Professional Documents
Culture Documents
Europe
Asia
Stephanie H. Flanders
Tai Hui
New York
London
Hong Kong
Andrew D. Goldberg
New York
Yoshinori Shigemi
Madrid
Tokyo
Houston
Frankfurt
Hong Kong
Julio C. Callegari
Lucia Gutierrez-Mellado
So Paulo
Madrid
Melbourne
Vincent Juvyns
Ian Hui
Chicago
Luxembourg
Hong Kong
David M. Lebovitz
Akira Kunikyo
New York
London
Tokyo
Gabriela D. Santos
Ben Luk
New York
Milan
Hong Kong
Hannah J. Anderson
Alexander W. Dryden
New York
London
Hong Kong
Abigail B. Dwyer
Nandini L. Ramakrishnan
New York
London
Ainsley E. Woolridge
New York
For China, Australia, Vietnam and Canada distribution: Please note this communication is for intended recipients only. In Australia for wholesale clients use only and in
Canada for institutional clients use only. For further details, please refer to the full disclaimer. Unless otherwise stated, all data is as of 30 June 2015 or most recently available.
Page reference
Europe economy
4.
5.
6.
7.
8.
9.
10.
11.
38.
39.
40.
41.
42.
43.
44.
45.
Fixed income
Global economy
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Equities
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
Europe economy
GTM Europe
Average
since 1999
Real GDP
0,3%
1Q15
0,4%
Inflation
| 4
Average
May
since 1999 2015
Headline CPI*
2,3%
0,3%
Core CPI
1,6%
0,9%
Average
3
0
2
-1
1
-2
0
-3
-1
'99
'01
'03
'05
'07
'09
'11
'13
'99
'01
'03
'05
'07
'09
Source: (Both charts) Eurostat, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food, energy and
tobacco. Guide to the Markets - Europe. Data as of 30 June 2015.
'11
'13
Europe economy
| 5
GTM Europe
Apr 2015:
2,2%
4
%
1,1
2
May 2015:
0,78
1,0
0,9
-2
Average: 0,89
0,8
-4
0,7
0,6
-6
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
'01
'15
'03
'05
'07
'09
'11
'13
US*
12
%
8
12
100
90
Eurozone
8
0
4
80
70
-4
'08
'09
'10
'11
'12
'13
'14
'15
-8
'93
'95
'97
'99
'01
'03
'05
'07
Source: (Top left, top and bottom right) ECB, Eurostat, FactSet, J.P. Morgan Asset Management. (Bottom left) Eurostat, US Bureau of Economic Analysis, FactSet,
J.P. Morgan Asset Management. *US data is nonresidential gross fixed capital formation, Eurozone data is overall gross fixed capital formation due to data
availability. M1 is defined as the sum of currency held by the public and transaction deposits at depository institutions. Guide to the Markets - Europe. Data as of 30
June 2015.
'09
'11
'13
'15
Europe economy
GTM Europe
Economic sentiment
Index level
65
Index level
120
Germany
France
Italy
Spain
| 6
Greece
110
55
100
45
90
80
35
Germany
France
Italy
Spain
'11
'13
Greece
25
70
60
'07
'08
'09
Unemployment rate
30
%
'10
'12
Germany
France
Eurozone
'14
Italy
Spain
'15
Greece
'07
'08
'09
'10
'11
'12
'14
'15
Gross exports
Rebased to 100 at December 2007, two-quarter moving average
140
130
25
120
20
110
15
100
10
Ireland
Spain
Italy
90
80
70
'07
'08
'09
'10
'11
'12
'13
'14
'07
'08
'09
'10
'11
Source: (Top left) Markit, J.P. Morgan Asset Management. (Bottom left and bottom right) Eurostat, FactSet, J.P. Morgan Asset Management. (Top right) European
Commission, FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
'13
'12
Germany
France
Portugal
'13
'14
Europe economy
GTM Europe
| 7
20
Stronger loan
demand
50
10
00
-10
-20
'09
-50
-2
-100
-4
Weaker loan
demand
-6
-200
'05
'06
'07
'08
'09
'10
'11
'13
'14
'15
-8
'15
Italy
Spain
France
Germany
2
'05
'06
'07
'08
Source: (Left) ECB, Eurostat, FactSet, J.P. Morgan Asset Management. (Top and bottom right) ECB, Thomson Reuters Datastream,
J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
'12
-150
'10
'09
'10
'11
'12
'13
'14
'15
Europe economy
GTM Europe
| 8
trillions
4,0
Jul 2015
Sep 2016:
est. 39%
3,5
% of debt outstanding
20
150
100
10
50
5
Jan 2005
Jul 2012:
249%
2,5
0
Fed
2,0
BoE
BoJ
ECB
1,5
1,0
20
0,5
0
0,0
Equities
Exchange rate
15,6
40
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
250
%
200
15
Aug 2012
Jun 2015:
-20%
3,0
30
%
25
'16
-20
31,7
46,0
38,5
20,0
-10,1
-1,9
US QE1
US QE2
US QE3
11,5
-9,2
-15,0
Eurozone
Japan
Source: (Left) ECB, FactSet, J.P. Morgan Asset Management. (Top right) Bank of England (BoE), Bank of Japan (BoJ), Deutsche Bank, European Central Bank
(ECB), US Federal Reserve, J.P. Morgan Asset Management. (Bottom right) Bank of England, FactSet, IMF, MSCI, Standard & Poors, J.P. Morgan Asset
Management. *QE period for Fed is September 2008 to October 2014, BoE is March 2009 to June 2012, ECB is from March 2015 to September 2016. QE period for
BoJ is April 2013 to October 2015 and based on Deutsche Bank estimates, as are net issuance amounts over the QE period for Japan and eurozone. **All US data
is for 2 years following initial policy announcement. US QE1 is from November 2008, US QE2 is from November 2010, US QE3 is from September 2012.
Eurozone QE is from August 2014 to 30 June 2015. Japan QE is from April 2013 to 30 June 2015. US equities is the S&P 500, Eurozone equities is the MSCI EMU
and Japan equities is the MSCI Japan. Guide to the Markets - Europe. Data as of 30 June 2015.
Europe economy
GTM Europe
| 9
3,5
2007: 4.580
5.000
Income
Inflation (y/y)
3,0
4.000
May 2015:
1,8tn
2,5
Jun 2015:
115
3.000
2,0
2.000
1.000
1,5
1,0
0,5
0,0
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
-1.000
-1
'00
'02
'04
'06
'08
Source: (Left) ECB, J.P. Morgan Asset Management. (Right) Bloomberg, Eurostat, J.P. Morgan Asset Management. Blue marker points represent year on year
inflation and illustrate how the value of income would have been eroded due to inflation. Guide to the Markets - Europe. Data as of 30 June 2015.
'10
'12
'14
Europe economy
GTM Europe
| 10
Total leverage
RoW*
Asia 11%
9%
%
320
Europe
53%
Americas
26%
300
280
260
Average: 260%
3Q15:
3,6x
240
220
4
Average: 3,1x
1Q15:
194%
200
2
180
1
'97
'99
'01
'03
'05
'07
'09
'11
'13
'97
'99
'01
'03
'05
Source: (Top left) MSCI, Thomson Reuters Datastream, Worldscope, J.P. Morgan Asset Management. (Right and bottom left) MSCI, FactSet,
J.P. Morgan Asset Management. *RoW denotes revenues coming from the world excluding Europe, Asia and the Americas. Guide to the Markets - Europe.
Data as of 30 June 2015.
10
'07
'09
'11
'13
Europe economy
UK economic indicators
GTM Europe
US
Germany
UK
106
| 11
France
Japan
10
Consumer confidence
Unemployment rate
0
-10
7,0
102
-20
6,0
98
-30
5,0
94
90
4,0
'08
'09
'10
'11
'12
'13
'14
'15
Current account
% of GDP
4
%
2
-40
'05
'06
'07
'08
'09
'10
'11
Trade balance
Current transfers
'13
'14
-50
Wage growth
Investment income
'12
6
4
-2
0
-4
-2
-6
-8
'05
'07
'09
'11
'13
-4
'05
'06
'07
'08
'09
'10
Source: (Top left) OECD, J.P. Morgan Asset Management. (Bottom left) FactSet, ONS, J.P. Morgan Asset Management. (Top right) FactSet, GFK, ONS,
J.P. Morgan Asset Management. (Bottom right) FactSet, ONS, J.P. Morgan Asset Management. *Nominal wages include bonuses. Guide to the Markets - Europe.
Data as of 30 June 2015.
11
'11
'12
'13
'14
Europe
Emerging
Developed
Global economy
Global
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
2015
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
| 12
50,6 51,5 51,6 51,9 52,8 52,9 52,9 53,1 52,4 51,9 52,2 52,6 52,4 52,5 52,2 52,2 51,8 51,5 51,7 51,9 51,8 51,0 51,2 51,2
Eurozone
50,3 51,4 51,1 51,3 51,6 52,7 54,0 53,2 53,0 53,4 52,2 51,8 51,8 50,7 50,3 50,6 50,1 50,6 51,0 51,0 52,2 52,0 52,2 52,5
France
49,7 49,7 49,8 49,1 48,4 47,0 49,3 49,7 52,1 51,2 49,6 48,2 47,8 46,9 48,8 48,5 48,4 47,5 49,2 47,6 48,8 48,0 49,4 50,7
Germany
50,7 51,8 51,1 51,7 52,7 54,3 56,5 54,8 53,7 54,1 52,3 52,0 52,4 51,4 49,9 51,4 49,5 51,2 50,9 51,1 52,8 52,1 51,1 51,9
Italy
50,4 51,3 50,8 50,7 51,4 53,3 53,1 52,3 52,4 54,0 53,2 52,6 51,9 49,8 50,7 49,0 49,0 48,4 49,9 51,9 53,3 53,8 54,8 54,1
Spain
49,8 51,1 50,7 50,9 48,6 50,8 52,2 52,5 52,8 52,7 52,9 54,6 53,9 52,8 52,6 52,6 54,7 53,8 54,7 54,2 54,3 54,2 55,8 54,5
Ireland
51,0 52,0 52,7 54,9 52,4 53,5 52,8 52,9 55,5 56,1 55,0 55,3 55,4 57,3 55,7 56,6 56,2 56,9 55,1 57,5 56,8 55,8 57,1 54,6
UK
54,6 58,4 56,9 56,4 57,8 57,2 56,5 55,9 55,3 57,2 56,6 56,8 54,9 53,0 51,5 53,4 53,3 52,7 52,9 53,9 54,3 51,8 51,9 51,4
US
53,7 53,1 52,8 51,8 54,7 55,0 53,7 57,1 55,5 55,4 56,4 57,3 55,8 57,9 57,5 55,9 54,8 53,9 53,9 55,1 55,7 54,1 54,0 53,6
Japan
50,7 52,2 52,5 54,2 55,1 55,2 56,6 55,5 53,9 49,4 49,9 51,5 50,5 52,2 51,7 52,4 52,0 52,0 52,2 51,6 50,3 49,9 50,9 50,1
Brazil
48,5 49,4 49,9 50,2 49,7 50,5 50,8 50,4 50,6 49,3 48,8 48,7 49,1 50,2 49,3 49,1 48,7 50,2 50,7 49,6 46,2 46,0 45,9 46,5
Russia
49,2 49,4 49,4 51,8 49,4 48,8 48,0 48,5 48,3 48,5 48,9 49,1 51,0 51,0 50,4 50,3 51,7 48,9 47,6 49,7 48,1 48,9 47,6 48,7
India
50,1 48,5 49,6 49,6 51,3 50,7 51,4 52,5 51,3 51,3 51,4 51,5 53,0 52,4 51,0 51,6 53,3 54,5 52,9 51,2 52,1 51,3 52,6 51,3
China
47,7 50,1 50,2 50,9 50,8 50,5 49,5 48,5 48,0 48,1 49,4 50,7 51,7 50,2 50,2 50,4 50,0 49,6 49,7 50,7 49,6 48,9 49,2 49,4
Korea
47,2 47,5 49,7 50,2 50,4 50,8 50,9 49,8 50,4 50,2 49,5 48,4 49,3 50,3 48,8 48,7 49,0 49,9 51,1 51,1 49,2 48,8 47,8 46,1
Taiwan
48,6 50,0 52,0 53,0 53,4 55,2 55,5 54,7 52,7 52,3 52,4 54,0 55,8 56,1 53,3 52,0 51,4 50,0 51,7 52,1 51,0 49,2 49,3 46,3
12
Dec
2014
Nov
Oct
Sep
Aug
Jul
2013
GTM Europe
50
Source: FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers Index (PMI) assesses the economic health of the manufacturing sector by
surveying output and employment intentions. For Global PMI, heatmap colours are based on PMI relative to global recent history; for countries, heatmap colours are
based on PMI relative to all countries shown. Global PMI is a GDP-weighted calculation. Guide to the Markets - Europe. Data as of 30 June 2015.
GTM Europe
| 13
Global economy
3
2
1
0
-1
'90
'94
'98
'02
'06
'10
'14
5-year/5-year inflation*
4,0
%
3,5
UK
US
Eurozone
6
%
5
CPI** lagged six
months (y/y)
Consumer confidence
-5
-10
3,0
-15
-20
2,5
-25
0
2,0
-30
-35
1,5
Dec 13
Jun 14
Dec 14
Jun 15
-2
'03
-40
'04
'05
'06
'07
'08
'09
'10
'11
Source: (Top) J.P. Morgan Economic Research, J.P. Morgan Asset Management. (Bottom left) Bloomberg, J.P. Morgan Asset Management. (Bottom right) Eurostat,
FactSet, J.P. Morgan Asset Management. *5-year/5-year inflation expectations is the market expectation for average inflation over 5 years beginning in 5 years time,
derived from inflation swaps. **CPI is the Consumer Price Index. Guide to the Markets - Europe. Data as of 30 June 2015.
13
'12
'13
'14
GTM Europe
3,0
| 14
%
US
US Fed FOMC June 2015 forecasts midpoint
Global economy
120
2,5
UK
US
UK
115
Eurozone
core
Eurozone
Dec 2017:
1,85%
2,0
110
1,5
105
100
Eurozone
periphery
95
1,0
Dec 2017:
1,72%
Dec 2016:
1,37%
Dec 2015:
0,73%
Dec 2016:
1,05%
Japan
0,5
90
Dec 2015:
0,30%
Dec 2017:
0,30%
Dec 2016:
0,08%
85
'08
'09
'10
'11
'12
'13
'14
'16
'17
Source: (Left) FactSet, French National Institute of Statistics and Economic Studies (INSEE), German Federal Statistical Office, Irish Central Statistics Office (CSO),
Italian National Statistical Institute (ISTAT), Japanese Cabinet Office, National Statistical Service of Greece, Portuguese National Statistical Institute (INE), Spanish
National Statistical Institute (INE), UK Office for National Statistics (ONS), US Bureau of Economic Analysis, J.P. Morgan Asset Management. (Right) Bloomberg, US
Federal Reserve, J.P. Morgan Asset Management. Eurozone core is France and Germany and eurozone periphery is Greece, Italy, Ireland, Portugal and Spain. The
market expectations for the path of interest rates is derived from the futures market. There is no active Japanese futures market, therefore no market expectations for
the target policy rate. Guide to the Markets - Europe. Data as of 30 June 2015.
14
'18
US dollar
GTM Europe
US dollar index
Average
May 2015
since 1973
Global economy
120
1973-1978:
-21,8%
110
100
US dollar index
1985: Plaza
Accord
1978-1985:
+52,7%
1987: Louvre
Accord
95,7
2002-2011:
-28,6%
1995-2002:
+34,2%
93,0
2011-2015:
+15,5%
1985-1988:
-29,5%
90
| 15
1988-1995:
-7,1%
80
70
'73
'77
'81
'85
Current account
'89
Eurozone
% of GDP
4
%
2
US
'93
'97
'01
'05
'09
'13
20,8
20,9
22,9
17,2
0
8,7
11
-2
5,4
-4
-6
-3
-8
'05
'07
'09
'11
'13
-0,1
Chinese
renminbi
Swiss
franc
Source: (Top) US Federal Reserve, J.P. Morgan Asset Management. (Bottom left) BEA, ECB, FactSet, J.P. Morgan Asset Management. (Bottom right) FactSet,
J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
15
Euro
GTM Europe
Global economy
$ trillions
5
$
4
| 16
Forecast
Other
3
4,0
US Treasuries
2
3,5
Agency MBS
3,0
0
'08
'09
'10
'11
'12
'13
'14
'15
2,5
New purchases*
2,0
Reinvested purchases*
1,5
80
60
1,0
40
0,5
20
0
Sep 13 Dec 13
0,0
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
2015
2016
Source: (All charts) FactSet, US Federal Reserve, J.P. Morgan Asset Management. *New purchases are the stated purchases from the US Federal Reserve.
Reinvested purchases are bonds purchased with the principal received from maturing bonds. Guide to the Markets - Europe. Data as of 30 June 2015.
16
2017
Longer run
Real GDP
Inflation
Average
since 1999
1Q15
2,0%
-0,2%
Average Average
May
since
since
2015
1964
1999
Global economy
| 17
GTM Europe
Headline CPI*
4,1%
2,3%
0,0%
Core CPI
4,1%
2,0%
1,7%
12
6
4
Average
2
0
-2
3
-4
-6
-8
-10
'99
'03
'05
'07
'09
'11
'13
-3
'64
'69
'74
'79
'84
'89
'94
Source: (Left) BEA, FactSet, J.P. Morgan Asset Management. (Right) BLS, FactSet, J.P. Morgan Asset Management. SAAR is seasonally adjusted annual rate. *CPI
is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Guide to the Markets - Europe. Data as of 30 June 2015.
17
'99
'04
'09
'14
US employment
GTM Europe
Unemployment rate
Seasonally adjusted
Global economy
11
%
10
65
Retired
Other
63
8
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
Wage growth
Change year on year
3,5
Employment Cost Index
%
3,0
Average: 6,1%
6
Jun 2015:
5,3%
2,5
2,0
1,5
1,0
'69
'74
'79
'84
'89
'94
'99
'04
'09
'14
1Q15:
2,7%
4,0
%
3,5
3,0
2,5
2,0
3
'64
Jun 2015:
62,6%
62
'07
'08
'09
Jun 2015:
1,5
2,0%
Average hourly earnings
1,0
'10
'11
'12
'13
'14
Source: (Left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) Constructing the Reason-for-Nonparticipation Variable Using the Monthly CPS,
6 February 2014, Shigeru Fujita, Federal Reserve Bank of Philadelphia, J.P. Morgan Asset Management. (Bottom right) BLS, FactSet,
J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
18
Disabled
64
| 18
US cyclical indicators
GTM Europe
Millions, SAAR
24
48
June 2015:
17,1
Global economy
20
46
Apr 2015:
41,4
44
42
16
Average: 15,3
40
12
38
36
8
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'93
'13
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
Housing starts
Thousands, SAAR
2,500
2,000
May 2015:
1.036
1,500
45
40
Average: 1.342
1,000
500
30
25
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
May 2015:
40,7
Average: 39,5
35
'93
'93
'95
'97
'99
'01
'03
'05
Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top and bottom right and bottom left) FactSet, US Census Bureau,
J.P. Morgan Asset Management. *Capital goods orders deflated using the producer price index for capital goods. SAAR is seasonally adjusted annual rate.
Guide to the Markets - Europe. Data as of 30 June 2015.
19
| 19
'07
'09
'11
'13
US consumer finances
GTM Europe
2Q15*:
$85.772
2Q07:
$67.858
80.000
$
| 20
Global economy
60.000
150
40.000
+26,3%
125
20.000
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
100
+55,1%
75
Price index
12
2Q15*:
9,9%
11
10
Housing starts
+116,7%
9
8
'80
'85
'90
'95
'00
'05
'10
'15
25
'99
'01
'03
'05
'07
'09
Source: (Top and bottom left) FactSet, US Federal Reserve, J.P. Morgan Asset Management. (Right) FactSet, National Association of Realtors, US Census Bureau,
J.P. Morgan Asset Management. Price index is the mean existing home sale price. SAAR is seasonally adjusted annual rate. *2Q15 numbers for US household net
worth and debt service ratio are J.P. Morgan Asset Management forecasts. Guide to the Markets - Europe. Data as of 30 June 2015.
20
'11
'13
GTM Europe
Average
1Q15
since 1999
Real GDP
0,2%
1,0%
Global economy
Inflation
Change year on year
| 21
Average
since 1999
May
2015
Headline CPI*
0,0%
0,5%
Core CPI
-0,3%
0,4%
-0,1%
0,0%
Average
1
2
0
1
-1
0
-2
-1
-3
-2
-4
-3
-5
'99
'01
'03
'05
'07
'09
'11
'13
'99
'01
'03
'05
'07
Source: (Left) FactSet, Japan Statistics Bureau & Statistics Centre, J.P. Morgan Asset Management. (Right) Bloomberg, Japan Ministry of Internal Affairs &
Communications, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy.
Guide to the Markets - Europe. Data as of 30 June 2015.
21
'09
'11
'13
GTM Europe
Japanese yen and the stock market
22.000
130
per $
Core inflation*
Wage growth
20.000
Global economy
| 22
1
0
120
18.000
-1
110
16.000
-2
'03
'05
'07
'09
'11
14.000
'13
All
59,4%
OECD
avg.
74,2%
Female
49,4%
65,1%
Current
100
12.000
90
63
10.000
62
61
May 2015:
59,4%
60
80
8.000
59
58
'80
'85
'90
'95
'00
'05
'10
'15
6.000
'03
70
'04
'05
'06
'07
'08
'09
'10
'11
Source: (Top left) FactSet, Japan Ministry of Internal Affairs & Communications, Japan Ministry of Health, Labour and Welfare, J.P. Morgan Asset Management. (Bottom
left) OECD, Statistics Bureau of Japan, J.P. Morgan Asset Management. (Right) FactSet, Nikkei, J.P. Morgan Asset Management. *CPI is the Consumer Price Index.
Core CPI is defined as CPI excluding food and energy. Guide to the Markets - Europe. Data as of 30 June 2015.
22
'12
'13
'14
GTM Europe
21
Investment
24
Consumption
18
18
Global economy
May 2015
Inflation
Net exports
| 23
Food CPI
Headline CPI*
Core CPI
1,6%
1,2%
1,6%
12
15
1Q15:
7,0%
12
0
-6
'00
'02
'04
'06
'08
'10
'12
'14
RRR
25
%
20
15
10
-3
-6
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
0
'04
'06
'08
'10
'12
Source: (Left and top right) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Bottom right) FactSet, Peoples Bank of China (PBoC),
J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Guide to the Markets - Europe.
Data as of 30 June 2015.
23
'14
GTM Europe
Global economy
%
20
| 24
25
mths
20
15
Exports
0
10
0
-1
Imports
-20
'11
'12
'13
'14
Property prices
-2
'15
0
'11
'12
'13
'14
'15
24
%
Auto sales
20
40
50
Infrastructure
Manufacturing
Real estate
30
16
20
10
12
0
Retail sales
8
'06
-10
'07
'08
'09
'10
'11
'12
'13
'14
'15
'06
'07
'08
'09
'10
'11
'12
Source: (All charts) CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. Tier 1 cities include Beijing, Shanghai, Guangzhou and
Shenzhen. Tier 2 cities include 31 provincial capital cities and municipalities not included in Tier 1 cities, and Tier 3 cities include the other 65 cities in the Soufun
survey. Guide to the Markets - Europe. Data as of 30 June 2015.
24
'13
'14
'15
Global economy
GTM Europe
% of GDP
350
%
300
Public debt
Non-financial corporate debt
Household debt
250
180
200
150
130
100
50
0
80
1
27
53
79
105
Japan
131
UK
US
Eurozone
China
Korea
% of GDP
140
%
120
2013: 140%
% of GDP
50
%
40
100
30
80
20
60
10
40
0
'77
'81
'85
'89
'93
'97
'01
'05
'09
'13
'00
'02
'04
'06
'08
Source: (Top left) BIS, CEIC, Lombard Street Research, J.P. Morgan Asset Management. (Bottom left) World Bank, J.P. Morgan Asset Management. (Top right) BIS,
IMF World Economic Outlook April 2015, Lombard Street Research, J.P. Morgan Asset Management. (Bottom right) Bloomberg, FactSet,
Oxford Economics, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
25
| 25
'10
'12
'14
Global economy
GTM Europe
MSCI EM Index in USD, rebased to 100 on the date of first rate hike
150
30 Jun 2004
30 Jun 1999
125
4 Apr 1994
India
| 26
7
China
6
5
Indonesia
Thailand
100
75
50
Turkey
-250
-125
125
Days
90
MSCI EM / MSCI DM
200
0
Brazil
-1
100
150
Russia
110
-2
100
-3
50
-4
Jul 13
Oct 13
Jan 14
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
0
'93
'95
'97
'99
'01
'03
'05
'07
Source: (Left) Bloomberg, J.P. Morgan Asset Management. (Top right) MSCI, US Federal Reserve, J.P. Morgan Asset Management. (Bottom right) FactSet, MSCI,
J.P. Morgan Asset Management. *REER is real effective exchange rate. Guide to the Markets - Europe. Data as of 30 June 2015.
26
250
'09
'11
'13
120
130
Czech
Republic
Korea
Hungary
Taiwan
Poland
Mexico
Turkey
Thailand
Philippines
Vietnam
Malaysia
60
Asian countries
EMEA countries
LatAm countries
India
Commodity Exporters
70
Ukraine
Chile
Europe
US
S. Africa
Japan
Russia
If the US economy expands by 1%,
then the Mexican economy is
estimated to grow by an additional
0,3%, other things equal.
Colombia
Brazil
50
S. Africa
Indonesia
40
Argentina
30
20
Peru
10
Mexico
Brazil
Russia
Colombia
Chile
Nigeria
Venezuela
0
0
10
20
30
40
50
60
70
80
90
100
Commodity exports as % of merchandise exports - 2013
Manufacturers
Global economy
80
Taiwan
Turkey
Korea
Thailand
0,0
0,2
0,4
0,6
Source: (Left) IMF, World Trade Organisation, J.P. Morgan Asset Management. (Right) FactSet, IMF, J.P. Morgan Asset Management. *Assumes a 1% increase in
GDP growth from Japan, Europe and the US, and estimates a reaction function through a multistage regression measuring emerging market economies sensitivity to
export volumes. Developed market imports are used as a proxy for developed demand and estimated from a 1% pick up in domestic GDP. The sample period tested
ranges between 1993 and 2014 reflecting quarterly data. Guide to the Markets - Europe. Data as of 30 June 2015.
27
| 27
100
90
GTM Europe
0,8
1,0 % 1,2
Equities
Local
28
GTM Europe
| 28
2009
2010
2011
2012
2013
2014
YTD
2Q15
Ten-yr
Ann.
-23,0%
TOPIX
-40,6%
73,4%
MSCI EM
62,8%
35,4%
Sm all Caps
24,4%
5,5%
US S&P 500
2,1%
20,8%
Asia ex-Jp
19,7%
27,2%
Sm all Caps
35,8%
29,5%
US S&P 500
13,7%
24,5%
TOPIX
17,0%
-0,0%
TOPIX
5,8%
11,0%
Asia ex-Jp
10,0%
26,1%
MSCI EM
33,6%
-33,7%
US S&P 500
-37,0%
67,2%
Asia ex-Jp
67,2%
28,3%
Asia ex-Jp
15,6%
3,5%
HDY Equity
1,5%
18,1%
Europe
16,4%
26,7%
US S&P 500
32,4%
19,7%
Asia ex-Jp
7,7%
15,3%
Sm all Caps
7,7%
-2,1%
Sm all Caps
0,8%
10,1%
MSCI EM
10,3%
18,6%
MSCI EM
28,8%
4,6%
Portfolio
11,1%
-37,9%
HDY Equity
-34,4%
40,2%
Sm all Caps
40,8%
27,5%
MSCI EM
14,4%
-5,7%
Small Caps
-8,7%
16,8%
MSCI EM
17,4%
21,5%
TOPIX
54,4%
16,5%
Sm all Caps
6,7%
14,7%
Asia ex-Jp
6,3%
-2,8%
Portfolio
-0,4%
9,3%
Sm all Caps
8,2%
33,8%
Sm all Caps
23,3%
16,0%
HDY Equity
21,6%
3,2%
Europe
6,5%
-38,6%
Sm all Caps
-40,4%
37,6%
Portfolio
35,8%
23,9%
TOPIX
1,0%
-5,8%
Portfolio
-7,5%
16,3%
Small Caps
18,4%
20,5%
Europe
22,3%
16,2%
HDY Equity
8,7%
13,3%
Portfolio
6,3%
-2,8%
MSCI EM
0,8%
8,9%
US S&P 500
7,7%
33,6%
Portfolio
23,9%
12,5%
Portfolio
19,4%
-1,0%
HDY Equity
4,7%
-40,3%
Portfolio
-40,1%
34,0%
HDY Equity
30,2%
23,1%
US S&P 500
15,1%
-7,5%
Europe
-8,8%
15,6%
Portfolio
17,1%
15,3%
Portfolio
23,6%
15,3%
Portfolio
8,2%
13,3%
Europe
7,7%
-3,0%
Europe
-3,6%
8,5%
Portfolio
8,0%
27,0%
HDY Equity
17,7%
5,2%
Sm all Caps
13,6%
-4,9%
US S&P 500
5,5%
-43,3%
Europe
-38,5%
32,5%
Europe
28,6%
20,9%
Portfolio
11,1%
-9,6%
TOPIX
-17,0%
14,2%
US S&P 500
16,0%
13,9%
HDY Equity
20,5%
11,8%
MSCI EM
5,6%
12,0%
MSCI EM
5,8%
-3,0%
Asia ex-Jp
0,8%
8,2%
HDY Equity
7,7%
26,7%
Europe
25,5%
3,6%
US S&P 500
15,8%
-8,8%
Sm all Caps
-3,8%
-49,8%
Asia ex-Jp
-47,7%
22,5%
US S&P 500
26,5%
16,2%
HDY Equity
8,0%
-14,3%
Asia ex-Jp
-14,6%
13,6%
HDY Equity
14,0%
-1,1%
Asia ex-Jp
6,2%
10,1%
TOPIX
10,3%
9,9%
US S&P 500
1,2%
-3,3%
US S&P 500
0,3%
6,4%
Europe
6,4%
20,9%
US S&P 500
4,9%
-8,7%
TOPIX
3,0%
-14,5%
TOPIX
-11,1%
-50,8%
MSCI EM
-45,7%
1,5%
TOPIX
7,6%
11,7%
Europe
7,5%
-15,4%
MSCI EM
-12,5%
5,9%
TOPIX
20,9%
-6,5%
MSCI EM
3,8%
7,4%
Europe
5,2%
8,7%
HDY Equity
1,5%
-3,8%
HDY Equity
-2,0%
3,5%
TOPIX
3,9%
2005
2006
2007
55,0%
MSCI EM
35,8%
20,2%
Europe
19,6%
26,7%
Asia ex-Jp
38,0%
45,3%
TOPIX
45,2%
19,6%
Asia ex-Jp
28,6%
41,9%
Asia ex-Jp
24,1%
2008
Source: MSCI, TOPIX, Standard & Poors, FactSet, J.P. Morgan Asset Management. Annualised return covers the period 2005 to 2014. HDY Equity: MSCI AC World
High Dividend Yield Index; Small Cap: MSCI Europe Small Cap Index. Hypothetical portfolio (for illustrative purposes only and should not be taken as a
recommendation): 30% Europe; 20% S&P 500; 15% EM; 10% Asia ex-Japan; 10% TOPIX; 10% HDY equity and 5% small cap. All indices are total return.
Guide to the Markets - Europe. Data as of 30 June 2015.
GTM Europe
| 29
29
Cons.
staples
Cons.
disc.
Europe weight
23,1%
13,6%
13,5%
11,8%
11,0%
Growth weight
11,7%
17,9%
20,9%
17,5%
Value weight
34,6%
9,1%
6,1%
2Q15
-2,8
-5,1
YTD
9,2
Telecom
Utilities
Tech
Europe
7,5%
7,1%
5,0%
3,9%
3,4%
100%
13,6%
6,6%
1,7%
3,2%
0,1%
6,7%
100%
5,9%
8,4%
8,6%
12,8%
6,7%
7,8%
0,1%
100%
-3,7
-3,5
-5,3
-4,4
-2,6
1,2
-2,3
-5,9
-3,6
8,1
5,9
14,2
8,6
6,4
0,2
11,3
-1,7
7,9
7,7
-27,9
109,6
87,5
75,7
22,5
-0,8
7,2
55,5
-7,3
4,7
20,5
206,8
200,8
174,2
288,4
187,3
135,1
47,2
133,6
63,1
164,7
158,3
Beta to Europe
1,34x
0,62x
0,63x
0,95x
1,14x
1,31x
1,00x
0,78x
0,86x
0,99x
1,00x
0,43
0,26
0,29
0,36
0,40
0,37
0,34
0,33
0,33
0,33
0,41
11,8x
18,2x
19,2x
14,9x
15,9x
16,8x
14,4x
20,0x
14,5x
18,7x
15,1x
15-year average
11,1x
16,2x
16,0x
14,6x
14,2x
12,3x
11,9x
18,6x
13,8x
21,7x
13,5x
13,7x
19,4x
20,8x
17,2x
18,0x
17,9x
13,3x
21,3x
15,0x
22,2x
16,7x
15-year average
12,9x
17,5x
17,3x
17,2x
16,4x
14,1x
12,1x
21,0x
14,5x
22,6x
15,1x
Dividend yield
3,6%
2,6%
2,8%
2,4%
2,6%
3,0%
5,4%
4,0%
4,4%
1,6%
3,2%
15-year average
3,7%
2,6%
2,7%
2,8%
2,7%
2,9%
3,9%
4,3%
4,7%
1,7%
3,2%
Source: FactSet, MSCI, J.P Morgan Asset Management. All calculations are total return in local currency, not annualised. *Since market peak represents period
9 October 2007 to end of latest quarter. Since market low represents period 9 March 2009 to end of latest quarter. **Correlation to interest rates is calculated using
daily sector returns and daily 10-year German Bund yield over the last 10 years. Guide to the Markets - Europe. Data as of 30 June 2015.
Return
P/E
Industrials Materials
Weights
Energy
Health
care
Financials
Div
Equities
GTM Europe
| 30
3.500
3.000
2.500
Equities relatively
less expensive
30 Jun 2015:
5,00%
(lower than 73% of
days since 1965)
%
6
2.000
1.500
1.000
Equities
500
0
0
9 10 11 12 13 14 15 16
Average: 1,8%
Equities relatively
more expensive
30 Jun 2015:
2,35%
(lower than 96% of
days since 1965)
1.500
-2
1.000
500
-4
0
2
10 11 12 13 14 15 16
'89
'91
'93
'95
'97
'99
'01
'03
'05
Source: (All charts) FactSet, Standard & Poors, Tullett Prebon, J.P. Morgan Asset Management. *The equity risk premium is the S&P 500 forward earnings yield less
the US Treasury 10-year yield. Guide to the Markets - Europe. Data as of 30 June 2015.
30
'07
'09
'11
'13
Characteristic
Index level
1.800
4 Sep 2000:
P/E = 21,8x
1.623
1.400
GTM Europe
16 Jul 2007:
P/E = 13,0x
1.641
| 31
30 Jun 2015:
P/E = 15,1x
1.455
Total return:
+133%
Equities
-55%
+180%
-54%
+158%
1.000
31 Dec 1996:
P/E = 16,3x
714
12 Mar 2003:
P/E = 11,9x
676
9 Mar 2009:
P/E = 8,3x
714
600
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet, MSCI, Tullett Prebon, J.P. Morgan Asset Management. Local currency returns. P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up
calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market
Aggregates. Return calculations shown in green are based on the total return index. Guide to the Markets - Europe. Data as of 30 June 2015.
31
'12
'13
'14
GTM Europe
24
x
12
20
30 Jun 2015:
15,1x
16
10
Earnings yield
(inverse of forward P/E)
Average: 13,9x
12
Equities
| 32
8
'01
'03
'05
'07
'09
'11
'13
30 Jun 2015:
6,6%
30
Average: 17,8x
20
10
30 Jun 2015:
0,8%
10-year European
bond yield
30 Apr 2015:
16,0x
'79
'84
'89
'94
'99
'04
'09
'14
'00
'02
'04
'06
'08
'10
Source: (Top left) FactSet, J.P. Morgan Asset Management. (Bottom left) FactSet, MSCI, J.P. Morgan Asset Management. (Right) FactSet, MSCI, Tullett Prebon,
J.P. Morgan Asset Management. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by consensus estimates for earnings in the
next 12 months and is provided by FactSet Market Aggregates. Earnings yield is calculated as the inverse of the forward P/E ratio. Guide to the Markets - Europe.
Data as of 30 June 2015.
32
'12
'14
GTM Europe
| 33
1.600
10,0
1.500
'13
'14
'15
125
9,5
1.400
9,0
1.300
Equities
8,5
'16
115
105
95
1.200
8,0
1.100
7,5
1.000
7,0
900
6,5
'11
'12
'13
'14
US
9
8
800
6,0
5,5
'07
Europe
7
700
'08
'09
'10
'11
'12
'13
'14
6
'04
'05
'06
'07
'08
'09
'10
'11
Source: (Left) FactSet, MSCI, J.P. Morgan Asset Management. (Top right) FactSet, MSCI, J.P. Morgan Asset Management. (Bottom right) FactSet, MSCI, Standard
& Poors, J.P. Morgan Asset Management. *Data is last 12 months. Guide to the Markets - Europe. Data as of 30 June 2015.
33
'12
'13
'14
GTM Europe
| 34
2,200
Index level
P/E ratio (fwd)
Dividend yield
2,000
US 10 year
Mar 2000
1.527
Oct 2007
1.565
Jun 2015
2.063
27,2x
1,1%
6,2%
15,7x
1,7%
4,6%
16,4x
1,9%
2,4%
1,800
Equities
9 Oct 2007:
P/E = 15,7x
1.565
24 Mar 2000:
P/E = 27,2x
1.527
1,600
1,400
Total return:
+116%
30 Jun 2015:
P/E = 16,4x
2.063
+248%
+121%
-47%
-55%
1,200
1,000
800
31 Dec 1996:
P/E = 16,0x
741
9 Mar 2009:
P/E = 10,3x
677
9 Oct 2002:
P/E = 14,1x
777
600
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: FactSet, Standard & Poors, Tullett Prebon, J.P. Morgan Asset Management. The P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up
calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market
Aggregates. Return calculations shown in green are based on the total return index. Guide to the Markets - Europe. Data as of 30 June 2015.
34
'12
'13
'14
GTM Europe
11
28
x
| 35
31 Dec 1999:
25,4x
24
10
30 Jun 2015:
6,1%
Baa corporate
bond yield
16
Average:
16,3x
12
Equities
30 Jun 2015:
16,4x
20
'89
'91
'93
'95
'97
'99
'01
'03
'05
'09
'11
'13
30
3
'89
30 Jun 2015:
5,2%
Earnings yield
(inverse of forward P/E)
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
Average:
16,6x
20
10
0
'00
'10
'20
'30
'40
'50
'60
'70
Source: (Left) FactSet, IBES, Moodys, Standard & Poors, J.P. Morgan Asset Management. (Top right) FactSet, Standard & Poors, J.P. Morgan Asset Management.
Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by consensus estimates for earnings in the next 12 months and is provided
by FactSet Market Aggregates. (Bottom right) FactSet, Robert Shiller, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
35
'07
'80
'90
'00
'10
130
120
12,0
1.600
-3
-6
100
1.400
70
Total index
Domestic
companies
Ex-energy
Exporters
1.200
% of GDP
60
Employee compensation
%
58
1.000
56
54
52
50
'60
90
80
1,1
-5,0
110
12
%
10
Corporate profits
800
60
600
'07
'08
'09
'10
'11
'12
'13
'14
'65
'70
'75
'80
'85
'90
'95
Source: (Left and top right) FactSet, Standard & Poors, J.P. Morgan Asset Management. (Bottom right) BEA, FactSet, J.P. Morgan Asset Management. Exporters is
defined as the 40% of the S&P 500 with the highest percentage of overseas revenues and domestic companies are the remaining 60% of the S&P 500.
Guide to the Markets - Europe. Data as of 30 June 2015.
36
| 36
6
1.800
Equities
GTM Europe
'00
'05
'10
'15
Bear markets
GTM Europe
Equities
Recession
Crash of 1929
1937 Fed Tightening
Post WWII Crash
Flash Crash of 1962
Tech Crash of 1970
Stagflation
Volcker Tightening
1987 Crash
Tech Bubble
Global Financial Crisis
Cycle peak
Bull market
duration
(months)
Decline from
all-time high
Aug 1929
Feb 1937
May 1946
Dec 1961
Dec 1968
Dec 1972
Nov 1980
Aug 1987
Aug 2000
Oct 2007
37
22
48
14
73
29
31
59
118
55
-84%
-74%
-54%
-22%
-29%
-43%
-19%
-27%
-42%
-51%
Recession
Commodity
Aggressive
spike
Fed tightening
Extreme
valuations
Commentary
Excessive leverage, irrational exuberance
Premature monetary tightening
Post-war demobilisation, recession fears
Flash crash, Cuban Missile Crisis
Economic overheating, civil unrest
OPEC oil embargo
Extremely high rates to rein in inflation
Program trading, overheated market
Extreme valuations, mostly in tech stocks
Leverage, housing, Lehman collapse
Source: FactSet, NBER, Robert Shiller, Standard & Poors, J.P. Morgan Asset Management. *A bear market represents a 20% or more decline from the previous
market high using a monthly frequency. Periods of Recession are defined using NBER business cycle dates. Commodity spike is defined as significant rapid
upward moves in oil prices. Periods of Extreme valuations are those where S&P 500 last twelve months P/E levels were approximately two standard deviations
above long run averages. Aggressive Fed Tightening is defined as Federal Reserve monetary tightening that was unexpected and significant in magnitude.
Guide to the Markets - Europe. Data as of 30 June 2015.
37
| 37
GTM Europe
| 38
0,8
S&P 500
MSCI Europe
Positive
relationship
between yield
movements and
equity returns
0,6
Correlation
Equities
0,4
S&P 500
price return
87
87-89
94-95
99-00
04-06
Initial reaction
-5%
-7%
-10%
-7%
-8%
Subsequent
market
reaction
32%
24%
7%
18%
20%
Total reaction
26%
17%
-2%
10%
11%
0,2
0,0
-0,2
Negative
relationship
between yield
movements and
equity returns
-0,4
-0,6
-0,8
0
10
12
14
38
16
Japanese equities
GTM Europe
Japan
Europe
US
Latest
allocation
(Dec 2014)
0,2
International
bonds
20%
25%
-0,2
43%
35%
15%
20%
-0,6
Equities
-0,8
'02
'04
'06
'08
'10
'12
35
30
27
30
Short-term
assets
13%
'14
30 Jun 2015:
30,2
25
20
25
21
20
20
18
15
15
10
10
5
0
Japan
Germany
Italy
France
UK
US
Canada
'00
'02
'04
'06
'08
Source: (Top left) FactSet, Standard & Poors, STOXX, TOPIX, J.P. Morgan Asset Management. (Bottom left) IMF, J.P. Morgan Asset Management. (Top right)
FactSet, Government Pension Investment Fund, Japanese Cabinet Office, Japan Investment Trust Association, Pension Fund Association,
J.P. Morgan Asset Management. (Bottom right) FactSet, TOPIX, J.P. Morgan Asset Management. *Cash and cash equivalent holdings derived from "Unstash the
Cash! Corporate Governance Reform in Japan, Chie Aoyagi and Giovanni Ganelli, IMF, August 2014. **The Japanese Government Pension Investment Fund
(GPIF) has JPY 137 trillion of assets under management as of 31 December 2014. Guide to the Markets - Europe. Data as of 30 June 2015.
39
Domestic
stocks
International
stocks
25%
Target
allocation
-0,4
Domestic
bonds
4%
0,0
'00
| 39
'10
'12
'14
GTM Europe
| 40
Developed markets
How to interpret this chart
+6 Std dev
+5 Std dev
+4 Std dev
Expensive
relative to
world
+3 Std dev
Expensive
relative to
own history
+2 Std dev
+1 Std dev
Current
Average
-1 Std dev
Cheap relative
to own history
-2 Std dev
-3 Std dev
Equities
-4 Std dev
-5 Std dev
Spain
Italy
UK
Germany
France
ACWI
Current
US
10-year average
Current composite
index
Forward P/E
P/B
P/CF
Dividend yield
Forward P/E
P/B
P/CF
Dividend yield
Spain
Italy
UK
Germany
France
ACWI
Japan
DM Index
Switzerland
-1,47
-1,46
-0,33
-0,30
-0,21
0,85
0,89
1,16
1,88
14,3x
15,1
15,1
13,5
15,4
15,5
15,4
16,1
16,9
1,4x
1,1
1,8
1,7
1,6
2,1
1,5
2,2
2,5
7,2x
5,2
9,3
8,7
9,1
10,2
8,7
10,6
14,2
4,6%
3,0
4,0
2,8
3,2
2,5
1,7
2,4
3,2
11,3x
11,4
11,8
11,7
11,8
13,4
16,3
13,7
14,1
1,5x
1,1
1,9
1,7
1,5
2,1
1,4
2,1
2,6
4,4x
3,6
7,1
5,5
6,0
7,4
6,5
7,5
10,3
5,1%
3,5
3,7
2,9
3,3
2,5
1,8
2,5
3,1
US
2,40
16,7
2,8
11,6
2,0
14,3
2,7
8,8
1,9
Source: FactSet, MSCI, J.P. Morgan Asset Management. Each valuation index shows an equally weighted composite of four metrics: price to forward earnings
(forward P/E), price to current book (P/B), price to last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalised using means
and average variability over the last 10 years. The grey bars represent valuation index variability relative to that of the All Country World Index (ACWI).
Guide to the Markets - Europe. Data as of 30 June 2015.
40
Average
Cheap
relative to
world
| 41
GTM Europe
Emerging markets
How to interpret this chart
+6 Std dev
Equities
+5 Std dev
+4 Std dev
+3 Std dev
Expensive
relative to
own history
+2 Std dev
+1 Std dev
Average
Current
Average
-1 Std dev
-2 Std dev
Cheap relative
to own history
-3 Std dev
-4 Std dev
-5 Std dev
Cheap
relative to
world
-6 Std dev
Russia
Russia
Brazil
China
EM Index
Taiwan
Korea
ACWI
S. Africa
Mexico
India
Brazil
China
EM Index
Taiwan
S. Korea
ACWI
S. Africa
Mexico
Current
India
10-year average
Current composite
index
Forward P/E
P/B
P/CF
Dividend yield
Forward P/E
P/B
P/CF
Dividend yield
-4,75
-1,94
-1,21
-1,15
-1,02
-0,96
0,85
1,31
3,04
3,81
5,3x
12,7
10,6
11,7
12,4
9,5
15,5
16,1
18,7
18,2
0,5x
1,2
1,5
1,5
1,8
1,0
2,1
2,6
2,7
3,1
3,0x
6,4
7,9
7,2
7,6
4,9
10,2
11,5
10,2
12,0
4,9%
4,1
2,8
2,7
3,3
1,5
2,5
2,9
1,5
1,5
7,2x
10,3
11,8
11,3
14,5
9,7
13,4
12,3
15,3
16,0
1,2x
1,9
2,1
1,9
1,9
1,4
2,1
2,6
2,9
3,2
6,2x
5,9
4,5
6,2
6,4
5,5
7,4
8,9
6,5
12,5
2,9%
3,4
2,8
2,7
3,7
1,6
2,5
3,2
1,9
1,3
Source: FactSet, MSCI, J.P. Morgan Asset Management. Each valuation index shows an equally weighted composite of four metrics: price to forward earnings
(forward P/E), price to current book (P/B), price to last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalised using means
and average variability over the last 10 years. The grey bars represent valuation index variability relative to that of the All Country World Index (ACWI).
Guide to the Markets - Europe. Data as of 30 June 2015.
41
Expensive
relative to
world
GTM Europe
| 42
3,00
80
Current level
2,75
60
2,50
40
Equities
2,25
20
2,00
1,75
Average: 1,80x
1,50
30 Jun 2015:
1,59x
-20
1,25
-40
1,00
0,75
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
-60
0,75
1,00
1,25
1,50
1,75
2,00
2,25
Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management. Linear regression of price to book ratios on next 12 months price return from September 1995
through June 2015. Guide to the Markets - Europe. Data as of 30 June 2015.
42
2,50
2,75
3,00 x 3,25
GTM Europe
130
500
120
EM DPS
450
EM EPS (fwd)
110
400
DM DPS
100
DM EPS (fwd)
| 43
90
350
Equities
80
'00
300
'02
'04
'06
'08
'10
'12
'14
250
200
150
400
100
314
303
200
86
50
0
0
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
Emerging
markets
US
Source: (Left) FactSet, IBES, MSCI, J.P. Morgan Asset Management. (Top and bottom right) FactSet, MSCI, J.P. Morgan Asset Management.
Guide to the Markets - Europe. Data as of 30 June 2015.
43
Europe
Japan
Equity income
GTM Europe
| 44
Capital appreciation
Dividends
15
10
3,0%
5
0
4,7%
Equities
5,4%
6,0%
5,1%
12,6%
1,6%
4,4%
3,3%
1926-1929
1930s
4,4%
2,5%
1940s
1950s
1960s
1970s
2,7%
4,0%
1980s
1990s
2000s
2010-2014
1926-2014
Sources of income
+125%
Total return
Price return
1,8%
-2,7%
8
%
6
+58%
2,5
-4%
6,2
6,2
High
yield
EM
Debt
4,0
4
150
100
5,9%
4,2%
200
16,6%
15,3%
-5,3%
-5
-10
13,6%
13,9%
3,0
3,2
1,4
2
0,8
0,1
50
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Cash
Bunds
Euro
corp
Source: (Top) Ibbotson, Standard & Poors, J.P. Morgan Asset Management. (Bottom left) FactSet, FTSE, J.P. Morgan Asset Management. High dividend yield is the
FTSE 350 Higher Yield Index. (Bottom right) Barclays, BofA/Merrill Lynch, FactSet, FTSE, Tullett Prebon, J.P. Morgan Asset Management. Euro corporate: Barclays
Euro Aggregate Credit - Corporate; EM debt: J.P. Morgan EMBI Global; High yield: BofA/Merrill Lynch Developed Markets High Yield Constrained; Global REITs:
FTSE NAREIT Index; Converts: Barclays Global Convertibles; EM equity; MSCI EM. Yields for the bond indices are yield to worst and dividend yields for the equity
indices. *Returns in local currency. Guide to the Markets - Europe. Data as of 30 June 2015.
44
GTM Europe
Calendar-year return
Despite average intra-year drops of 15,6% (median 11,9%), annual returns are positive in 27 of 35 years
39
40
35
34
34
%
28
30
20
13
17
13
23
22
20
20
16
15
Intra-year decline
28
22
21
18
16
12
12
9
10
6
4
Equities
| 45
0
-10
-4
-3
-4
-7
-11
-11
-10
-15
-20
-4
-6
-8
-11
-6
-5
-6
-8
-9
-11
-16
-18
-19
-12
-12 -12
-12
-12
-18
-18
-22
-24
-25
-26
-30
-31
-31
-35
-40
-12 -12
-15
-15
-35
-37
-41
-50
-48
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
Source: FactSet, MSCI, J.P Morgan Asset Management. Returns are based on price only and do not include dividends. Intra-year decline refers to the largest market
fall from peak to trough within a short time period during the calendar year. Returns shown are calendar years from 1980 to 2014. Guide to the Markets - Europe.
Data as of 30 June 2015.
45
'10
'12
'14
Fixed income
Local
46
GTM Europe
| 46
2014
YTD
2Q15
Ten-yr
Ann.
8,8%
Euro HY
8,8%
22,4%
US IG
7,5%
11,3%
US HY
2,5%
-0,9%
Euro HY
-0,9%
9,0%
EM Debt
7,7%
16,2%
EM Debt
18,0%
2,8%
US HY
7,4%
20,9%
EM Debt
6,2%
9,7%
EM Debt
1,0%
-1,4%
Linkers
-1,4%
8,9%
US HY
7,6%
11,8%
US IG
8,1%
13,8%
US HY
15,5%
2,4%
Euro IG
2,4%
19,6%
US Treas.
5,1%
8,6%
US Treas.
0,0%
-2,9%
Euro IG
-2,9%
7,4%
Euro HY
7,4%
14,3%
Euro HY
14,3%
7,9%
US HY
4,4%
13,6%
Euro IG
13,6%
2,1%
Euro Gov
2,2%
16,7%
US HY
2,5%
7,6%
US IG
-0,9%
-3,7%
US HY
-0,0%
6,8%
US IG
5,5%
15,7%
Euro IG
15,7%
13,2%
US Treas.
5,9%
7,4%
Portfolio
5,4%
10,6%
Portfolio
11,6%
-2,7%
Portfolio
-0,3%
14,9%
Portfolio
6,6%
4,8%
Portfolio
0,1%
-4,3%
Portfolio
-2,2%
6,6%
Portfolio
5,5%
-3,8%
Euro IG
-3,8%
15,0%
US IG
18,7%
11,4%
Portfolio
7,3%
3,5%
Euro Gov
3,2%
10,5%
Euro Gov
11,2%
-3,0%
Linkers
-3,0%
12,4%
Euro Gov
11,1%
2,3%
Euro HY
2,3%
-4,5%
EM Debt
-0,9%
5,6%
US Treas.
4,4%
-4,0%
EM Debt
6,5%
-5,0%
EM Debt
-9,7%
7,0%
Linkers
7,0%
4,7%
Euro IG
4,7%
1,5%
Euro IG
1,5%
8,4%
Linkers
8,4%
-5,8%
US IG
-1,5%
8,4%
Euro IG
8,4%
0,8%
Linkers
0,8%
-5,0%
Euro Gov
-4,3%
5,0%
Euro Gov
4,9%
-6,7%
US IG
4,3%
-5,7%
US IG
4,6%
-22,3%
US HY
-26,1%
4,5%
Euro Gov
6,9%
2,1%
Linkers
2,1%
1,3%
Linkers
1,3%
8,1%
US IG
9,8%
-7,0%
US Treas.
-2,7%
5,5%
Euro HY
5,5%
-1,3%
Euro Gov
-1,2%
-5,1%
US Treas.
-1,6%
4,5%
Euro IG
4,5%
-7,8%
US Treas.
3,1%
-7,5%
US HY
2,6%
-32,8%
Euro HY
-32,8%
-6,6%
US Treas.
-3,6%
1,5%
Euro Gov
2,2%
-1,1%
Euro HY
-1,1%
0,4%
US Treas.
2,0%
-12,3%
EM Debt
-8,3%
2,2%
Linkers
2,2%
-1,6%
Euro IG
-1,6%
-6,7%
US IG
-3,2%
3,0%
Linkers
3,0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
28,9%
EM Debt
11,9%
9,0%
Euro HY
9,0%
3,7%
Linkers
3,7%
19,6%
US Treas.
13,7%
66,1%
Euro HY
66,1%
23,1%
US HY
15,1%
13,5%
US Treas.
9,8%
23,3%
Euro HY
23,3%
18,5%
US Treas.
2,8%
0,5%
Euro IG
0,5%
1,7%
Euro Gov
1,4%
9,1%
Euro Gov
6,2%
53,2%
US HY
58,1%
19,6%
EM Debt
11,8%
12,9%
EM Debt
9,2%
18,4%
US HY
2,8%
-0,0%
Euro Gov
-0,0%
0,0%
Euro IG
0,0%
5,3%
Linkers
5,3%
22,0%
EM Debt
25,9%
16,6%
US IG
9,0%
17,2%
US IG
1,7%
-0,5%
Linkers
-0,5%
-1,6%
Euro HY
-1,6%
0,3%
Portfolio
-3,0%
16,4%
Portfolio
18,9%
13,6%
Portfolio
4,8%
-0,9%
US HY
10,7%
-1,7%
US Treas.
9,0%
-0,0%
US IG
-4,9%
6,8%
Euro HY
6,8%
-1,2%
EM Debt
10,5%
-1,8%
Portfolio
3,8%
4,8%
Euro Gov
4,8%
-2,0%
Portfolio
4,2%
4,0%
Euro IG
4,0%
3,7%
Linkers
3,7%
Source: Barclays Capital, BofA/Merrill Lynch, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Annualised return covers period 2005 to
2014. Euro Gov.: Barclays Euro Agg. Government; US Treasuries: Barclays US Agg. Gov. Treasury; Linkers: Barclays Euro Gov. Inflation-Linked; US IG: Barclays
US Agg. Corporate Investment Grade; Euro IG: Barclays Euro Agg. Credit Corporate; US HY: BofA/Merrill Lynch US High Yield Constrained; Euro HY:
BofA/Merrill Lynch Euro Non-Financial High Yield Constrained; EM Debt: J.P. Morgan EMBI+. Hypothetical portfolio (for illustrative purposes only and should not be
taken as a recommendation): 20% Euro Gov.; 15% US Treasuries; 10% Linkers; 15% US IG; 10% Euro IG; 10% US HY; 5% Euro HY; 15% EM Debt. Returns are
unhedged in euro and local currencies. Guide to the Markets - Europe. Data as of 30 June 2015.
GTM Europe
Yield
# of issues
Mkt. value
($ billions)
1-3 years
1.280
3.109
2,0 years
0,34%
5-7 years
968
2.285
6,0
10+ years
938
3.581
1-3 years
95
5-7 years
10-20 years
Return*
| 47
10-year correlation
2Q15
YTD
10-year
Bund
10-year
Treasury
0,22%
0,11%
1,83%
0,44
0,17
1,10
0,62
-1,91
0,96
0,83
0,58
20,4
2,37
1,55
-9,42
0,83
0,83
0,67
2.451
1,9 years
0,63%
0,56%
0,14%
0,68%
0,47
0,65
37
1.001
6,0
1,89
1,58
-1,10
1,01
0,74
0,96
13
119
13,0
2,50
2,11
-3,28
-0,70
0,79
1,00
387
5.040
7,1 years
2,78%
2,40%
-0,74%
0,31%
0,64
0,80
IG credit
9.288
7.657
8,9
2,83
2,39
-1,55
-2,71
0,09
0,26
High yield
3.447
2.253
6,4
6,54
6,27
1,28
1,94
-0,28
-0,21
Floating rate
520
364
2,0
0,74
0,70
0,18
0,42
-0,24
-0,20
Convertibles
795
359
0,0
3,02
3,04
1,44
3,35
-0,46
-0,46
490
687
11,3
5,79
5,56
-0,26
2,26
0,09
0,11
1.199
299
7,8
5,22
5,20
1,32
3,70
0,05
0,05
264
1.570
4,9
6,79
6,34
0,19
2,44
-0,04
0,03
Europe Treasuries
Fixed income
US Treasuries
Sector
MBS
EMD LC sovereign
47
Source: Barclays Capital, FactSet, J.P. Morgan Asset Management. Fixed income sectors shown are represented by the following indices: Europe Treasuries:
Barclays Pan-European Aggregate Treasuries indices; US Treasuries: Barclays US Treasury indices; MBS: Barclays US Aggregate Securitized-MBS; IG Credit:
Barclays Global Aggregate-Corporates; High yield: Barclays Global High Yield; Floating rate: Barclays US Floating Rate Notes; Convertibles: Barclays Global
Convertibles Composite; EMD USD sovereign: J.P. Morgan EMBIG; EMD USD Corporate: J.P. Morgan CEMBI; EMD LC sovereign: J.P. Morgan GBI-EM. Credit
yields are yield to worst. *Return is in local currency of the index and unhedged. Guide to the Markets - Europe. Data as of 30 June 2015.
GTM Europe
Real rates
% of nominal GDP
80
| 48
Projections
Japan
%
Eurozone
US
UK
60
2
1
Fixed income
40
0
-1
20
-2
-3
-4
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
0
'06
'07
'08
'09
'10
'11
'12
Source: (Both charts) Bank of England, Bank of Japan, ECB, US Federal Reserve, J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Core
consumer price index inflation is the benchmark core CPI for each country, except Japan which is CPI less food and consumer tax. Guide to the Markets - Europe.
Data as of 30 June 2015.
48
'13
'14
'15
GTM Europe
Country
Greece
Portugal
US
Italy
Spain
UK
Ireland
France
Netherlands
Germany
Switzerland
Portugal
US
UK
Spain
Ireland
France
Germany
Japan
4
Fixed income
Yield (%)
Current
14,98%
2,94
2,35
2,30
2,27
2,03
1,62
1,19
1,04
0,77
0,10
Change (bps)
2Q15
From Dec 2013
351bps
672bps
127
-317
43
-68
107
-181
106
-191
43
-99
98
-181
72
-119
78
-120
61
-118
16
-117
0,8
10 yr bonds
0,6
2
0,4
0,2
0,0
-0,2
0
Jun 13
2 yr bonds
-0,4
Dec 13
Jun 14
Dec 14
Jun 15
'10
'11
'12
'13
Source: (All charts) FactSet, Tullett Prebon, J.P. Morgan Asset Management. *Rolling six-month correlation of weekly change in yield. Guide to the Markets - Europe.
Data as of 30 June 2015.
49
| 49
'14
GTM Europe
How to
interpret this
chart
Max
15
10
Average
Current
Min
Fixed income
Treasury:
Europe
1-3 years
5-7 years
10+ years
| 50
Floating Investmentrate
grade credit
High
yield
Illustration of the impact a 1% rise in local interest rates may have on selected indices
Assumes a parallel shift in the yield curve and spreads are maintained
0
Price return
Total return
-5
-10
-15
50
Treasury:
Europe
1-3 years
5-7 years
10+ years
Floating
rate
Investmentgrade credit
High
yield
GTM Europe
$ billions
600
12.000
Dealer inventories
US corporate debt
outstanding*
500
800
10.000
152
700
400
8.000
| 51
600
98
89
500
Fixed income
300
6.000
400
59
48
300
200
29
4.000
26
200
17
100
2.000
100
0
0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Global
HY
EMD
Sovereign
EMD
USD
Global IG
US IG
Euro
US
UK Gilts
Aggregate
Treasuries
Govt
Source: (Left) Barclays, Federal Reserve Bank of New York, J.P. Morgan Asset Management. (Right) Barclays, FactSet, J.P. Morgan Asset Management. *US
corporate debt outstanding is the Barclays US Corporate Investment Grade. Interest rate risks chart assumes that all investments are issued at par and are made on
30 June 2015, with no reinvestment of income and with no consideration to convexity characteristics. Fixed income sectors shown are provided by Barclays Capital
and are represented by Barclays Global High Yield, Barclays Emerging Market Local Currency Government, Barclays Emerging Markets USD Aggregate, Barclays
Global Credit Corporate, Barclays US Aggregate Credit Corporate Investment Grade, Barclays US Aggregate Government Treasury (7-10 Y), Barclays UK
Gilt (7-10 Y), Barclays Euro Aggregate Government Treasury (7-10 Y). Guide to the Markets - Europe. Data as of 30 June 2015.
51
Government bonds
GTM Europe
Britain
leaves ERM
1992
Black Friday
1987
ECB QE
2015
US
UK
12
Eurozone
Asian currency
crisis
1997
Fall of Berlin
Wall 1989
0
'79
'84
'89
10
15
Germany
Finland
Years
20
30
BoJ QE
2013
Fed QE3
2012
Fed QE
2008
9/11 attacks
2001
'94
Fixed income
Fed QE2
2010
BoE QE
2009
8
Oil shock
1981
| 52
'99
'04
'09
'14
France
30
% of total outstanding
30 June 2015:
16,4%
55%
Sweden
Ireland
20
Italy
10
Spain
Negative yields
Positive yields
0
Aug 14
Oct 14
Dec 14
Feb 15
Source: (Top and bottom left) FactSet, Tullett Prebon, J.P. Morgan Asset Management. (Bottom right) BofA/Merrill Lynch, Bloomberg,
J.P. Morgan Asset Management. *The lowest yield reached for each country during April 2015. Guide to the Markets - Europe. Data as of 30 June 2015.
52
Apr 15
Jun 15
Investment-grade bonds
| 53
GTM Europe
Option-adjusted spreads*
billions
750
600
UK
US
Eurozone
bps
500
Gross issuance
Net issuance
500
YTD:
255bn
400
250
300
200
100
Fixed income
0
'06
-250
'07
'08
'09
'10
'11
'12
'13
'08
'14
'09
'10
US corporate issuance
Option-adjusted spreads*
350
bps
300
$ billions
1.200
$
1.000
Energy
Industrials ex-energy
'11
'12
'14
Net issuance
Financials
250
200
600
150
400
100
200
50
0
'10
'11
'12
'13
YTD:
658bn
800
Utilities
'14
'15
'15
Gross issuance
'10
'11
'12
'13
Source: (Top and bottom left) Barclays, FactSet, J.P. Morgan Asset Management. (Top and bottom right) J.P. Morgan Securities, J.P. Morgan Asset Management.
*Option-adjusted spread is the spread of a fixed income security rate over the risk-free rate, adjusted to take into account any embedded options.
Guide to the Markets - Europe. Data as of 30 June 2015.
53
'13
'14
'15
| 54
GTM Europe
Average
since 1986
Asset class
20
%
HY defaults (lhs)
15
Latest
4,0%
1,9%
576
549
439
508
2.000
bps
1.500
10
1.000
500
Fixed income
'94
'96
'98
'00
'02
'04
'06
'08
'10
$ billions
400
$
60
'14
YTD:
$185,4bn
Refinancing
General*
300
50
'12
Acquisition/LBO
40
200
30
20
100
10
0
0
'82
'85
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'05
'06
'07
'08
'09
'10
'11
Source: (Top) Credit Suisse, J.P. Morgan Economic Research, US Treasury, 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. Leveraged loan spread is
the discount margin to maturity. (Bottom left and right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. *General issuance includes issuance for
the purpose of paying dividends. Guide to the Markets - Europe. Data as of 30 June 2015.
54
'12
'13
'14
'15
GTM Europe
Asset class
Average
Latest
| 55
654
396
2.500
bps
5,2%
0,7%
2.000
15
1.500
10
1.000
500
N/A
0
'98
'99
'00
'01
'02
'03
'04
'05
'06
Fixed income
'08
'09
'10
'11
'12
'13
'14
% of index
100
%
80
60
Other 17%
Energy 18%
Industrial 19%
BB
40
30
20
0
Other 7%
Energy 2%
Industrial 29%
Telecom 17%
Telecom 10%
Financial 7%
Financial 13%
Consumer 28%
Consumer 31%
US HY
Euro HY
0
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
Source: (Top) BofA/Merrill Lynch, Credit Suisse, FactSet, J.P. Morgan Asset Management. (Bottom left) FactSet, J.P. Morgan Economic Research,
J.P. Morgan Asset Management. (Bottom right) Barclays, FactSet, J.P. Morgan Asset Management. Spread to worst is BofA/Merrill Lynch Euro Non-Financial High Yield
Constrained. US HY is the J.P. Morgan Domestic HY index and Euro HY is the J.P. Morgan Euro HY index. Guide to the Markets - Europe. Data as of 30 June 2015.
55
'15
billions
90
'07
GTM Europe
14
%
EM sovereign
(local currency)
13
EM sovereign (USD)
12
EM corporate (USD)
11
6
%
4
Developed markets
Emerging markets
2
0
-2
-4
-6
-8
10
Fixed income
EM sovereign (USD)
7
6,0
5,5
5,0
4,5
4
'01
'03
'05
'07
'09
'11
'13
4,0
'09
Baa corporate
bond (USD)
'10
'11
'12
Source: (Left and top right) FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. (Bottom right) Moodys, J.P. Morgan Economic Research,
FactSet, J.P. Morgan Asset Management. EM sovereign (local currency) is the J.P. Morgan GBI-EM; EM sovereign (USD) is the J.P. Morgan EMBI+; EM corporate
(USD) is the J.P. Morgan CEMBI. 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. Guide to the Markets - Europe. Data as of 30 June 2015.
56
'13
'14
| 56
GTM Europe
$ trillions
3,5
GBI-EM by region
$
3,0
9%
EM corporate (USD)
| 57
Asia
22%
Europe
EM sovereign (USD)
EM sovereign (local currency)
Latin America
40%
29%
2,5
Other
2,0
Fixed income
1,5
1,0
60
0,5
40
BB
20
IG
0,0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Source: (All charts) J.P. Morgan Economic Research, J.P. Morgan Asset Management. 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. EM corporate (USD) is the CEMBI; EM sovereign (USD) is the
J.P. Morgan EMBI Global; EM sovereign (local currency) is the Global Bond Index Emerging Market Broad Diversified Index (GBI-EM). Guide to the Markets - Europe.
Data as of 30 June 2015.
57
Unrated
58
GTM Europe
| 58
2009
2010
2011
2012
2013
2014
YTD
2Q15
Ten-yr
Ann.
G ovt bonds
10 , 2 %
EME
62 ,8 %
REITS
27 ,6 %
REITS
7 ,3 %
REITS
2 0 , 1%
DM Equitie s
29,6%
REITS
2 7 , 1%
EME
5 ,8 %
Cmdty
4,7%
EME
10 , 3 %
Cmdty
16 , 2 %
Ca sh
5,7%
HY bonds
59 ,4 %
Cmdty
16 , 8 %
EMD
7 ,0 %
HY bonds
19 , 6 %
He dge
Funds
9,7%
DM Equitie s
10 , 4 %
DM Equitie s
4,5%
HY bonds
1, 3 %
HY bonds
8,0%
DM Equitie s
16 , 1%
He dge
Funds
12 , 6 %
IG bonds
- 8,6%
EMD
34 ,2 %
HY bonds
14 , 8 %
G ovt bonds
6 ,3 %
EMD
17 , 9 %
Portfolio
9,3%
EME
5 ,6 %
EMD
2 ,8 %
He dge
Funds
0,8%
EMD
7,8%
EMD
12 , 3 %
He dge
Funds
13 , 9 %
G ovt bonds
10 , 6 %
EMD
- 14 , 7 %
REITS
27 ,4 %
EME
14 , 4 %
IG bonds
4 ,3 %
EME
17 , 4 %
HY bonds
7 ,3 %
P ortfolio
5 ,0 %
HY bonds
1, 9 %
EME
0,8%
REITS
7,5%
P ortfolio
10 , 0 %
P ortfolio
13 , 8 %
P ortfolio
8,5%
He dge
Funds
- 19 , 1%
P ortfolio
27 ,0 %
EMD
12 , 8 %
HY bonds
3 , 1%
DM Equitie s
16 , 4 %
EME
3 ,8 %
EMD
4 ,8 %
P ortfolio
1, 0 %
EMD
0,4%
DM Equitie s
6,9%
REITS
8,3%
HY bonds
13 , 7 %
IG bonds
6,7%
P ortfolio
- 23 ,2 %
DM Equitie s
26 ,5 %
He dge
Funds
10 , 9 %
Ca sh
1, 7 %
P ortfolio
12 , 3 %
REITS
3 ,2 %
He dge
Funds
4 , 1%
Ca sh
0 , 1%
Ca sh
0,0%
P ortfolio
6,5%
He dge
Funds
7,6%
EMD
10 , 0 %
DM Equitie s
5 ,2 %
HY bonds
- 26 ,9 %
IG bonds
19 , 2 %
P ortfolio
10 , 8 %
P ortfolio
- 1, 1%
IG bonds
11, 2 %
IG bonds
0 ,3 %
IG bonds
3 , 1%
He dge
Funds
0,0%
DM Equitie s
- 0 ,5 %
He dge
Funds
5,8%
HY bonds
3,6%
IG bonds
7,2%
EMD
5,2%
Cmdty
- 35 ,6 %
Cmdty
18 , 9 %
DM Equitie s
10 , 6 %
He dge
Funds
- 2 ,5 %
He dge
Funds
7,7%
Ca sh
0 ,2 %
Ca sh
0 ,3 %
Cmdty
- 1, 6 %
P ortfolio
- 0,5%
IG bonds
4,3%
Ca sh
2,2%
G ovt bonds
6,4%
Ca sh
4,4%
REITS
- 37 ,3 %
He dge
Funds
18 , 6 %
G ovt bonds
5 ,9 %
DM Equitie s
- 5,0%
G ovt bonds
1, 8 %
EMD
- 4 , 1%
HY bonds
0 ,0 %
IG bonds
- 2,7%
G ovt bonds
- 1, 5 %
G ovt bonds
3 , 1%
IG bonds
- 3,6%
Ca sh
3,0%
HY bonds
3,2%
DM Equitie s
- 38 ,3 %
G ovt bonds
2,6%
IG bonds
5 ,8 %
EME
- 12 , 5 %
Ca sh
1, 2 %
G ovt bonds
- 4 ,3 %
G ovt bonds
- 0 ,8 %
G ovt bonds
- 3,7%
IG bonds
- 1, 6 %
Ca sh
2,2%
G ovt bonds
- 6,7%
Cmdty
2 , 1%
REITS
- 17 , 8 %
EME
- 45 ,7 %
Ca sh
2,3%
Ca sh
1, 1%
Cmdty
- 13 , 3 %
Cmdty
- 1, 1%
Cmdty
- 9 ,5 %
Cmdty
- 17 , 0 %
REITS
- 5,2%
REITS
- 8,9%
Cmdty
- 1, 9 %
2005
2006
2007
EME
3 5 ,8 %
REITS
34 ,4 %
EME
33 ,6 %
Cmdty
2 1, 4 %
EME
28 ,8 %
DM Equitie s
16 , 3 %
2008
Source: Barclays Capital, Bloomberg, Credit Suisse/Tremont, MSCI, FactSet, J.P. Morgan Economic Research, NAREIT, J.P. Morgan Asset Management. Annualised return
covers the period from 2005 to 2014. EME: MSCI EM Emerging Market; Govt bonds: Barclays Global Aggregate Government Treasuries; HY bonds: Barclays Global High Yield;
EMD: Barclays Emerging Markets (USD); IG bonds: Barclays Global Aggregate Corporates; Cmdty: Bloomberg Commodity; REITS: FTSE NAREIT All REITS; DM equities:
MSCI World; Hedge funds: Credit Suisse/Tremont Hedge Fund; Cash: JP Morgan Cash Index ECU (3M). Hypothetical portfolio (for illustrative purposes only and shouldnt be
taken as a recommendation): 30% DM equities; 10% EM equities; 15% IG bonds; 12.5% government bonds; 7.5% HY bonds; 5% EMD; 5% commodities; 5% cash; 5% REITS
and 5% hedge funds. Returns are unhedged. Guide to the Markets - Europe. Data as of 30 June 2015.
GTM Europe
| 59
10-year correlations
MSCI
Europe
S&P 500
MSCI EM
MSCI Asia
ex-Japan
Pan Europe
bonds
EM debt
High yield
bonds
Global
bonds
Cmdty
Hedge
funds
Leveraged
loans
Real
estate
MSCI
Europe
1,00
0,79
0,86
0,84
-0,08
0,63
0,77
-0,22
0,45
0,81
0,74
-0,11
S&P 500
0,47
1,00
0,67
0,71
0,05
0,35
0,50
0,11
0,39
0,57
0,60
-0,08
MSCI EM
0,79
0,49
1,00
0,96
-0,10
0,68
0,76
-0,15
0,58
0,83
0,77
-0,26
MSCI Asia
ex-Japan
0,76
0,62
0,97
1,00
0,02
0,62
0,71
-0,03
0,44
0,74
0,72
-0,28
Pan Europe
bonds
0,56
0,49
0,71
0,76
1,00
0,19
-0,16
0,70
-0,30
-0,33
-0,22
-0,12
EM debt
0,42
-0,13
0,61
0,48
0,48
1,00
0,81
-0,10
0,40
0,62
0,69
-0,34
High yield
bonds
Global
bonds
0,35
-0,33
0,11
-0,04
0,02
0,69
1,00
-0,39
0,48
0,84
0,92
-0,47
0,58
0,72
0,81
0,87
0,82
0,26
-0,31
1,00
-0,13
-0,47
-0,30
-0,13
Cmdty
0,49
0,22
0,54
0,44
0,28
0,63
0,39
0,45
1,00
0,61
0,59
-0,03
Hedge
funds
0,68
0,38
0,42
0,38
0,33
0,36
0,55
0,17
0,35
1,00
0,87
-0,18
Leveraged
loans
0,62
0,09
0,40
0,29
0,09
0,60
0,80
0,04
0,67
0,67
1,00
-0,42
Real
estate
0,15
-0,18
-0,05
-0,06
-0,09
-0,06
-0,01
-0,07
-0,03
0,13
-0,22
1,00
Three-year correlations
59
Source: Barclays, Bloomberg, Citigroup, Credit Suisse, J.P. Morgan Economic Research, MSCI, NCREIF, Standard & Poors, US Federal Reserve, J.P. Morgan Asset Management.
Pan Europe bonds: Citigroup Europe Government Bond; EM debt: JP Morgan EMBI Global; High yield bonds: JP Morgan Domestic High Yield; Global bonds: Barclays Global Aggregate; Lev.
Loans: Credit Suisse Leveraged Loans; Cmdty: Bloomberg Commodity; Hedge Funds: CS/Tremont Multi-Strategy; Real estate: blended index, which includes NCREIF Property Index data
and Federal Reserve estimates of changes in capital value. Ten-year correlation values are calculated for period June 2005 to June 2015. All indices except Real Assets are total return
based on quarterly return data in euros; real asset correlations are based on quarterly data and are as at 31 March 2015. Guide to the Markets - Europe. Data as at 31 March 2015.
Asset volatility
GTM Europe
| 60
Average
31
78
18
Latest
32
92
18
100
60
20
'10
'11
'12
'13
'14
50
Germany (VDAX)
S&P 500 (VIX)
140
100
0
-50
60
-100
'07
'08
'09
'10
'11
'12
'13
'14
'15
20
'10
'11
'12
'13
Source: (Top and bottom right) CBOE, Deutsche Boerse, BofA/Merrill Lynch, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom left) FactSet,
J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
60
'15
'14
'15
Commodity returns
2005
2006
2007
GTM Europe
2008
2009
2010
2011
2012
2013
2014
2Q15
Ten-yr
Ann.
Copper
56,1%
Nickel
167,2%
Wheat
52,1%
Gold
2,4%
Copper
129,6%
Silver
81,6%
Gold
9,6%
Corn
18,9%
Crude Oil
6,8%
Coffee
37,7%
Wheat
3,5%
Wheat
19,3%
Gold
8,0%
Nat. gas
52,8%
Copper
45,1%
Crude Oil
40,1%
Corn
-23,1%
Nickel
54,6%
Coffee
66,8%
Corn
1,1%
Wheat
9,7%
Nat. gas
5,0%
Nickel
7,3%
Corn
0,0%
Crude Oil
17,5%
Copper
6,9%
Silver
25,0%
Corn
40,0%
Gold
24,2%
Silver
-26,6%
Silver
47,4%
Nickel
32,0%
Crude Oil
-3,7%
Silver
7,0%
Copper
-8,8%
Gold
-1,8%
Crude Oil
0,0%
Corn
7,8%
Silver
6,0%
Crude Oil
21,9%
Silver
37,8%
Silver
9,1%
Coffee
-27,3%
Alum inium
33,6%
Corn
30,5%
Silver
-10,2%
Gold
6,0%
Nickel
-20,1%
Alum inium
-3,1%
Silver
-0,9%
Nat. gas
1,9%
Nickel
0,4%
Alum inium
15,5%
Wheat
20,0%
Copper
4,1%
Nat. gas
-38,0%
Gold
22,7%
Copper
29,4%
Coffee
-11,2%
Copper
4,9%
Alum inium
-20,8%
Wheat
-9,5%
Gold
-1,3%
Gold
-1,0%
Corn
-3,1%
Gold
13,8%
Alum inium
19,4%
Corn
-2,3%
Wheat
-39,4%
Coffee
10,1%
Gold
28,5%
Alum inium
-21,7%
Alum inium
-4,1%
Wheat
-27,2%
Corn
-13,3%
Copper
-7,7%
Nickel
-3,7%
Coffee
-5,8%
Nickel
-8,1%
Gold
16,0%
Coffee
-6,4%
Alum inium
-41,0%
Crude Oil
4,2%
Wheat
21,0%
Copper
-24,5%
Nickel
-10,3%
Gold
-28,7%
Copper
-16,6%
Nat. gas
-9,4%
Coffee
-3,9%
Alum inium
-6,1%
Wheat
-8,8%
Coffee
1,0%
Nickel
-16,9%
Copper
-53,8%
Corn
-10,3%
Alum inium
5,2%
Nickel
-24,7%
Crude Oil
-11,8%
Corn
-30,3%
Silver
-20,5%
Alum inium
-11,1%
Copper
-4,8%
Wheat
-8,1%
Coffee
-11,7%
Crude Oil
-16,7%
Alum inium
-18,9%
Crude Oil
-53,9%
Wheat
-26,1%
Crude Oil
3,7%
Wheat
-34,0%
Nat. gas
-30,7%
Coffee
-30,6%
Nat. gas
-30,8%
Nickel
-21,5%
Silver
-6,6%
Crude Oil
-9,4%
Corn
-18,4%
Nat. gas
-72,1%
Nat. gas
-22,9%
Nickel
-56,8%
Nat. gas
-51,6%
Nat. gas
-40,7%
Nat. gas
-47,1%
Coffee
-41,6%
Silver
-36,7%
Crude Oil
-41,7%
Coffee
-24,6%
Alum inium
-7,3%
Nat. gas
-34,1%
Source: Bloomberg, FactSet, J.P. Morgan Asset Management. Returns are in base currency of the index. Annualised period covers 2005 to 2014.
Guide to the Markets - Europe. Data as of 30 June 2015.
61
YTD
| 61
Commodities
GTM Europe
Commodity volatility
Gold price
2.500
5,9
Natural gas
Grains
3,6
Industrial metals
3,6
Precious metals
Bloomberg Cmdty
Index
Gold price
$/oz.
4,4
Crude oil
| 62
31 Jan 1980:
$2.086
2.000
3,2
2,5
2,4
ACWI
Livestock
1.500
2,0
0
8
%
6
Bloomberg
Commodity Index
Headline CPI*
80
%
60
40
20
-2
-20
-4
-40
-6
-60
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
30 Jun
2015:
$1.175
1.000
500
0
'69
'74
'79
'84
'89
'94
Source: (Top and bottom left) Bloomberg, MSCI, J.P. Morgan Asset Management. (Right) BLS, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer
Price Index. Guide to the Markets - Europe. Data as of 30 June 2015.
62
'99
'04
'09
'14
GTM Europe
Oil importers and exporters
US
Saudi Arabia
Russia
| 63
Canada
14
Norway
12
UK
-1,1
0,9
1,6
US
10
2,2
Italy
8
6
'01
'03
'05
'07
'09
'11
'13
'15
YTD change
$ per barrel
Brent Crude
WTI
150
6,7%
11,1%
125
2,4
Germany
2,4
3,6
Japan
Russia
-14,0
0,5
Brazil
100
2,4
China
75
3,2
Turkey
50
5,1
South Africa
25
0
France
5,3
India
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
-8
-14
-6
-4
-2
Source: (Top left) EIA, J.P. Morgan Asset Management. (Bottom left) FactSet, J.P. Morgan Asset Management. (Right) EIA, IMF, J.P. Morgan Asset Management.
Guide to the Markets - Europe. Data as of 30 June 2015.
63
% 6
100
25
94
Men
Expected savings
shortfall (years)
yrs
Savings expected
to last (years)
Women
78
80
| 64
GTM Europe
20
7
70
11
66
10
15
60
10
10
10
8
6
47
10
40
36
14
9
UAE
10
20
Brazil
Canada
US
Singapore
90 years
Australia
80 years
France
UK
Source: (Left) ONS 2010-2012 Life Tables, J.P. Morgan Asset Management. (Right) The Future of Retirement: A new reality study by HSBC,
J.P. Morgan Asset Management. Figures represent the expected portion of retirement that will not be covered by retirement savings based on survey data.
Guide to the Markets - Europe. Data as of 30 June 2015.
64
10
Mexico
India
12
11
China
11
10
Average
Aug 2000:
-23,8%
5
Average 12-month MSCI Europe Index return:
After a peak: -3,4%
Jun 2007:
-22,5%
-5
Jul 1989:
+4,4%
May 1986:
+12,1%
| 65
GTM Europe
Jun 2015
Jun 1995:
+17,7%
Nov 2010:
-8,3%
-10
-15
Feb 1988:
+19,6%
-20
Nov 1996:
+30,1%
Mar 2003:
+32,5%
-25
-30
Dec 2012:
+18,1%
Mar 1993:
+19,4%
Mar 2009:
+44,7%
-35
'85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
Source: European Commission, 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 series of higher highs. Subsequent 12-month MSCI Europe Index returns are price returns only, which excludes dividends.
Total period return is the average 12-month rolling return. Guide to the Markets - Europe. Data as of 30 June 2015.
65
'11
'13
GTM Europe
$1.175 bn
Equity funds
| 66
Bond funds
Institutional
+$654 billion
1.000
0
Retail
-$707 billion
$837 bn
-400
800
-800
'07
600
'09
'11
'12
'13
'14
'15
Equity funds
Bond funds
40
0
200
$107 bn
$64 bn
0
-40
-80
1997-2000
2009-2012
'10
'11
Source: (Left) FactSet, Strategic Insight, J.P. Morgan Asset Management. (Top and bottom right) FactSet, Investment Company Institute,
J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 30 June 2015.
66
'10
400
'08
'12
'13
'14
GTM Europe
Bonds
61%
50/50 portfolio
50
48%
49%
30%
25
24%
24%
21%
17%
17%
18%
13%
1%
-7%
-3%
-1%
-3%
4%
4%
0%
-18%
-24%
-25
-43%
-50
1-yr rolling
5-yr rolling
10-yr rolling
Source: Strategas/Ibbotson, J.P. Morgan Asset Management. Returns shown are per annum and are calculated based on monthly returns from 1950 to May 2015
and include dividends. Guide to the Markets - Europe. Data as of 30 June 2015.
67
1%
15%
20-yr rolling
| 67
2005
GTM Europe
YTD
2Q15
Ten-yr Ten-yr
Ann.
Ann.
Return Volatility
2006
2007
2008
2009
2010
2011
2012
2013
2014
Real Estate
21,4%
Private
Equity
29,9%
Private
Equity
22,9%
Glbl. Macro
4,7%
Rel. Val.
23,0%
Private
Equity
18,2%
Real Estate
16,0%
Private
Equity
13,1%
Private
Equity
19,8%
Real Estate
12,5%
Mrgr. Arb.
4,3%
Distressed
2,2%
Private
Equity
11,8%
Private
Equity
10,4%
Private
Equity
21,3%
Real Estate
16,3%
Real Estate
16,0%
Eq. Mkt.
Ntrl.
-3,0%
Distressed
20,2%
Real Estate
16,4%
Private
Equity
7,4%
Real Estate
10,9%
Distressed
15,1%
Private
Equity
7,3%
HF Agg.
3,6%
Mrgr. Arb.
2,1%
Real Estate
7,1%
Distressed
9,2%
Distressed
10,4%
Distressed
15,3%
Glbl. Macro
11,4%
Mrgr. Arb.
-6,7%
HF Agg.
18,6%
Rel. Val.
12,5%
Mrgr. Arb.
2,3%
Rel. Val.
9,7%
Real Estate
13,9%
Glbl. Macro
5,8%
Real Estate
3,4%*
HF Agg.
2,0%
Rel. Val.
6,4%
Real Estate
8,9%
HF Agg.
9,1%
Mrgr. Arb.
14,6%
HF Agg.
11,0%
Real Estate
-10,0%
Private
Equity
15,3%
Distressed
12,2%
Rel. Val.
0,8%
Distressed
8,5%
HF Agg.
9,6%
Rel. Val.
5,3%
Rel. Val.
2,9%
Rel. Val.
1,9%
Distressed
6,0%
HF Agg.
8,0%
Eq. Mkt.
Ntrl.
6,1%
HF Agg.
13,3%
Rel. Val.
10,0%
Rel. Val.
-17,3%
Mrgr. Arb.
11,9%
HF Agg.
8,5%
Distressed
-0,0%
HF Agg.
4,4%
Rel. Val.
7,5%
HF Agg.
4,3%
Eq. Mkt.
Ntrl.
2,3%
Eq. Mkt.
Ntrl.
1,1%
HF Agg.
5,3%
Rel. Val.
7,2%
Glbl. Macro
6,1%
Rel. Val.
12,2%
Mrgr. Arb.
8,9%
HF Agg.
-18,7%
Glbl. Macro
6,9%
Mrgr. Arb.
4,6%
Glbl. Macro
-0,7%
Eq. Mkt.
Ntrl.
3,1%
Eq. Mkt.
Ntrl.
6,4%
Eq. Mkt.
Ntrl.
3,2%
Glbl. Macro
2,3%
Glbl. Macro
-0,7%
Mrgr. Arb.
4,9%
Glbl. Macro
4,6%
Mrgr. Arb.
5,5%
Glbl. Macro
8,2%
Distressed
6,8%
Distressed
-22,3%
Eq. Mkt.
Ntrl.
-1,7%
Glbl. Macro
3,2%
Eq. Mkt.
Ntrl.
-1,5%
Mrgr. Arb.
1,8%
Mrgr. Arb.
5,3%
Mrgr. Arb.
1,9%
Distressed
1,3%
Real Estate
-
Glbl. Macro
4,4%
Mrgr. Arb.
4,0%
Rel. Val.
5,3%
Eq. Mkt.
Ntrl.
7,0%
Eq. Mkt.
Ntrl.
5,7%
Private
Equity
-25,8%
Real Estate
-29,8%
Eq. Mkt.
Ntrl.
2,5%
HF Agg.
-2,0%
Glbl. Macro
-1,3%
Glbl. Macro
0,1%
Distressed
1,2%
Private
Equity
-
Private
Equity
-
Eq. Mkt.
Ntrl.
2,7%
Eq. Mkt.
Ntrl.
3,0%
Source: FactSet, HFRI, NCREIF, The Burgiss Group, J.P. Morgan Asset Management. Hedge fund indices include distressed and restructuring (Distressed), relative
value (Rel. Val.), global macro (Glbl. Macro), merger arbitrage (Mrgr. Arb.), equity market neutral (Eq. Mkt. Ntrl.), and the aggregate (HF Agg.). Annualised volatility
and returns cover the period from 2005 to 2014. *YTD Real Estate returns are 1Q15 returns as no further data is available for 2015 yet. Private Equity 2015 returns
are also unavailable due to a lag in data. Returns may fluctuate as hedge fund reporting occurs on a lag. Guide to the Markets - Europe. Data as of 30 June 2015.
68
| 68
GTM Europe
| 69
40% Stocks
40% Bonds
20% Alternatives
Annualised return %
20% Stocks
60% Bonds
20% Alternatives
100% Stocks
0% Bonds
70% Stocks
30% Bonds
Alternatives sub-portfolio*
50% Stocks
50% Bonds
8
Real
estate
30% Stocks
70% Bonds
Hedge
funds
Private
equity
0% Stocks
100% Bonds
6
3
11
13
15
Annualised volatility %
Source: Barclays, Bloomberg, Hedge Fund Research, NCREIF, S&P, The Burgiss Group, J.P. Morgan Asset Management. Data period from January 1990 to
December 2014, utilising annual rebalancing. Stocks represents the S&P 500 Index, and Bonds represents the Barclays U.S. Aggregate Bond Index.
*Alternatives represents a hypothetical sub-portfolio chosen to replicate investors preferred exposure from Global Alternatives Survey 2013 by Towers Watson. All
portfolios are for illustrative purposes only and should not be taken as a recommendation. Burgiss Index Pooled return for 4Q14 is not yet available so 3Q14 Pooled
Return is used as a proxy. Past performance may not be indicative of future results. Indices are shown for illustrative purposes. Guide to the Markets - Europe. Data
as of 30 June 2015.
69
17
19
Alternative strategies
GTM Europe
OECD Infrastructure
16
Recession
%
14
Electric
12
-1,0
-2
10
Utility bond
Natural gas
-3,9
S&P up months
-4
10 yr US
Treasury
0
'70
'76
'82
'88
'94
'00
'06
'12
-1
Bond up months
-0,7
Bond down months
Source: (Left) Bloomberg, Regulatory Research Associates, J.P. Morgan Asset Management. (Top right) FactSet, Hedge Fund Research, Standard and Poors,
J.P. Morgan Asset Management. (Bottom right) Barclays Capital, FactSet, Hedge Fund Research, J.P. Morgan Asset Management. S&P 500 is total return
performance. HFRI FW is Hedge Fund Research Index Fund Weighted. US bonds is the Barclays Capital US Aggregate Bond Index. Guide to the Markets - Europe.
Data as of 30 June 2015.
70
| 70
The MSCI China Index is an unmanaged index considered representative of stocks of China.
The MSCI KOKUSAI Index is a free float-adjusted market capitalization index that is designed to measure the equity
market performance of developed markets excluding Japan. The MSCI KOKUSAI Index consists of the following 23
developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Israel, Italy, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland,
the United Kingdom, and the United States*.
The Nikkei 225 Index is a price-weighted average of the 225 top-rated Japanese companies listed in the first section of
the Tokyo Stock Exchange.
The Tokyo Price Index (TOPIX) is a capitalization-weighted index lists all firms that are considered to be under the 'first
section' on the TSE, which groups all of the large firms on the exchange into one pool. The second section groups all of
the remaining smaller firms.
The FTSE 100 Index is an index of the 100 largest companies (by market capitalization) in the United Kingdom.
The FTSE All Share Index is an index of the 630 largest companies (by market capitalization) in the United Kingdom.
The MSCI Value and Growth IndicesSM cover the full range of developed, emerging and All Country MSCI Equity
indexes. As of the close of May 30, 2003, MSCI implemented an enhanced methodology for the MSCI Global Value and
Growth Indices, adopting a two dimensional framework for style segmentation in which value and growth securities are
categorized using different attributes - three for value and five for growth including forward-looking variables. The
objective of the index design is to divide constituents of an underlying MSCI Standard Country Index into a value index
and a growth index, each targeting 50% of the free float adjusted market capitalization of the underlying country index.
Country Value/Growth indices are then aggregated into regional Value/Growth indices. Prior to May 30, 2003, the
indices used Price/Book Value (P/BV) ratios to divide the standard MSCI country indices into value and growth indices.
All securities were classified as either "value" securities (low P/BV securities) or "growth" securities (high P/BV
securities), relative to each MSCI country index.
The following MSCI Total Return IndicesSM are calculated with gross dividends:
This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend
distributed to individuals resident in the country of the company, but does not include tax credits.
The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed
market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed
market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market
performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed
Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore.
Credit Suisse/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted
hedge fund index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont
database, which tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under
management, a 12-month track record, and audited financial statements. It is calculated and rebalanced on a monthly
basis, and shown net of all performance fees and expenses. It is the exclusive property of Credit Suisse Tremont Index,
LLC.
The NCREIF Property Index is a quarterly time series composite total rate of return measure of investment
performance of a very large pool of individual commercial real estate properties acquired in the private market for
investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt
institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary
environment.
The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry
performance, and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the
American Stock Exchange or the NASDAQ National Market List.
The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic
high yield corporate debt market.
The CS/Tremont Equity Market Neutral Index takes both long and short positions in stocks with the aim of minimizing
exposure to the systematic risk of the market (i.e., a beta of zero).
The CS/Tremont Multi-Strategy Index consists of funds that allocate capital based on perceived opportunities among
several hedge fund strategies. Strategies adopted in a multi-strategy fund may include, but are not limited to,
convertible bond arbitrage, equity long/short, statistical arbitrage and merger arbitrage.
The Barclays U.S. Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated floating
rate note market.
*Market Neutral returns for November 2008 are estimates by J.P. Morgan Funds Market Strategy, and are based on a
December 8, 2008 published estimate for November returns by CS/Tremont in which the Market Neutral returns were
estimated to be +0.85% (with 69% of all CS/Tremont constituents having reported return data). Presumed to be
excluded from the November return are three funds, which were later marked to $0 by CS/Tremont in connection with
the Bernard Madoff scandal. J.P. Morgan Funds believes this distortion is not an accurate representation of returns in
the category. CS/Tremont later published a finalized November return of -40.56% for the month, reflecting this
mark-down. CS/Tremont assumes no responsibility for these estimates.
The Office of National Statistics (ONS) Index is a mix-adjusted average housing price index. The index is calculated
monthly using mortgage financed transactions from the Regulated Mortgage Survey by the Council of Mortgage
Lenders.
The Nationwide House Price Index is a mix adjusted index constructed from Nationwide lending data across the UK.
The Halifax House Price Index is constructed from mortgage data derived from Halifax lending data across the UK.
The MSCI AC World High Dividend Yield Index is composed of those securities that have higher-than-average
dividend yield within its parent index, a track record of consistent dividend payments and the capacity to sustain future
dividend payments.
The Hedge Fund Research Distressed /Restructuring Index is composed of funds whose investment process focus
on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant
discounts to their value at issuance or obliged (par value) at maturity as a result of either formal bankruptcy proceeding
or financial market perception of near term proceedings.
The Hedge Fund Research Macro Index is composed of funds which employ an investment process that analyses
underlying economic variables and the impact these have on a range of asset markets.
The Hedge Fund Research Equity Market Neutral Index is composed of funds which employ sophisticated
quantitative techniques for analysing price data to ascertain information about future price movements and relationships
between securities.
The Hedge Fund Research Merger Arbitrage Index is composed of funds which employ an investment process
primarily focused on opportunities in equity and equity related instruments of companies which are currently engaged in
a corporate transaction
The Hedge Fund Research Relative Value Index is composed of funds which look for valuation discrepancies in the
relationship between different securities.
The HFRI Fund Weighted Composite Index is a global, equal-weighted index of over 2,000 single-manager funds that
report to HFR Database
The Burgiss Pooled Return Index is an index of private equity fund level cash flows that includes buyout funds and
venture capital funds.
The Merrill lynch Option Volatility Estimate (MOVE) Index is a yield curve weighted index of the normalized implied
volatility on 1-month Treasury options which are weighted on the 2, 5, 10, and 30 year contracts.
The VDAX volatility index is an indication of the expected volatility (i.e. range) of the DAX stock index for the next
thirty days.
Prepared by: Stephanie Flanders, David Stubbs, Vincent Juvyns, Maria Paola Toschi, Kerry Craig,
Alexander Dryden, Nandini Ramakrishnan.
Unless otherwise stated, all data as of 30 June 2015 or most recently available.
Guide to the Markets EUROPE
JP-LITTLEBOOK