1 1q | 2015 as of december 31, 2014 guide to the markets ®

1

1Q | 2015As of December 31, 2014

Guide to the Markets®

2

Recessions, Expansions and Bull Markets jpmorganfunds.com/bench

0

25

50

75

100

125

1900 1912 1921 1933 1949 1961 1980 2001

Dimensions of Equity Bull Markets

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Source: Standard and Poors, Robert Shiller, Yale University Department of Economics,Factset, J.P. Morgan Asset Management.*Denotes current market dimensions, which are as of 12/31/2014, not necessarily market peak. P/E ratios use lagged as reported earnings from Robert Shiller’sdata, except for values since 6/30/2014, which are estimated using Standard and Poor’s data for earnings estimates.

Source: NBER, J.P. Morgan Asset Management.

*Chart assumes current expansion started in July 2009 and continued through December 2014.

Data for length of economic expansions and recessions obtained from the National Bureau of Economic Research (NBER). These data can be found at www.nber.org/cycles/ and reflects information through December 2014.

For illustrative purposes only.

Data reflect most recently available as of 12/31/14.

Length of Economic Expansions and Recessions

Average Length (months):

Expansions: 46 monthsRecessions: 15 months

*

Start Date

Duration in Mths

RankPrice

Gains, %Rank

P/E at Peak

Rank

Apr. '09 68* 6 168.3* 6 18.8* 7

Mar. '03 56 7 83.9 9 20.7 4

Jan. '88 152 2 516.4 1 28.0 1

Jan. '75 153 1 362.4 4 20.1 6

Jul. '70 31 10 56.6 10 18.1 9

Jul. '62 78 5 91.4 8 18.5 8

Jul. '49 150 3 413.5 2 22.5 2

May '42 49 9 138.5 7 21.7 3

Jul. '32 55 8 279.7 5 16.8 10

Sep. '21 97 4 385.3 3 20.2 5

3

Energy: Supply, Demand and Prices 28GTM – U.S.

'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$0

$20

$40

$60

$80

$100

$120

$140

$160

'95 '00 '05 '10 '15 '20 '250

5

10

15

20

25

30

35

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Change in Production and Consumption of Oil

2013 2014* 2015* Growth since 2013Production

U.S. 12.3 13.9 14.9 20.7%

OPEC 36.0 36.0 35.9 -0.3%

Other 41.8 42.1 41.9 0.4%

Global 90.2 92.0 92.8 2.9%

Consumption

U.S. 19.0 19.0 19.1 0.7%

Europe 13.6 13.5 13.4 -1.9%

Japan 4.5 4.4 4.2 -6.4%

China 10.6 11.0 11.3 6.9%

Other 42.8 43.6 44.3 3.6%

Global 90.5 91.4 92.3 2.0%

Inventory Change -0.3 0.5 0.4

Production, consumption and inventories, million barrels per dayPrice of OilBrent crude, nominal prices , USD/bbl

Dec. 2014: $57.33

Gbl. Natural Gas Prices

Japan $13.86Germany $10.16U.S. $3.65

U.S. Natural Gas Production**Trillions of cubic feet, USD

Other***

Shale Gas

EIA Forecast

Source: EIA, FactSet, J.P. Morgan Asset Management. *Forecasts are from EIA Annual Energy Outlook and start in 2013. **Production numbers as of 2013. ***Other includes conventional on and offshore natural gas drilling, tight gas, and coalbed methane. Natural gas prices are $/mmbtu and are as of December 2014.

Guide to the Markets – U.S.

Data are as of 12/31/14.

4

Energy Price Impacts 29GTM – U.S.

0%

2%

4%

6%

8%

10%

12%

14%

Lowest Second Third Fourth Highest

-3.6%

0.9%

1.6%

2.2%

2.4%

2.4%

3.6%

-13.6%

0.7%

2.4%

4.8%

5.3%

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

Canada

U.K.

U.S.

Italy

France

Germany

Japan

Russia*

Brazil

China

South Africa

India

Imports as a % of GDP

Percent of Income Spent on Gasoline and Motor Oil Before-tax income quintile, percent of spending, 2013

Gasoline PricesUnited States all city average, USD per gallon

'80 '90 '00 '10$0.00

$1.00

$2.00

$3.00

$4.00

$5.00Dec. 2014:

$2.61

Source: (Top left) BEA, (Bottom Left) Department of Labor, FactSet, (Right) EIA, IMF, J.P. Morgan Asset Management.

*Russia imports as a percent of GDP was -13.6% in 2013 and is adjusted on the chart.



Oil Importers and Exporters

De

ve

lop

ed

De

ve

lop

ing

Net imports as a percent of GDP, 2013

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-14%

5

Economic Growth and the Composition of GDP 16GTM – U.S.

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-$2

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

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

Values may not sum to 100% due to rounding. Quarter over quarter percent changes are at an annualized rate. Average represents the annualized growth rate for the full period. Expansion average refers to the period starting in the second quarter of 2009.



Real GDP Year-over-year % chg

3Q14

YoY % chg: 2.7%

Components of GDP

13.3% Investment Ex-housing

68.2% Consumption

18.2% Gov’t Spending

3Q14 nominal GDP, trillions USD

3.2% Housing

- 2.9% Net Exports

Average: 3.0%

QoQ % chg: 5.0%

Real GDP

Expansion Average:

2.3%

6

Inflation 26GTM – U.S.

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

0%

3%

6%

9%

12%

15%

CPI and Core CPI% change vs. prior year, seasonally adjusted

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

CPI used is CPI-U and values shown are % change vs. one year ago and reflect November 2014 CPI data. CPI component weights are as of November 2014. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed weight basket used in CPI calculations.

Guide to the Markets – U.S. Data are as of 12/31/14.

50-yr. Avg. Nov. 2014

Headline CPI 4.2% 1.3%

Core CPI 4.1% 1.7%

Headline PCE 3.6% 1.2%

Core PCE 3.5% 1.4%

CPI Components

Weight in CPI

12-month Change

Food & Bev. 14.1% 3.2%

Housing 32.3% 3.0%

Apparel 3.5% -0.3%

Transportation 5.6% 1.8%

Medical Care 5.8% 2.3%

Recreation 2.0% -2.8%

Edu. & Comm. 0.6% -4.0%

Other 1.6% 1.5%

Headline CPI 100.0% 1.3%

Less:

Energy 8.9% -4.8%

Food 14.1% 3.2%

Core CPI 77.1% 1.7%

7

Labor Market Perspectives

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Net Job Creation Since Feb. 2010 – Millions of Jobs

Employment – Total Private Payroll Total job gain/loss (thousands)

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14-1,000

-800

-600

-400

-200

0

200

400

6008.8mm

jobs lost

11.2 mm jobs

gained

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '1462%

63%

64%

65%

66%

67%

68%

Labor Force Participation Rate

Dec. 2014: 62.7%

Ratio of Unemployed to Job Openings

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '141

2

3

4

5

6

7

Oct. 2014: 1.9

24GTM – U.S.

3.32.9

2.1 2.0

0.9

-0.5

-1 mm

0 mm

1 mm

2 mm

3 mm

Info. Fin & Bus. Svcs.

Mfg. Trade & Trans.

Leisure, Hospt. &

Other Svcs.

Edu. & Health Svcs.

Mining & Construct.

Gov't

8

Civilian Unemployment Rate and Year-over-Year Growth in Wages of Production and Non-Supervisory Workers

Unemployment and Wages

Econ

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'70 '80 '90 '00 '100%

2%

4%

6%

8%

10%

12%

49-yr. Average: 4.3%

Seasonally adjusted, percent

Dec. 2014: 5.6%

Oct. 2009: 10.0%

Dec. 2014: 1.6%

50-yr. Average: 6.1%




Wage Growth

Unemployment

23GTM – U.S.

9

The Fed and Interest Rates 32GTM – U.S.

0%

1%

2%

3%

4%

5%

6%

7%

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17

Fix

ed

Inc

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e

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

Fed’s Balance Sheet: Liabilities$ trillions

Fed’s Balance Sheet: Assets$ trillions

Other

U.S. Treasuries

Agency MBS

Excess Reserves

Required Reserves

Other Liabilities

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 held in the central bank's reserves. Other liabilities of the Federal Reserve primarily consist of currency outstanding. Market expectations are the federal funds rates priced into the fed futures market. *Forecasts of 17 Federal Open Market Committee (FOMC) participants, midpoints of central tendency except for federal funds rate which is a median estimate.


Federal Reserve Summary of Economic Projections

Federal Funds Rate ExpectationsFOMC and market expectations for the Fed Funds rate

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

'04 '06 '07 '08 '09 '10 '11 '12 '13 '14

Federal Funds Rate

FOMC Long Run Projection

FOMC Year-End Estimates

Market Expectations

FOMC December 2014 Forecasts* Percent

2014 2015 2016 2017Long Run

Change in real GDP, Q4 to Q4 2.4 2.8 2.8 2.4 2.2

Unemployment Rate, Q4 5.8 5.3 5.1 5.1 5.4

PCE Inflation, Q4 to Q4 1.3 1.3 1.9 1.9 2.0

Federal Funds Rate, end of year 0.13 1.13 2.50 3.63 3.75

10

High Yield Bonds 39GTM – U.S.

0%

5%

10%

15%

20%

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

3%

5%

7%

9%

'12 '13 '14

Average Latest HY Spreads 5.9% 5.7%HY Defaults Rates 4.0% 3.0%

Source: 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. Spreads indicated are benchmark yield to worst less comparable maturity Treasury yields. 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. J.P. Morgan Domestic HY, J.P. Morgan Euro HY, and J.P. Morgan CEMBI Non-IG indexes were used for Spreads and Industry Weights. Past performance is not indicative of comparable future results. Guide to the Markets – U.S. Data are as of 12/31/14.

Fix

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U.S. High Yield Spreads and Defaults

HY Default Rates

HY Spreads

Global High Yield SpreadsSpread over Treasuries

Sector Weights

Euro HY

EM HYU.S. HY

Consumer 28% Consumer 31%

Consumer 17%

Financial 7%Financial 13%

Financial 22%

Telecom 10%

Telecom 18%Telecom 21%

Industrial 20%

Industrial 29% Industrial 24%Energy 17%

Energy 2% Energy 11%Other 17%Other 7%

Other 5%

0%

20%

40%

60%

80%

100%

U.S. HY Euro HY EM HY

11

Emerging Market Debt 40GTM – U.S.

1,317

1,089

633

628

592

428

348

181

168

146

49

0 200 400 600 800 1,000 1,200 1,400

Russia

Brazil

India

Turkey

Indonesia

Colombia

Mexico

China

Philippines

Hungary

Poland

Local denominated debt, 5 years, spread to Treasuries, basis pointsEMD Indices by Region

EMD Indices by Credit Ratings

5 year average

EMD Sovereign Spreads

Fix

ed

Inc

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Source: J.P. Morgan Global Economic Research, FactSet, 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 Emerging Bond Index Broad (CEMBI) is a USD-denominated external debt index tracking bonds issued by corporations in developing nations. The J.P. Morgan Government Bond Index – EM (GBI-EM) is a local currency denominated index tracking bonds issued by emerging market sovereigns. Past performance is not indicative ofComparable future results. Index breakdown may not equate to 100% due to rounding.Guide to the Markets – U.S. Data are as of 12/31/14.

Other 23%

S. Africa 9%

Turkey 10%

Poland 11%

Mexico 20%

Brazil 27%

Middle East & Africa 13%

Middle East & Africa 18%

Asia 21%

Asia 39%

Europe 31%

Europe 13%

Latin America 35%

Latin America 30%

0%

20%

40%

60%

80%

100%

Local Sovereign USD Sovereign USD Corporate

Current spread

Graph Key

Non Investment Grade 15%



Investment Grade 85%



0%

20%

40%

60%

80%

100%

Local Sovereign USD Sovereign USD Corporate

12

Corporate Profits and Leverage 8

-$1

$3

$7

$11

$15

$19

$23

$27

$31

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Eq

uit

ies

S&P 500 Earnings Per Share and PerformanceIndex level and quarterly operating earnings

Profit Margins

4Q14*: $30.50

2Q07: $24.06

Source: BEA, Standard & Poor’s, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. *Most recently available data is 3Q14 as 4Q14 is a Standard & Poor’s preliminary estimate. **S&P 500 Operating EPS % of Sales per Share fell to 0% in 4Q2008 and is adjusted on the chart. Past performance is not indicative of future returns.



'96 '98 '00 '02 '04 '06 '08 '10 '12 '1480%

100%

120%

140%

160%

180%

200%

220%

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

4Q14: 100%

4%

5%

6%

7%

8%

9%

10%

11%

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

Average: 162%

S&P 500 Operating EPS % of Sales per Share**

3Q14:8.8%

After-Tax, Adj. Corp. Profits, % of GDP

3Q14*:10.1%

GTM – U.S.

13

Stock Valuation Measures: S&P 500 Index 7GTM – U.S.

U.S. Equity: Valuation Measures Historical Averages

Valuation Measure Description

Latest1-year

ago5-year

avg.10-year

avg.25-year

avg.*

P/E Price to Earnings 16.2x 15.4x 13.5x 13.8x 15.6x

CAPE Shiller's P/E 27.3 25.5 22.5 22.9 25.3

Div. Yield Dividend Yield 1.9% 1.9% 2.0% 2.0% 2.1%

REY Real Earnings Yield 3.7% 3.7% 4.3% 3.3% 2.3%

P/B Price to Book 2.9 2.7 2.3 2.4 2.9

P/CF Price to Cash Flow 11.4 10.8 9.3 9.7 11.3

EY Spread EY Minus Baa Yield 1.5% 1.6% 2.2% 1.3% -0.7%

Eq

uit

ies

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '148x

10x

12x

14x

16x

18x

20x

22x

24x

26x

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '142%

4%

6%

8%

10%

12%

14%

S&P 500 Earnings Yield vs. Baa Bond Yield

S&P 500 Earnings Yield (Inverse of fwd. P/E): 6.2%

Moody’s Baa Yield: 4.7%

Source: Standard & Poor’s, FactSet, Robert Shiller Data, FRB, J.P. Morgan Asset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Shiller’s P/E uses trailing 10-years of inflation adjusted earnings as reported by companies. Dividend Yield is calculated as the trailing 12-month average dividend divided by price. Real Earnings Yield is defined as (trai ling four quarters of reported earnings/price) - year over year core CPI inflation. Price to Book Ratio is the price divided by book value per share. Price to Cash Flow is price divided by NTM cash flow. EY Minus Baa Yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) minus the Moody’s Baa seasoned corporate bond yield. *P/CF is a 20-year avg. due to cash flow data availability.Guide to the Markets – U.S. Data are as of 12/31/14.

S&P 500 Index: Forward P/E Ratio

Average: 15.6x

Current: 16.2x

14

Multiples and Confidence jpmorganfunds.com/bench

'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '149x

12x

15x

18x

21x

24x

27x

50

60

70

80

90

100

110

120

Multiple Expansion and Contraction

Consumer Sentiment Forward P/E

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

Eq

uit

ies

Correlation Coefficient: 0.54

Source: (Top) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. *Estimated impact based on coefficients from regression analysis.



15

Returns and Valuations by Sector 6GTM – U.S.

Source: Standard & Poor’s, Russell Investment Group, FactSet, J.P. Morgan Asset Management.All calculations are cumulative total return, not annualized, including dividends for the stated period. Since Market Peak represents period 10/9/07 – 12/31/14. Since Market Low represents period 3/9/09 – 12/31/14. Correlation to Treasury Yields are trailing 2-year monthly correlations between S&P 500 sector price returns and 10-year Treasury yield movements. Forward P/E Ratio is a bottom-up calculation based 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. Trailing P/E ratios are bottom-up values defined as month-end price divided by the last 12 months of available reported earnings. Historical data can change as new information becomes available. Note that P/E ratios for the S&P 500 may differ from estimates elsewhere in this book due to the use of a bottom-up calculation of constituent earnings (as described) rather than a top-down calculation. This methodology is used to allow proper comparison of sector level data to broad index level data. Dividend yields are bottom-up values defined as the annualized value of the most recent cash dividend as a percent of month-end price. Beta calculations are based on 10 years of monthly price returns for the S&P 500 and its sub-indices. Beta’s are calculated on a monthly frequency over the past 10-years.Past performance is not indicative of future returns.

Guide to the Markets – U.S.Data are as of 12/31/14.

Eq

uit

ies

Finan

cials

Technolo

gy

Health

Car

e

Indus

trial

s

Energy

Cons. Dis

cr.

Cons. Sta

ples

Telec

om

Utiliti

es

Mat

erials

S&P 500

Index

S&P Weight 16.6% 19.7% 14.2% 10.4% 8.4% 12.1% 9.8% 2.3% 3.2% 3.2% 100.0%Russell Growth Weight 5.3% 28.3% 14.2% 12.2% 4.5% 18.7% 10.5% 2.1% 0.1% 4.0% 100.0%

Russell Value Weight 29.9% 9.5% 13.7% 10.1% 11.3% 6.6% 7.4% 2.1% 6.4% 3.0% 100.0%

2014 15.2 20.1 25.3 9.8 -7.8 9.7 16.0 3.0 29.0 6.9 13.7

4Q14 7.2 5.2 7.5 6.8 -10.7 8.7 8.2 -4.2 13.2 -1.8 4.9

Since Market Peak (October 2007)

-19.6 78.6 118.7 52.4 16.9 115.8 112.3 22.5 54.0 33.5 54.0

Since Market Low (March 2009)

338.7 274.2 252.6 318.9 114.1 399.5 197.7 133.9 169.5 217.9 244.2

Beta to S&P 500 1.44 1.10 0.70 1.20 0.99 1.13 0.57 0.63 0.50 1.27 1.00 β

Correl to Treas. Yields 0.20 0.03 -0.16 0.17 0.29 0.06 -0.19 -0.21 -0.50 0.12 0.04 ρ

Forward P/E Ratio 13.6x 15.9x 17.2x 16.3x 16.5x 18.4x 19.1x 13.5x 17.4x 16.1x 16.2x

15-yr avg. 12.7x 20.6x 17.3x 17.0x 13.6x 18.5x 18.4x 16.9x 14.0x 16.0x 16.1x

Trailing P/E Ratio 16.8x 19.3x 24.4x 17.9x 12.8x 21.0x 22.5x 10.9x 19.9x 19.1x 18.6x

20-yr avg. 16.5x 26.0x 24.1x 20.3x 17.1x 19.3x 21.3x 19.8x 15.0x 19.5x 19.5x

Dividend Yield 1.8% 1.5% 1.4% 2.1% 2.9% 1.4% 2.5% 4.7% 3.5% 2.1% 1.9%

20-yr avg. 2.1% 0.7% 1.4% 1.7% 1.7% 0.9% 2.1% 4.2% 4.3% 2.1% 1.7%

P/E

We

igh

tD

ivR

etu

rn (

%)

16

0%

1%

2%

3%

4%

5%

1990 1995 2000 2005 2010

Private nonresidential fixed investment, % of GDP

'90 '95 '00 '05 '100%

4%

8%

12%

16%

Long-term Drivers of Economic Growth

Econ

om

y

Gross Investment and Depreciation

Real Capital Stock Growth

2013: 1.6%

Depreciation

Gross investment spending

Nonresidential fixed assets, year-over-year % chg

'70 '80 '90 '00 '10-1%

0%

1%

2%

3%

4%

5%

Five year moving average of year-over-year % changeGrowth in Employment and Real Output Per Worker*

Real Output Per Worker

Employment Growth

Average growth

50 yr. 10 yr. 5 yr.

Employment 1.5% 0.5% 1.1%

Real Output Per Worker

1.5% 1.1% 1.3%

GDP 3.0% 1.6% 2.4%

Source: BEA, BLS, FactSet, J.P. Morgan Asset Management.*Labor Force includes the population age 16+ working or looking for work, Real Output Per Worker is calculated as real GDP growth minus civilian employment growth. Averages are calculated as the annualized growth rate.



21GTM – U.S.

17

Global Equity Markets 42

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13

Source: Standard & Poor’s, MSCI, FactSet, J.P. Morgan Asset Management.All return values are MSCI Gross Index (official) data. Chart is for illustrative purposes only. Past performance is not indicative of future results. Please see disclosure page for index definitions. Countries included in global correlations include Argentina, South Africa, Japan, UK, Canada, France, Germany, Italy, Australia, Austria, Brazil, China, Colombia, Denmark, Finland, Hong Kong, India, Malaysia, Mexico, Netherlands, New Zealand, Peru, Philippines, Portugal, Korea, Spain, Taiwan, Thailand, Turkey, United States.Guide to the Markets – U.S. Data as of 12/31/14.

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

United States

51%

Europe ex-U.K.16%

U.K. 7%

EmergingMarkets

11%

Japan7%

Ca

na

da

4%

Global Equity Market CorrelationsRolling 1-year correlations, 30 countries

Dec. 2014: 0.44

Inte

rna

tio

nal

Country / Region

Regions / Broad Indexes

U.S. (S&P 500) - 4.9 - 13.7

EAFE 1.8 -3.5 6.4 -4.5

Europe ex-U.K. 0.2 -4.3 7.4 -5.8

Pacif ic ex-Japan 3.1 -1.5 5.8 -0.3

Emerging Markets 0.1 -4.4 5.6 -1.8

MSCI: Selected Countries

United Kingdom -0.4 -4.2 0.5 -5.4

France -1.7 -5.8 3.6 -9.0

Germany 4.0 -0.4 2.8 -9.8

Japan 6.7 -2.4 9.8 -3.7

China 7.0 7.2 8.3 8.3

India 1.5 -0.7 26.4 23.9

Brazil -7.5 -14.8 -2.8 -13.7

Russia -5.9 -32.8 -12.1 -45.9

4Q14 2014

Local USD Local USD

GTM – U.S.

18

Trade and the U.S. Dollar 27

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%'99 '01 '03 '05 '07 '09 '11 '13 '15

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Current Account Balance and Oil Imports, % of GDP

3Q14:-2.3%

4Q05:-6.2%

Current Account Balance

Net Oil Imports

2Q08:-3.1%

3Q14:-1.0%

'96 '98 '00 '02 '04 '06 '08 '10 '12 '1465

70

75

80

85

90

95

100

105

110

115

Mar. 2009: 84.0

Mar. 2008: 70.3

Dec. 2014**: 84.3

U.S. Dollar IndexMonthly average of nominal trade-weighted exchange index: major currencies

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

*Oil imports as a percent of GDP is an EIA forecast. **December U.S. Dollar index value is a J.P. Morgan Asset Management estimate.



Forecast*

GTM – U.S.

19

Europe: Cyclical Headwinds and Tailwinds 47GTM – U.S.

3.5%

13.9%

6.0%

4.6%4.0%

3.3% 3.1%2.7%

0.5%

-0.4%

1.2% 1.1%1.4%

0.5%

-0.1%

0.8%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Inte

rna

tio

nal

'08 '09 '10 '11 '12 '130%

5%

10%

15%

20%

25%

30%

35%12/31/14

Greece 9.42%Portugal 2.67%Italy 1.86%Spain 1.61%Ireland 1.24%Germany 0.53%

Source: Tullett Prebon, FactSet, IMF, J.P. Morgan Asset Management. Data are based on the October 2014 World Economic Outlook. Government deficits are calculated by the IMF as the general government structural balance. The structural balance excludes the normal impact of the business cycle, providing a clearer measure of the independent impact of changes in government spending and taxation on demand in the economy.*Eurozone includes a J.P. Morgan Asset Management estimate for the 2016 structural deficit as a % of GDP. Guide to the Markets – U.S. Data are as of 12/31/14.

Government Fiscal Drag

2010-2013

2013-2016

Mo

re fi

scal

dra

g

European Sovereign Funding Costs

LTRO

OMT

Les

s fi

scal

dra

g

10-year benchmark bond yield % of potential GDP, reduction in structural deficits from one period to the next

20

Europe: Unemployment, Inflation and Credit Markets 48GTM – U.S.

-5%

%

5%

10%

15%

20%

'06 '07 '08 '09 '10 '11 '12 '13 '14

Inte

rna

tio

nal

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '140%

2%

4%

6%

8%

10%

12%

Europe Inflation

U.S.

Euro Area

Oct. 2014: 11.5%

Nov. 2014: 5.8%

Unemployment Rates

Core

Euro Area

Periphery

Euro Area Asset-Backed Securities Outstanding

Euro Area Credit Growth

Nonfinancial Corporations

Nov. 2014: -1.6%Households

Year-over-year % change

% year-over-year loan growth

Nov. 2014: -0.4%

€ billions

Source: Eurostat, BLS, SIFMA, ECBC, FactSet, IMF, J.P. Morgan Asset Management.(Top left) Unemployment rate levels for the U.S. and Euro Area are not directly comparable due to calculation differences. (Bottom right) Euro Area securitization outstanding includes Covered Bonds, Asset-Backed Securities, Residential Mortgage-Backed Securities, Commercial Real Estate Mortgage-Backed Securities, and Small and Medium-Sized Enterprise Asset-Backed Securities.



'05 '06 '07 '08 '09 '10 '11 '12 '13 '14-1%

0%

1%

2%

3%

4%

5%

€1,000

€1,500

€2,000

€2,500

€3,000

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

21

Global Equity Valuations: Developed Markets 54GTM – U.S.

Inte

rna

tio

nal

+3 Std Dev

+2 Std Dev

+1 Std Dev

Average

-1 Std Dev

-2 Std Dev

-3 Std Dev

+5 Std Dev

+4 Std Dev

-4 Std Dev

+6 Std Dev

-5 Std Dev

+7 Std DevDeveloped Market Countries

Std

De

v fr

om

Glo

ba

l Ave

rag

e

Expensive relative to own

history

Expensive relative to

world

Cheap relative to own history

Average

Current

Cheap relative to

world

Example

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), price to last 12 months’ 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 one standard deviation in variability relative to that of the MSCI All Country World Index (ACWI).

See disclosures page at the end for metric definitions.


World (ACWI)

EAFE Index

U.K. France Germany Australia Canada Japan Switzerland United States

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

World (ACWI) 0.71 14.8 2.1 8.7 2.5% 13.1 2.0 7.5 2.5%

EAFE Index -0.48 14.2 1.6 7.5 3.2% 12.7 1.7 6.7 3.2%

U.K. -0.76 13.8 1.8 7.3 3.9% 11.4 2.0 7.4 3.7%

France -0.69 13.8 1.4 7.7 3.3% 11.5 1.6 5.9 3.5%

Germany -0.58 12.9 1.6 7.5 2.9% 11.5 1.6 5.8 3.1%

Australia -0.37 14.7 1.9 8.8 4.8% 13.5 2.2 9.2 4.3%

Canada 0.46 15.5 1.9 8.6 2.8% 13.7 2.1 8.5 2.3%

Japan 0.70 14.3 1.4 8.1 1.8% 16.1 1.4 6.4 1.6%

Switzerland 1.36 15.7 2.5 11.3 3.2% 13.5 2.4 9.9 2.8%

United States 2.68 16.4 2.8 11.0 1.9% 14.0 2.4 8.7 1.9%

Current Composite

Index

Current 10-year avg.

22

Demographics and Development 51

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

15% 25% 35% 45% 55% 65% 75% 85% 95%

GD

P p

er C

apit

a

Urbanization Ratio

China

Japan

U.S.

India

South Korea

Inte

rna

tio

nal

The Impact of Urbanization

2013: $53,142

1961: $2,935

Urbanization ratios and GDP per capita (current USD), 1961 – 2013Demographic Snapshot

Investment

Developed

U.S. $53,101 316 mm 26% 20%

Canada 51,990 35 22 24

U.K. 39,567 64 24 14

Germany 44,999 81 18 17

France 43,000 64 24 19

Japan 38,491 127 18 21

Italy 34,715 60 19 17

Emerging

Korea 24,329 50 22 26

India 1,505 1,243 38 35

Brazil 11,311 198 33 18

Mexico 10,630 118 38 22

Russia 14,819 143 21 24

China 6,747 1,361 20 48

(% of GDP)

GDP Per Capita

Population% of Pop. under 20

Source: FactSet, World Bank, United Nations, J.P. Morgan Global Economics Research, OECD, Bureau of Statistics of China, Ministry of Statistics & Programme Implementation of India, J.P. Morgan Asset Management.

GDP per capita and Investment as % of GDP in the Demographic Snapshot table are IMF estimates for 2014.



GTM – U.S.

23

Global Equity Valuations: Emerging Markets 55

World(ACWI)

EM Index

Russia Brazil China Taiwan Korea Thailand South Africa

Indonesia Mexico India

+3 Std Dev

+2 Std Dev

+1 Std Dev

Average

-1 Std Dev

-2 Std Dev

-3 Std Dev

+5 Std Dev

+4 Std Dev

-4 Std Dev

+6 Std Dev

-5 Std Dev

+7 Std Dev

-6 Std Dev

Inte

rna

tio

nal

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), price to last 12 months’ 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 one standard deviation in variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page at the end for metric definitions. See disclosures page at the end for metric definitions.


Emerging Market Countries

Std

De

v fr

om

Glo

ba

l Ave

rag

e

Expensive relative to own

history

Expensive relative to

world

Cheap relative to own history

Average

Current

Cheap relative to

world

Example

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

World (ACWI) 0.71 14.8 2.1 8.7 2.5% 13.1 2.0 7.5 2.5%EM Index -1.49 11.0 1.4 5.4 2.8% 11.1 1.9 6.3 2.7%Russia -5.52 3.8 0.4 1.8 6.6% 7.3 1.3 4.4 2.2%Brazil -2.58 10.2 1.2 5.2 4.5% 10.0 1.8 5.6 3.2%China -2.35 9.4 1.4 4.0 3.2% 11.7 2.1 6.8 2.7%Taiwan -0.54 13.2 1.9 6.9 3.0% 14.2 1.9 6.7 3.6%Korea 0.09 9.6 1.0 5.8 1.3% 9.7 1.4 5.1 1.5%Thailand 0.22 13.2 2.1 9.4 3.0% 10.9 2.0 7.2 3.6%South Africa 1.41 15.7 2.6 11.0 3.0% 11.7 2.5 8.9 3.2%Indonesia 2.62 15.0 3.3 12.6 2.4% 12.8 3.5 10.3 2.7%Mexico 3.17 18.3 2.6 7.1 1.4% 14.7 2.8 7.5 1.8%India 3.90 16.7 3.0 12.2 1.5% 15.7 3.2 13.0 1.3%

Current Composite

Index

Current 10-year avg.

GTM – U.S.

24

Asset Class Returns 562005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4Q14 Cum. Ann.

MSCIEME

REITsMSCIEME

Barclays Agg

MSCIEME

REITs REITs REITsRussell 2000

REITs REITsMSCIEME

MSCIEME

34.5% 35.1% 39.8% 5.2% 79.0% 27.9% 8.3% 19.7% 38.8% 28.0% 12.9% 132.0% 8.8%

BbergCmdty

MSCIEME

BbergCmdty

CashMSCI EAFE

Russell 2000

Barclays Agg

MSCIEME

S&P500

S&P500

Russell 2000

REITs REITs

21.4% 32.6% 16.2% 1.8% 32.5% 26.9% 7.8% 18.6% 32.4% 13.7% 9.7% 122.3% 8.3%. .

MSCI EAFE

MSCI EAFE

MSCI EAFE

Market Neutral

REITsMSCIEME

Market Neutral

MSCI EAFE

MSCI EAFE

Barclays Agg

S&P500

Russell 2000

Russell 2000

14.0% 26.9% 11.6% 1.1% 28.0% 19.2% 4.5% 17.9% 23.3% 6.0% 4.9% 111.3% 7.8%

REITsRussell 2000

Market Neutral

Asset Alloc.

Russell 2000

BbergCmdty

S&P500

Russell 2000

Asset Alloc.

Asset Alloc.

Asset Alloc.

S&P500

S&P500

12.2% 18.4% 9.3% - 24.0% 27.2% 16.8% 2.1% 16.3% 15.0% 5.2% 2.0% 109.5% 7.7%

Asset Alloc.

S&P500

Asset Alloc.

Russell 2000

S&P500

S&P500

CashS&P500

Market Neutral

Russell 2000

Barclays Agg

Asset Alloc.

Asset Alloc.

8.3% 15.8% 7.4% - 33.8% 26.5% 15.1% 0.1% 16.0% 9.3% 4.9% 1.8% 91.7% 6.7%

Market Neutral

Asset Alloc.

Barclays Agg

BbergCmdty

Asset Alloc.

Asset Alloc.

Asset Alloc.

Asset Alloc.

REITs CashMarket Neutral

MSCI EAFE

MSCI EAFE

6.1% 15.2% 7.0% - 35.6% 22.2% 12.5% - 0.6% 11.3% 2.9% 0.0% 1.0% 61.5% 4.9%

S&P500

Market Neutral

S&P500

S&P500

BbergCmdty

MSCI EAFE

Russell 2000

Barclays Agg

CashMarket Neutral

CashBarclays

AggBarclays

Agg4.9% 11.2% 5.5% - 37.0% 18.9% 8.2% - 4.2% 4.2% 0.0% - 0.5% 0.0% 58.4% 4.7%

Russell 2000

Cash Cash REITsBarclays

AggBarclays

AggMSCI EAFE

Market Neutral

Barclays Agg

MSCIEME

MSCI EAFE

Market Neutral

Market Neutral

4.6% 4.8% 4.8% - 37.7% 5.9% 6.5% - 11.7% 0.9% - 2.0% - 1.8% - 3.5% 54.0% 4.4%

CashBarclays

AggRussell 2000

MSCI EAFE

Market Neutral

CashBbergCmdty

CashMSCIEME

MSCI EAFE

MSCIEME

Cash Cash

3.0% 4.3% - 1.6% - 43.1% 4.1% 0.1% - 13.3% 0.1% - 2.3% - 4.5% - 4.4% 15.7% 1.5%

Barclays Agg

BbergCmdty

REITsMSCIEME

CashMarket Neutral

MSCIEME

BbergCmdty

BbergCmdty

BbergCmdty

BbergCmdty

BbergCmdty

BbergCmdty

2.4% 2.1% - 15.7% - 53.2% 0.1% - 0.8% - 18.2% - 1.1% - 9.5% - 17.0% - 12.1% - 17.1% - 1.9%

10-yrs. '05 - '14

As

se

tCla

ss

Source: Russell, MSCI, Bloomberg, Standard & Poor’s, Credit Suisse, Barclays Capital, NAREIT, FactSet, J.P. Morgan Asset Management. The “Asset Allocation” portfolio assumes the following weights: 25% in the S&P 500, 10% in the Russell 2000, 15% in the MSCI EAFE, 5% in the MSCI EME, 25% in the Barclays Capital Aggregate, 5% in the Barclays 1-3m Treasury, 5% in the CS/Tremont Equity Market Neutral Index, 5% in the Bloomberg Commodity Index and 5% in the NAREIT Equity REIT Index. Balanced portfolio assumes annual rebalancing. All data represents total return for stated period. Past performance is not indicative of future returns. Data are as of 12/31/14, except for the CS/Tremont Equity Market Neutral Index, which reflects data through 11/30/14. “10-yrs” returns represent period of 12/31/04 – 12/31/14 showing both cumulative (Cum.) and annualized (Ann.) over the period. Please see disclosure page at end for index definitions. *Market Neutral returns include estimates found in disclosures. Guide to the Markets – U.S. Data are as of 12/31/14.

GTM – U.S.

1 1q | 2015 as of december 31, 2014 guide to the markets ®

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