'10 '11 '12 '13

Residential Floor Space Started and Sold Manufacturing PMIs

Exports

Feb. 2013: -15.0%

55

60

60%

90%

Year-over-year % change, seasonally adjusted

Residential FloorSpace Started

Feb. 2013:56.0%

Index level

Mar. 2013: 51.7 (Flash)

o

nal

50

-

0%

30%Residential Floor

Space Sold

Feb. 2013:17.7%

g.

Markit Mfg. PMI Feb. 2013: 50.1Internati

51

'10 '11 '12 '13'10 '11 '12 '13

Source: National Bureau of Statistics of China, Markit, FactSet, J.P. Morgan Asset Management.

Note: NBS manufacturing PMI covers approximately 800 companies with a bias toward state-owned and large enterprises, while the Markitmanufacturing PMI includes 400 companies with a bias toward small and medium-sized companies.



52/70

Japan: Economic Snapshot

6%

20-yr Avg. 4Q12

Real GDP: 0.9% 0.4%

Japanese Yen and the Stock MarketReal GDPYear-over-year % change 130 20,000

Japanese Yen per U.S. Dollar Nikkei 225

-3%

0%

3%

120

16,000

18,000

-9%

-6%

'02 '04 '06 '08 '10 '12

CPI Inflation

100

110

14,000

1%

3%ear-over-year c ange, sa

Jan. 2013: -0.4%Headline CPI

90

10,000

12,000

o

nal

-3%

-1%

'02 '04 '06 '08 '10 '12

Jan. 2013: -0.6%Core CPI

'03 '04 '05 '06 '07 '08 '09 '10 '11 '1270

80

6,000

8,000

Internati

52

Source: (Left) Japanese Statistics Bureau & Statistics Centre, Bank of Japan, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management.

Core CPI is defined as CPI excluding food and energy prices.



53/70

Global Equity Valuations Developed Markets

Developed Market Countries

verage Expensive

relative toworld

Example

+5 Std Dev

+4 Std Dev

+6 Std Dev

dDevfromG

lobal

Expensiverelative to own

history

Cheap relative toown history

Average

Current

+3 Std Dev

+2 Std Dev

+1 Std Dev

Average

-1 Std Dev

-2 Std Dev

-3 Std Dev

St

relative toworld

-4 Std Dev

-5 Std Dev

World(ACWI)

EAFEIndex

France Germany U.K. Japan Australia Canada UnitedStates

Switzerland

CurrentComposite Current 10-year avg.

o

nal

. . . . . .

World (ACWI) -0.29 13.0 1.8 7.5 2.6% 12.7 1.9 6.8 2.7%EAFE Index -1.11 12.8 1.5 6.5 3.3% 12.3 1.7 5.9 3.4%

France -1.83 11.5 1.3 5.7 3.8% 11.0 1.5 5.5 3.8%

Germany -1.51 11.3 1.5 6.0 3.4% 11.3 1.5 5.0 3.4%

U.K. -0.93 11.5 1.8 8.2 3.7% 10.8 1.9 6.7 3.9%

Source: MSCI, FactSet, J.P. Morgan Asset Management.

Internati apan - . . . . . . . . .

Australia -0.45 14.2 1.9 8.6 4.4% 13.1 2.2 7.9 4.5%

Canada -0.32 13.3 1.8 8.0 2.9% 13.5 2.1 7.1 2.5%

United States 1.08 13.9 2.4 9.3 2.0% 13.4 2.3 8.0 2.1%Switzerland 0.82 14.6 2.5 10.7 3.1% 13.0 2.4 9.9 3.0%

53

. , ,cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over the last 10 years. The grey bars represent

valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page at the end for metric definitions.Data are as of 3/31/13.


54/70

Global Equity Valuations Emerging Markets

Emerging Market Countries

erage

+5 Std Dev

+4 Std Dev

+6 Std Dev Expensiverelative to

world

Example

Devfrom

GlobalA +3 Std Dev

+2 Std Dev

+1 Std Dev

Average-1 Std Dev

-2 Std Dev

-3 Std Dev

Expensiverelative to own

history

Cheap relative toown history

Average

Current

Std

-4 Std Dev

-5 Std Dev

relative to

world

World(ACWI)

EMIndex

Russia Brazil China TaiwanThailand

SouthAfrica

KoreaIndonesia

Mexico India

CurrentComposite

Current 10-year avg.

o

nal

Fwd. P/E P/B P/CF Div. Yld. Fwd. P/E P/B P/CF Div. Yld.

World(ACWI) -0.29 13.0 1.8 7.5 2.6% 12.7 1.9 6.8 2.7%EM Index -1.31 10.6 1.6 5.9 2.7% 11.4 2.0 6.1 2.7%

Russia -3.80 5.3 0.7 3.0 3.8% 7.7 1.4 4.2 2.3%

Brazil -1.76 11.2 1.4 5.5 3.7% 10.5 2.0 6.0 3.2%

China -2.14 9.2 1.5 4.4 3.2% 12.6 2.3 5.1 2.6%

Index

Internati Taiwan -0.58 14.2 1.8 6.4 3.0% 14.9 1.9 6.2 3.9%

Thailand -0.05 12.4 2.4 8.4 3.1% 10.7 2.0 6.9 3.8%

South Africa 0.16 12.4 2.3 10.4 3.4% 11.3 2.5 8.0 3.3%Korea 0.12 8.5 1.2 4.9 1.1% 10.0 1.5 5.5 1.6%

Indonesia 3.09 15.1 3.8 14.0 2.2% 13.0 3.7 10.2 2.8%Mexico 2.41 18.0 3.0 7.7 1.6% 14.2 2.8 6.3 2.0%

54

Source: MSCI, FactSet, J.P. Morgan Asset Management.Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), priceto last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over thelast 10 years. The grey bars represent valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page atthe end for metric definitions.Data are as of 3/31/13.

India 2.52 13.6 2.4 13.2 1.6% 16.0 3.3 12.9 1.3%


55/70

Emerging Market Equity Composition

MSCI EM Index by Region MSCI EM Index by Sector

Africa/Mideast7%

Latin America exBrazil

9%

Brazil13%

OtherConsumer

Asia ex China &Korea28%Korea

Europe

10%

19%

Commodities23%

Tech14%

17%

MSCI EM Country Index by Sector

China18%

Financials27%

o

nal

13%33%18%

21%22%

12%

16% 12% 16%22% 26%

15%

60%

80%

100%

Other

Commodities

Internati

20% 17%

39%

22%

2%18%

6%

37%29%

19%

30%

40%

13%

20%

40%

Financials

Tech

Consumer

55

Source: MSCI, FactSet, J.P. Morgan Asset Management. Other is comprised of Healthcare, Industrials, Telecom, and Utilities sectors.*Mexican Telecom sector accounts for 19% of the countrys market capitalization. Values may not sum to 100% due to rounding.


5%0%

Brazil Russia India China Mexico* Korea


56/70


57/70

Correlations: 10-Years

Large

Cap

Small

Cap EAFE EME

Core

Bonds

Corp.

HY EMD Cmdty. REITs

Hedge

Funds

Eq.

Market

Neutral*

Large Cap 1.00 0.95 0.91 0.81 -0.22 0.79 0.65 0.51 0.80 0.82 0.58

Small Cap 1.00 0.87 0.77 -0.28 0.75 0.61 0.45 0.84 0.76 0.55

EAFE 1.00 0.92 -0.16 0.78 0.71 0.59 0.73 0.89 0.73

EME 1.00 -0.08 0.82 0.80 0.64 0.63 0.91 0.62

Core Bonds 1.00 -0.04 0.30 -0.25 0.00 -0.22 -0.08

Corp. HY 1.00 0.86 0.54 0.72 0.78 0.44

EMD 1.00 0.44 0.66 0.68 0.43

Commodities 1.00 0.39 0.72 0.52

REITs 1.00 0.59 0.50

Source: Standard & Poors, Russell, Barclays Capital Inc., MSCI Inc., Credit Suisse/Tremont, NCREIF, DJ UBS, J.P. Morgan Asset Management.

Indexes used Large Cap: S&P 500 Index; Small Cap: Russell 2000; EAFE: MSCI EAFE; EME: MSCI Emerging Markets; Bonds: BarclayssetClass

Hedge Funds 1.00 0.59

Eq. Market Neutral* 1.00

57

Capital Aggregate; Corp HY: Barclays Capital Corporate High Yield; EMD: Barclays Capital Emerging Market; Cmdty.: DJ UBS Commodity Index;Real Estate: NAREIT Equity REIT Index; Hedge Funds: CS/Tremont Multi-Strategy Index; Equity Market Neutral: CS/Tremont Equity MarketNeutral Index. *Market Neutral returns include estimates found in disclosures.

All correlation coefficients calculated based on quarterly total return data for period 3/31/03 to 3/31/13.

This chart is for illustrative purposes only.

Data as of 3/31/13.

As


58/70

Mutual Fund Flows

Billions, USD AUM YTD 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

Domestic E uit 4 608 17 156 132 81 29 149 65 0 18 101 120 26 55 261 176 149

Fund Flows

World Equity 1,689 35 3 4 58 28 (80) 139 149 106 71 24 (3) (22) 53 11 8

Taxable Bond 2,899 43 254 137 224 310 21 98 45 27 5 40 125 76 (36) 8 59

Tax-exempt Bond 593 10 50 (12) 11 69 8 11 15 5 (15) (7) 17 11 (14) (12) 15

Hybrid 1,042 18 46 29 29 12 (25) 41 18 37 48 38 8 9 (36) (14) 10

$1,400

$1,600 $40

Difference Between Flows Into Stock and Bond FundsBillions, USD, U.S. and international funds, monthly

Bond flows exceeded equity flowsby $6 billion in February 2013

Cumulative Flows into Stock & Bond FundsIncludes both mutual funds and ETFs, $ billions

Feb. 13: $1,447 billion into bond funds

,

$800

$1,000

$1,200

-$20

$0

$20an xe ncome s s nce

Feb. 13: $278 billion

$0

$200

$400

'07 '08 '09 '10 '11 '12 '13-$60

-$40

Sep '08 Jul '09 May '10 Mar '11 Jan '12 Nov '12setClass Bonds

Stocks

into stock funds andequity ETFs since 07

58

Source: Investment Company Institute, J.P. Morgan Asset Management.Data include flows through February 2013 and exclude ETFs except for the bottom left chart. ICI data are subject to periodic revisions. Worldequity flows are inclusive of emerging market, global equity and regional equity flows. Hybrid flows include asset allocation, balanced fund,flexible portfolio and mixed income flows.Data are as of 3/31/13.

As


59/70

Yield Alternatives: Domestic and Global

S&P 500 Total Return: Dividends vs. Capital AppreciationAverage annualized returns Capital Appreciation

Dividends20%

4.7% 5.4% 6.0% 5.1% 3.3% 4.2% 4.4% 2.5%1.8%

4.1%

13.9%

3.0%

13.6%

4.4%

1.6%

12.6% 15.3%

-2.7%

5.6%

0%

5%

10%

Equity Dividend Yields Yield Alternatives

- .

-10%

-5%

1926 - 1929 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's 1926 to 2012

4.2%

3.8%3.6%

2.9% 2.9%2.7%3%

4%

5%

10-year governmentbond yield

4.9% 4.7%

3.5%3.3%

4%

5%

6%

2.2%2.0%

1%

2%

setClass

10-year governmentbond yield

1.0%0.7%1%

2%

3%

59

0%U. S. Aus tralia F rance U. K. Sw it zerland C anada ACWI Japan

Source: (Top chart) Standard & Poors, Ibbotson, J.P. Morgan Asset Management. Dividend vs. capital appreciation returns are through 12/31/12.(Bottom left) FactSet, NAREIT, J.P. Morgan Asset Management. Yields shown are that of the appropriate MSCI index. (Bottom right) FactSet, MSCI,J.P. Morgan Asset Management. Yields shown are that of the appropriate FTSE NAREIT REIT index, which excludes property developmentcompanies. Preferreds, U.S. REITs, Inter. REITs, EMD Loc., Converts, and Floating Rate yields reflect current yield.


As EMD Loc. Preferreds U.S. REITs Inter. REIT's Converts Float ing Rate


60/70

Global Commodities

600

Commodity PricesWeekly index prices rebased to 100

Oil Demand: Emerging Markets ShareEmerging markets as % of total global oil consumption40%

500

Precious Metals

Industrial Metals 34%

36%

38%

300

400

Commodit Prices and Inflation

30%

32%

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

4%

6%

8%

40%

60%

80%

200

Energy

Grains

Year-over-year % chg.

DJ-UBS Commodity Index (Y/Y % chg.)

-4%

-2%

0%

2%

-40%

-20%

0%

20%

100

setClass

Livestock

Headline CPI (Y/Y % chg.)

60

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

-6% -60%'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Source: Dow Jones/UBS, FactSet, J.P. Morgan Asset Management.

Commodity prices represented by the appropriate DJ/UBS Commodity sub-index.


Source: (Top) BP Statistical Review of World Energy, J.P.Morgan Asset Management. (Bottom) BLS, DJ/UBS,FactSet, J.P. Morgan Asset Management.


As


61/70

Gold

Gold Prices$ / oz

+338% -11%$3,000

Jan. 1980:$2,480.36

+1,209% - 67% + 75% - 49% + 609% - 16%

$2,500

Mar. 2013:

$1,598.25$1,500

$2,000

Jan. 1980:$850.00

Gold, Inflation Adjusted

Gold$1,000

setClass

$0

$500

61

Source: EcoWin, BLS, U.S. Department of Energy, FactSet, J.P. Morgan Asset Management. CPI adjusted gold values are calculated using monthlyaverages of gold spot prices divided by the CPI value for that month. CPI is rebased to 100 at the end of the chart. Returns based on nominal prices.


As '75 '80 '85 '90 '95 '00 '05 '10


62/70

Historical Returns by Holding Period

Annual total returns, 1950 2012Range of Stock, Bond and Blended Total Returns

Annual Avg. Growth of $100,00060%

50/50 Portfolio 8.9% $554,754

Bonds 6.2% $335,627

Stocks 10.8% $782,751

o a e urn over 20 years

51%

43%

30%

40%

50%

28%

23% 21% 19%16% 17% 18%

12% 14%10%

20%

Stocks

-8%

-15%

-2% -2% 1%-1% 1%

2%

6%

1%

5%

-

-10%

0%

setClass 50/50 Portfolio

Bonds

-37%

-40%

-30%

1- r. 5- r. 10- r. 20- r.

62

As

Sources: Barclays Capital, FactSet, Robert Shiller, Strategas/Ibbotson, Federal Reserve, J.P. Morgan Asset Management.

Returns shown are based on calendar year returns from 1950 to 2012. Growth of $100,000 is based on annual average total returns from1950-2012.


rolling rolling rolling


63/70


64/70

Annual Returns and Intra-year Declines

S&P 500 Intra-year Declines vs. Calendar Year ReturnsDespite average intra-year drops of 14.7%, annual returns positive in 25 of 33 years

3440%

26

15 17

26

1512

27 26

7

20

27

20

26

9

14

23

13 13

10%

20%

30%

-10 1 2

-7

4

-2 -10 -13 -233 4

-38 0

-7 -8 -9 -8 -8 -6

-6

-5

-9

-3

-8-11 -

-8 -7 -8-10 -10

-10%

%

-17 -18 -17

-

-34

-20 -19-17

-30

-34

-14

-28

-16

-19

-40%

-30%

-20%

setClass

-49

-60%

-50%

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

64

Source: Standard & Poors, FactSet, J.P. Morgan Asset Management.

Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough duringthe year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2012.


As


65/70

Cash Accounts

$ Billions

Weight in

Money

Supply

Money Supply

Component

$8,000

$10,000

Annual Income Generated by $100,000 Investment in a 6-month CD

M2-M1 7,941 76.6%

Retail MMMFs 628 6.1%$2,000

$4,000

$6,000

2012:$450

,

Savings deposits 6,701 64.6%

Small time deposits 612 5.9%

$01986 1990 1994 1998 2002 2006 2010

6-month CD rate vs. Core CPICash AccountsCash as a % of Total Household Financial Assets28%

Institutional MMMFs 1,768 17.0%

663 6.4%Cash in IRA & Keogh

accounts

16%

20%

24% Oct. 02 S&P 500 low

.

Total 10,371 100.0%

setClass

Source: Federal Reserve, St. Louis Fed, Bankrate.com, J.P. Morgan Asset Management.All cash measures obtained from the Federal Reserve are seasonally adjusted monthly numbers. All numbers are in billions of U.S. dollars.

'98 '00 '02 '04 '06 '08 '10 '12

12%

65

As ma - enom na on me epos s are ose ssue n amoun s o ess an , . an eog accoun a ances a commerc a an s an r ns u ons are su rac e

from small time deposits. Annual income is for illustrative purposes and is calculated based on the 6-month CD yield on average during each year and $100,000 invested. 2012

average income is through December 2012. IRA and Keogh account balances at money market mutual funds are subtracted from retail money funds.Past performance is not indicative of comparable future results.



66/70

Corporate DB Plans and Endowments

Underfunded

Defined Benefit Plans Funded Status: S&P 500 Companies

Overfunded

Asset Allocation: Corporate DB Plans vs. Endowments

Endowments

45.3%

13.0%

32.0%

Fixed Income

Equities

94%78

22%

2.7%

35.5%

21.9%Hedge Funds

Pension Return Assumptions: S&P 500 companies

20111999

27%29%

20%

28%

21%

35%

20%

30%

40%

3.1%

4.7%

6.1%

.

Real Estate

Private Equity

anies

2012: Average 7.3%

1999: Average 9.2%

2% 1%

5%

9%7%

13%

3%0% 0% 0%

0%

10%

< 7% 7 to 7.5 to 8 to 8.5 to 9 to 9.5 to > 10%4.7%

4.1%

4.0%

12.2%

Cash

Other

%o

fCom

setClass

% of total

66

7.5% 8% 8.5% 9% 9.5% 10%0% 10% 20% 30% 40% 50%

Return AssumptionSource: NACUBO (National Association of College and University Business Officers), Towers Watson, Compustat/FactSet, J.P. Morgan AssetManagement. Asset allocation as of 2010. Funded status as of 2011. Endowments represents dollar-weighted average data of 842 colleges anduniversities. Pension Return Assumptions based on all available and reported data from S&P 500 Index companies. Funded Status based on 347companies reporting pension funding status. Return assumption bands are inclusive of upper range. All information is shown for illustrative purposesonly. Data are as of 3/31/13.

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Stock Market Since 1900

S&P Composite Index, Price Return (Since 1900)

Log Scale

2000 P/E:28.6x

1,000

300

1966 P/E:

Current P/E:16.3x

100

1966 19741929 P/E:

17.8x

18.0x

1937 P/E:

10

1937 19481974 P/E:

9.5x

.

1900 P/E:15.1x

'00 '10 '20 '30 '40 '50 '60 '70 '80 '90 '00 '10setClass

1900 1924

1924 P/E:10.0x 1932 P/E:

14.5x

10.0x

67

Source: IDC, FactSet, J.P. Morgan Asset Management.

Data shown in log scale to best illustrate long-term index patterns. P/E ratios shown at price peaks and troughs use trailingfour quarters of reported earnings and are shown as a one year average.

Past performance is not indicative of future returns. Chart is for illustrative purposes only.


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Documents

Jp Littlebook 2Q13 CDN