4Q | 20134Q | 20144Q | 2013As of September 30, 2013

4Q | 2014As of September 30, 2014

Guide to the Markets®Guide to the Markets®Guide to the MarketsGuide to the Markets

1

Global Market Insights Strategy Team

Americas Europe Asia

Dr. David P. Kelly, CFANew York

Stephanie H. FlandersLondon

Tai HuiHong Kong

Andrew D. GoldbergNew York

Maria Paola ToschiMilan

Geoff LewisHong Kong

Anastasia V. Amoroso, CFAHouston

Vincent JuvynsLuxembourg

Yoshinori ShigemiTokyo

James C Liu CFA Manuel Arroyo Ozores CFA Grace Tam CFAJames C. Liu, CFAChicago

Manuel Arroyo Ozores, CFAMadrid

Grace Tam, CFAHong Kong

Julio C. CallegariSão Paulo

Tilmann Galler, CFAFrankfurt

Ian HuiHong Kong

David M. Lebovitzk

David Stubbs, PhDd

Ben LukNew York London Hong Kong

Gabriela D. SantosNew York

Lucia GutierrezMadrid

Ainsley E. WoolridgeNew York

Kerry Craig, CFALondon

Hannah J. AndersonNew York

Alexander W. DrydenLondon

Nandini RamakrishnanLondon

2Past performance is no guarantee of comparable future results. For China and Australia distribution, please note this communication is for intended recipients only and is for wholesale clients only in Australia. For details, please refer to the full disclaimer at the end. Unless otherwise stated, all data is as of September 30, 2014 or most recently available.

Page Reference

4. S&P 500 Index at Inflection Points5. Returns and Valuations by Style6. Returns and Valuations by Sector

36. Owners of Treasury Securities37. Credit Conditions38. High Yield Bonds39. Municipal Finance40. Global Fixed Income

Equities Page 4

7. Stock Valuation Measures: S&P 500 Index8. Corporate Profits and Leverage9. Sources of Earnings per Share Growth10. Sources of Total Return11. Equity Performance in Bull Markets12. Interest Rates and Equities13. Deploying Corporate Cash

41. Emerging Market Debt

42. Global Equity Markets43. Global Economic Growth44. Manufacturing Momentum45. Sovereign Debt Stresses

International Page 42

p y g p14. Annual Returns and Intra-year Declines15. Equity Correlations and Volatility16. Stock Market Since 1900

17. Economic Growth and the Composition of GDP18. Consumer Finances

g46. Global Monetary Policy47. Europe: Cyclical Headwinds and Tailwinds48. Europe: Unemployment, Inflation and Credit Markets49. Europe: Revenues, Margins and Earnings50. Japan: Economic Snapshot51. International Equity Earnings and Valuations52. Exports, Demographics and Development

Economy Page 17

18. Consumer Finances19. Cyclical Sectors20. Residential Real Estate21. Commercial Real Estate22. Long-term Drivers of Economic Growth23. Federal Finances24. Employment25 Labor Market Perspectives

52. Exports, Demographics and Development53. Emerging Market Currencies54. Emerging Market Diversity55. China: Economic and Credit Growth56. Global Equity Valuations – Developed Markets57. Global Equity Valuations – Emerging Markets

Asset Class Page 5825. Labor Market Perspectives26. Employment and Income by Educational Attainment27. Consumer Price Index28. Trade and the U.S. Dollar29. Energy and the Economy30. Consumer Confidence and the Stock Market

58. Asset Class Returns59. Correlations and Volatility60. Alternative Asset Class Returns61. Fund Flows62. Yield Alternatives: Domestic and Global63. Global Commodities64 Historical Returns by Holding PeriodFixed Income Page 31

3

31. Fixed Income Sector Returns32. Interest Rates and Inflation33. Fixed Income Yields and Returns34. Sources of Bond Returns35. The Fed and Interest Rates

64. Historical Returns by Holding Period65. Diversification and the Average Investor66. Cash Accounts67. Corporate DB Plans and Endowments

g

S&P 500 Index at Inflection Points

2,000Index level 1,527 1,565 1,972P/E ratio (fwd.) 25.6x 15.2x 15.2xDividend yield 1 1% 1 8% 1 9%

S&P 500 Index Sep. 30, 2014 P/E (fwd.) = 15.2x

1,972

Characteristic Mar-2000 Oct-2007 Sep-2014

1,600

1,800Dividend yield 1.1% 1.8% 1.9% 10-yr. Treasury 6.2% 4.7% 2.5%

Equi

ties

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

1,527

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

1,565

1,200

1,400

+101% +192%+106%

800

1,000-49%

Dec 31 1996

-57%

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14600

Source: Standard & Poor’s, First Call, Compustat, FactSet, J.P. Morgan Asset Management.

Dividend yield is calculated as the annualized dividend rate divided by price as provided by Compustat Forward Price to Earnings Ratio is a bottom-up calculation based

Oct. 9, 2002 P/E (fwd.) = 14.1x

777

Dec. 31, 1996 P/E (fwd.) = 16.0x

741 Mar. 9, 2009

P/E (fwd.) = 10.3x 677

4

Dividend yield is calculated as the annualized dividend rate divided by price, as provided by Compustat. Forward Price to Earnings 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. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future returns.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Returns and Valuations by Style

3Q 2014 Year to Date Current P/E vs. 20-year avg. P/E

14.8 15.2 18.1

Value Blend Growth

rge

Value Blend Growth Value Blend Growth

ge 0 2% 1 1% 1 5% ge

8 1% 8 3% 7 9%

Equi

ties 14.0 17.1 21.0

16.5 18.1 20.0

14.2 16.5 21.9

16 1 17 8 19 6

Lar

Mid

Larg -0.2% 1.1% 1.5%

Larg 8.1% 8.3% 7.9%

Mid -2.6% -1.7% -0.7% Mid 8.2% 6.9% 5.7%

Since Market Low (March 2009)Since Market Peak (October 2007)Current P/E as % of 20-year avg. P/E

E.g.: Large Cap Blend stocks are 10.8% cheaper than their historical average.

16.1 17.8 19.6

14.4 17.3 21.5Sm

all

Smal

l

-8.6% -7.4% -6.1%Sm

all

-4.7% -4.4% -4.0%

Value Blend Growth Value Blend GrowthValue Blend Growth

Larg

e

106.0% 89.2% 86.1%

Mid 116 2% 110 1% 91 6%

Value Blend Growth Value Blend Growth

Larg

e

35.4% 46.8% 62.3%

Larg

e

237.6% 228.0% 231.0%

Mid 58.8% 60.5% 60.2% Mid 305.6% 287.3% 270.4%

Source: Russell Investment Group, Standard & Poor’s, FactSet, J.P. Morgan Asset Management.

M 116.2% 110.1% 91.6%

Smal

l

111.9% 103.0% 91.5%

M M

Smal

l

35.4% 43.6% 51.4%

Smal

l

234.8% 246.3% 257.4%

5

Source: Russell Investment Group, Standard & Poor s, FactSet, J.P. Morgan Asset Management.All calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Peak represents period 10/9/07 – 9/30/14, illustrating market returns since the S&P 500 Index high on 10/9/07. Since Market Low represents period 3/9/09 – 9/30/14, illustrating market returns since the S&P 500 Index low on 3/9/09. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with the exception of the large blend category, which is reflected by the S&P 500 Index. Past performance is not indicative of future returns. P/E ratios reflect latest available data and are as of August.Guide to the Markets – U.S.Data are as of 9/30/14.

Returns and Valuations by Sector

Finan

cials

Tech

nolog

yHe

alth C

areInd

ustri

als

Energ

y

Cons

. Disc

r.Co

ns. S

taples

Telec

om

Utilit

ies

Mater

ials

S&P 5

00 In

dex

Equi

ties S&P Weight 16.3% 19.7% 13.9% 10.3% 9.7% 11.7% 9.5% 2.4% 3.0% 3.5% 100.0%

Russell Growth Weight 5.1% 28.4% 13.6% 11.9% 5.7% 18.2% 10.3% 2.4% 0.1% 4.2% 100.0%Russell Value Weight 29.2% 9.4% 13.5% 10.2% 12.9% 6.2% 7.1% 2.3% 6.0% 3.3% 100.0%

YTD 7.4 14.1 16.6 2.9 3.2 0.9 7.2 7.5 13.9 8.9 8.3

3Q14 2.3 4.8 5.5 -1.1 -8.6 0.3 2.0 3.1 -4.0 0.2 1.1

Wei

ght

(%)

Since Market Peak (October 2007)

-25.1 69.7 103.5 42.8 30.9 98.4 96.3 27.8 36.0 35.9 46.8

Since Market Low (March 2009)

309.1 255.6 228.1 292.3 139.7 359.3 175.2 144.1 138.0 223.7 228.0

Beta to S&P 500 1.44 1.11 0.69 1.20 1.01 1.13 0.57 0.63 0.50 1.28 1.00 β

Correl to Treas Yields 0 33 0 09 0 08 0 29 0 23 0 18 0 15 0 35 0 43 0 16 0 11 ρR

etur

n

Correl to Treas. Yields 0.33 0.09 -0.08 0.29 0.23 0.18 -0.15 -0.35 -0.43 0.16 0.11 ρ

Forward P/E Ratio 13.0x 15.4x 16.5x 15.5x 13.2x 17.3x 17.7x 13.5x 15.7x 16.3x 15.6x15-yr avg. 12.7x 21.0x 17.5x 17.1x 13.7x 18.7x 18.5x 17.2x 14.0x 16.0x 16.3x

Trailing P/E Ratio 16.5x 19.3x 24.3x 17.2x 14.6x 20.7x 20.2x 10.7x 18.9x 20.2x 18.4x20-yr avg. 16.4x 26.1x 24.0x 20.3x 17.2x 19.2x 21.2x 19.9x 14.9x 19.5x 19.5x

Dividend Yield 1.7% 1.5% 1.6% 2.1% 2.3% 1.5% 2.7% 4.8% 3.7% 2.0% 2.0%

P/E

v

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 – 9/30/14. Since Market Low represents period 3/9/09 – 9/30/14. 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

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% Div

6

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 9/30/14.

Stock Valuation Measures: S&P 500 Index

U.S. Equity: Valuation Measures Historical AveragesValuation Measure Description

Latest 1-year ago5-year

avg.10-year

avg.25-year

avg.*

Equi

ties P/E Price to Earnings 15.2x 14.2x 13.4x 13.8x 15.6x

CAPE Shiller's P/E 26.3 25.0 22.1 22.9 25.2Div. Yield Dividend Yield 1.9% 2.0% 2.0% 2.0% 2.1%REY Real Earnings Yield 3.8% 3.7% 4.2% 3.2% 2.2%P/B Price to Book 2.8 2.6 2.3 2.4 2.9

26x 14%S&P 500 Earnings Yield vs. Baa Bond YieldS&P 500 Index: Forward P/E Ratio

P/CF Price to Cash Flow 10.8 10.6 9.2 9.7 11.3EY Spread EY Minus Baa Yield 1.8% 1.5% 2.1% 1.2% -0.7%

16x

18x

20x

22x

24x

8%

10%

12%S&P 500 Earnings Yield

(Inverse of fwd. P/E): 6.6%

Current: 15.2x

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

10x

12x

14x

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

4%

6%

Moody’s Baa Yield: 4.8%

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

Average: 15.6x

7

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. Price/Earnings to Growth Ratio is calculated as NTM P/E divided by NTM earnings growth. 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 9/30/2014.

Corporate Profits and Leverage

10%

12%S&P 500 Earnings Per ShareOperating basis, quarterly

Profit Margins

S&P 500 Operating EPS % of Sales per Share2Q14*: $29.45

2Q14*:10.0%

4%

6%

8%

10%

$23

$27

Equi

ties

p g p

2Q14:8.7%

2Q07: $24.06

After Tax Adj Corp Profits % of GDP

0%

2%

'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10$15

$19

Total Leverage

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

$7

$11

180%

200%

220%

240%S&P 500, ratio of total debt to total equity, quarterly

-$1

$3

80%

100%

120%

140%

160%

3Q14: 101%

Average: 169%

8

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14Source: BEA, Standard & Poor’s, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. *Most recently available data is 1Q14 as 2Q14 are Standard & Poor’s preliminary estimates. Past performance is not indicative of future returns.

Guide to the Markets – U.S.

Data are as of 9/30/14.

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

Sources of Earnings per Share Growth

50%

S&P 500 Year-Over-Year EPS GrowthGrowth broken into revenue, changes in profit margin & changes in share count

Share of EPS Growth 2Q14*

20%

30%

40%

Equi

ties Share of EPS Growth 2Q14Margin 5.6%

Revenue 5.7%Share count 0.4%

0%

10%

20%

30%

-20%

-10%

-50%

-40%

-30%

2Q14*2Q122Q102Q082Q062Q042Q022Q002Q982Q962Q94

9

Source: Standard & Poor’s, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. *Most recently available data is 1Q14 as 2Q14 are Standard & Poor’s preliminary estimates. Past performance is not indicative of future returns. 4Q2008, 1Q2010 and 2Q2010 reflect -101%, 92% and 51% growth in operating earnings, and are adjusted on the chart.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Sources of Total Return

S&P 500 Year-Over-Year Total ReturnTotal return broken into multiples, earnings and dividends, quarterly50%

Equi

ties

20%

30%

40%

0%

10%

20%

Share of Total Return 3Q14 -30%

-20%

-10%

QMultiples 7.7%Earnings 9.6%Dividends 2.4%

-50%

-40%

30%

3Q143Q123Q103Q083Q063Q043Q023Q003Q983Q963Q94

10

Source: Standard & Poor’s, IBES, J.P. Morgan Asset Management.Earnings contribution is the measured change in forward earnings per share estimates.

Guide to the Markets – U.S.

Data are as of 9/3014.

Equity Performance in Bull Markets

300%% of days during bull markets the S&P 500 is at and near record highs

1991-2000

S&P 500 Performance and Average Valuation S&P 500 Levels Near Market HighsPrice returns to peak after crossing average real earnings yield

Returns to peak price after average valuation83% 84%

90%

240%

2002-20072009-Today

Equi

ties Returns before markets pass average valuation

“Average valuation” is defined as the average real earnings yield of the S&P 500 from 1963 until today

83% 84%

78%

70%

80%

49%

83%0%

180%

*500 from 1963 until today

36%41%

40%

50%

60%

16%

30%

49%

4%

0%

60%

120%

13%

33%

11%

36%

16%20%

30%

29% 49% 73% 121% 59% 180% 101% 192%

15%

0%'66 '70 '74 '82 '87 '90 '02 '09

Start of Bull Market Percent of days during a Bull Market t t d hi h ithi 1% 5% f th d hi h

13% 11%

0%

10%

New High Within 1% Within 5%

11

Source: Standard & Poor’s, J.P. Morgan Asset Management. Valuations are based on real earnings yield for the S&P 500 which is defined as (trailing four quarters of reported earnings/price) - year over year core CPI inflation. Period after average valuation defined by 15-day moving average passing below average real earnings yield. *As depicted on the left hand chart, the return to peak price for the current bull market is 0% as the S&P 500 has yet to cross its long run average real earnings yield. The S&P 500 would need to appreciate over 17% to reach its long-term average real earnings yield of 2.4%.Guide to the Markets – U.S. Data as of 9/30/2014

spent at record highs, or within a 1% or 5% range of the record high

Interest Rates and Equities

0.8

Correlations Between Weekly Stock Returns and Interest Rate Movements Weekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963 – Sep. 2014

When yields are

0.4

0.6

Equi

ties

Positive relationship between yield movements and stock

When yields are below 5%, rising rates are generally associated with rising stock prices

Last 12 Months1963 12 Months Ago

Graph Key

0

0.2returns

on C

oeffi

cien

t

-0.4

-0.2

Negative relationship between yield movements and

Cor

rela

ti

-0.8

-0.6

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

movements and stock returns

12

Source: Standard & Poor’s, U.S. Treasury, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only. Guide to the Markets – U.S.Data are as of 9/30/14.

10-Year Treasury Yield

Deploying Corporate Cash

$1 400

$1,600

$1 600

$1,700

30%

32%

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

Corporate Growth

Capital Expenditures M&A Activity $bn, nonfarm nonfinancial capex, quarterly value of deals completed

$600

$800

$1,000

$1,200

$1,400

$1,200

$1,300

$1,400

$1,500

$1,600

20%

22%

24%

26%

28%

30%

Equi

ties

$0

$200

$400

$900

$1,000

$1,100

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '1414%

16%

18%

Cash Returned to ShareholdersDividend Payout Ratio

50%

60%

y$bn, S&P 500 companies, rolling 4-quarter averagesS&P 500 companies, LTM

Dividends per Share

$100

$120

$140

$160

$30

$33

$36

20%

30%

40%

Share Buybacks

$20

$40

$60

$80

$100

$15

$18

$21

$24

$27

13

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '1420%

Source: Standard & Poor’s, FRB, Bloomberg, FactSet, J.P. Morgan Securities, J.P. Morgan Asset Management. (Top left) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. (Top right) M&A activity is the quarterly value of officially agreed transactions and capital expenditures are for nonfarm nonfinancial corporate business. (Bottom left) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. (Bottom right) Standard & Poor’s, Compustat, FactSet, J.P. Morgan Asset Management. Guide to the Markets – U.S. Data are as of 9/30/14.

$20$15'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Annual Returns and Intra-year Declines

3431

40%

S&P 500 Intra-year Declines vs. Calendar Year ReturnsDespite average intra-year drops of 14.2%, annual returns positive in 26 of 34 years*

YTD 2014

26

1517

26

1512

27 26

7

20

3127

20

26

914

23

13 13

30

710%

20%

30%

Equi

ties

-10

1 2

-7

47

-2

-1013

3 4

0

7

-7

13

-8 -9 -8 -8-6 -6 -5

-9

-3

-8-11 -12

-8 -7 -8-10 -10

-6 -6-10%

%

10%

-13

-23

38

-17 -18 -17-13

-34

-20

11

-19

-12

-17

-30-34

-14

-28

-16-19

-40%

-30%

-20%

-38

-49

-60%

-50%

40%

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

14

Source: Standard & Poor’s, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. *Returns shown are calendar year returns from 1980 to 2013 excluding 2014 which is year-to-date.Guide to the Markets – U.S.Data are as of 9/30/14.

Equity Correlations and Volatility

60%

70%

Large Cap StocksCorrelations Among Stocks

Sovereign Debt Crisis

Lehman Bankruptcy

Great Depression /World War II

30%

40%

50%

60%

Equi

ties Bankruptcy

Tech Bust & 9/11

1987 CrashWorld War II

OPEC Oil Crisis

Cuban Missile Crisis

0%

10%

20%

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

Daily Volatility of DJIA

Average: 26.9% Jul. 2014: 26.4%

2 0%

2.5%

3.0%

3.5%

60

75

90Volatility Measure ’08 Peak Average Latest DJIA (Left) 3.30% 0.71% 0.42%VIX (Right) 80.9 20.0 16.3

Daily Volatility of DJIA

DJIA vol. shownin 3-month

moving average

0.5%

1.0%

1.5%

2.0%

15

30

45

15

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

Source: (Top) Empirical Research Partners LLC, Standard & Poor’s, J.P. Morgan Asset Management. Capitalization weighted correlation of top 750 stocks by market capitalization, daily returns, 1926 – Jul. 1, 2014. (Bottom) CBOE, Dow Jones, J.P. Morgan Asset Management. DJIA volatility are represented as three-month moving averages of the daily absolute percentage change in the Dow Jones Industrial Average.Charts shown for illustrative purposes only. Guide to the Markets – U.S. Data are as of 9/30/14.

Stock Market Since 1900

S&P Composite Index

Log Scale

2000 – present

1,000

300

2000 present

Equi

ties

100

40

1966 – 1974

40

101900 – 1924

1937 – 1948

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

16

Source: Robert Shiller, FactSet, J.P. Morgan Asset Management. Data shown in log scale to best illustrate long-term index patterns. Past performance is not indicative of future returns. Chart is for illustrative purposes only.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Economic Growth and the Composition of GDP

$1810%

Real GDP Year-over-year % chg

2Q14

Components of GDP2Q14 nominal GDP, trillions USD

3.2% HousingReal GDP

$12

$14

$16

$

6%

8%

my

2Q14YoY % chg: 2.6% 13.2% Investment Ex-housing

18.3% Gov’t SpendingAverage:

QoQ % chg: 4.6%

Real GDP

$8

$10

$12

2%

4%

Econ

om 3.0%

$2

$4

$6

-2%

0% 68.5% Consumption

Expansion Average:

2.2%

-$2

$0

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

-4%

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

- 3.2% Net Exports

17

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.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Consumer Finances

$100

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

4Q07:13 2%

Consumer Balance Sheet2Q14, Trillions of dollars outstanding, not seasonally adjusted

Total Assets: $95.5tn 3Q-’07 Peak: $83.1tn$

14%

$80

$90

my

1Q80: 10.6%

13.2%Total Assets: $95.5tn

Homes: 24%

1Q-’09 Low: $69.7tn

11%

12%

13%

$50

$60

$70

Econ

om 2Q14*:9.9%

Household Net WorthBillions USD, not seasonally adjusted 3Q14*:

Deposits: 10%

Pension Funds: 21%

Other Tangible: 6%

10%

11%

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 14

$20

$30

$40

$50,000

$60,000

$70,000

$80,000

$90,000y j

$82,1122Q07:

$67,927

Other Financial

Other Non-revolving: 1%Revolving (e.g.: credit cards): 6%

Auto Loans: 7%Other Liabilities: 9%

Student Debt: 9%

$0

$10

$20

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$10,000

$20,000

$30,000

$40,000Total Liabilities: $13.8tnOther Financial

Assets: 39%

Mortgages: 68%

18

Source: (Left) FRB, J.P. Morgan Asset Management. Data includes households and nonprofit organizations. (Right) BEA, FRB, J.P. Morgan Asset Management. *2Q14 household debt service ratio and 3Q14 household net worth are J.P. Morgan Asset Management estimates. Values may not sum to 100% due to rounding.Guide to the Markets – U.S.Data are as of 9/30/14.

Cyclical Sectors

22

24Millions, seasonally adjusted annual rateLight Vehicle Sales

46

47

Manufacturing and Trade InventoriesDays of sales, seasonally adjusted

14

16

18

20

22

my Average: 15.3

Sep. 2014:16.4

40

4142

4344

4546

Jul. 2014: 39.2

'96 '98 '00 '02 '04 '06 '08 '10 '12 '148

10

12

Econ

om

Real Capital Goods OrdersN d f it l d d i ft $ b ll dj t d

Housing StartsTh d ll dj t d l t

'96 '98 '00 '02 '04 '06 '08 '10 '12 '143738

3940

$60

$65

$70

$75

1 200

1,600

2,000

2,400Non-defense capital goods orders ex. aircraft, $ bn, seasonally adjusted Thousands, seasonally adjusted annual rate

Aug. 2014:63.0

Average: 1 350

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14$40

$45

$50

$55

'96 '98 '00 '02 '04 '06 '08 '10 '12 '140

400

800

1,200

Aug. 2014:956

Average: 56.7

Average: 1,350

19

96 98 00 02 04 06 08 10 12 14Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, FactSet, J.P. Morgan Asset Management. (Bottom left) Census Bureau,FactSet, J.P. Morgan Asset Management. (Bottom right) Census Bureau, FactSet, J.P. Morgan Asset Management. Capital goods orders deflated using the producer price index for capital goods with a base year of 2004.Guide to the Markets – U.S.

Data are as of 9/30/14.

Residential Real Estate

40%

Housing Affordability IndexAvg. mortgage payment as a % of household income

125

Indexed to 100, seasonally adjustedHome Prices

Case Shiller 20-city

20%

25%

30%

35%

my

Aug. 2014: 13.5%

Average: 20 4%110

115

120

Case Shiller 20-cityFHFA Purchase OnlyAverage Existing Home

10%

15%

'75 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '12Econ

om

Average: 20.4%

100

105

110

Home InventoriesMilli l t ll dj t d

3 0

3.5

4.0

4.5

85

90

95Millions, annual rate, seasonally adjusted

Aug. 2014: 2.4

'96 '98 '00 '02 '04 '06 '08 '10 '12 '141.5

2.0

2.5

3.0

'05 '06 '07 '08 '09 '10 '11 '12 '13 '1475

80

85

20

Sources: (Left) National Association of Realtors, Standard & Poor’s, FHFA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, J.P. Morgan Asset Management. Monthly mortgage payment assumes the prevailing 30-year fixed-rate mortgage rates and average new home prices excluding a 20% down payment. (Bottom right) Census Bureau, National Association of Realtors, J.P. Morgan Asset Management.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Commercial Real Estate

8%

10%Commercial Vacancy Rates by SectorPercent at year end

Cap. Rates, REIT Div. Yields & Treasury Yields

Aug. 2014: Sector 2013

Cap. Rates25%

4%

6%

8% 6.67%

my

Sector 2013 Office 16.7%Retail 10.1%Industrial 9.5%Apartment 4.2%

Aug. 2014: 3.98%

REIT Div. Yield

10-Year Treasury Yield

20%

0%

2%

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

Commercial Mortgage-Backed Security Issuance$

Aug. 2014: 2.35%

Econ

om

15%

$ bn, quarterlyU.S. IssuanceForeign Issuance

80

100

120

5%

10%

0

20

40

60

0%

5%

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

21

Source: Reis, Inc., PREA, FactSet, J.P. Morgan Asset Management. Cap rate is the rate of return on a real estate investment property based on the expected return that the property will generate. It is calculated by dividing annual income by the total value of the property. Cap rate is for U.S. core properties limited to deal transactions of $2.5 million or greater. Vacancy rate data provided by Reis, Inc. Guide to the Markets – U.S.Data are as of 9/30/14.

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '1490 92 94 96 98 00 02 04 06 08 10 12

Long-term Drivers of Economic Growth

5%16%Five year moving average of year-over-year % change

Gross Investment and DepreciationPrivate nonresidential fixed investment, % of GDP

Gross investment spending Depreciation

Growth in Employment and Real Output Per Worker*

A th

4%

%

8%

12%

my

Average growth50 yr. 10 yr. 5 yr.

Employment 1.5% 0.5% 0.9%

Real Output Per Worker 1.5% 1.1% 1.3%

Sum 3.0% 1.6% 2.2%

2%

3%

0%

4%

1990 1995 2000 2005 2010Eco

nom

Real Capital Stock Growth

Real Output Per Worker

1%

3%

4%

5%Nonresidential fixed assets, year-over-year % chg.

2013 JPMAM

Est: 1.4%Employment Growth

-1%

0%

0%

1%

2%

Employment Growth

22

1964 1974 1984 1994 2004 20141990 1995 2000 2005 2010Source: 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.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Federal Finances

-12%

-10%$4.0

The 2014 Federal BudgetCBO Baseline forecast, trillions USD

Federal Budget Surplus/Deficit% of GDP, 1990 – 2024, 2014 CBO Baseline

Forecast

-8%

-6%

-4%

-2%

0%

$3.0

$3.5

my

2014: -3.0%

Total Spending: $3.5tnOther

$395bn (11%)

Non defense Disc :

Net Int.: $231bn (7%)

Borrowing:$537bn (15%)

Other: $237bn (7%) 0%2%

4%'90 '95 '00 '05 '10 '15 '20

$2.0

$2.5

Econ

om

Federal Net Debt (Accumulated Deficits)% of GDP, 1940 – 2024, 2014 CBO Baseline, end of fiscal year

Defense:$606bn (17%)

Non-defense Disc.:$527bn (15%)

Social Insurance:$1,024bn (30%)

80%

100%

120%

$1.0

$1.5

y

Social Security:$845bn (24%)

Income:$1,390bn (40%)

Corp.: $274bn (8%)

2024: 77.2%

2014:

20%

40%

60%

'40 '48 '56 '64 '72 '80 '88 '96 '04 '12 '20

$0.0

$0.5

Total Government Spending Sources of Financing

S U S T BEA CBO St L i F d J P M A t M t

Medicare & Medicaid:$908bn (26%)

( )

Forecast

2014: 74.4%

23

Source: U.S. Treasury, BEA, CBO, St. Louis Fed, J.P. Morgan Asset Management.2014 Federal Budget is based on the CBO’s August 2014 Baseline Scenario. Other spending includes, but is not limited to, health insurance subsidies, income security, and federal civilian and military retirement. Note: Years shown are fiscal years (Oct. 1 through Sep. 30). 2014 numbers are CBO estimates as of August 2014.Guide to the Markets – U.S.Data are as of 9/30/14.

Employment

60012%

Civilian Unemployment Rate Employment – Total Private Payroll Seasonally adjusted Total job gain/loss (thousands)

200

400

10%

11%

my 8.8mm

jobs lost

Oct. 2009: 10.0%

-200

0

8%

9%

Econ

om

jobs lost

10.0 mm jobs

gained

-600

-400

5%

6%

7%

Aug. 2014: 6.1%

gained

-1,000

-800

3%

4%

5% 50-yr. avg.: 6.1%

24

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

'70 '80 '90 '00 '10Source: BLS, FactSet, J.P. Morgan Asset Management.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Labor Market Perspectives

68%

Labor Force Participation RateEmployed Part-time for Economic Reasons% of labor force employed part-time for economic reasons

6%

7%Aug. 2014:

4 7%

% of population aged 16+ working or looking for work

64%

65%

66%

67%

my Aug. 2014:62.8%2%

3%

4%

5%

6% 4.7%

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

63%

Econ

om

Average Hourly Earnings GrowthYear-over-year % chg for production and nonsupervisory workers

0%

1%

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

Net Job Creation Since Feb. 2010 – Millions of Jobs 3 mm

3%

4%

5%

Aug. 2014: 2.5%

Year over year % chg. for production and nonsupervisory workers 2.9

2.6

1.9 1.8

0.8

1 mm

2 mm

3 mm

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '140%

1%

2%

S BLS F tS t J P M A t M t

-0.6

-1 mm

0 mm

Info. Fin & Bus. Svcs.

Mfg. Trade & Trans.

Leisure, Hospt. &

Other Svcs.

Educ. & Health Svcs.

Mining & Construct.

Gov't

25

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

Guide to the Markets – U.S.

Data are as of 9/30/14.

Employment and Income by Educational Attainment

18%

$84 852$90,000

Average Annual Earnings by Highest Degree EarnedFull-time workers aged 18 and older, 2012, USD

Unemployment Rate by Education Level

14%

16%$84,852

$70,000

$80,000

my

+28K

Less than High School DegreeHigh School No CollegeSome CollegeCollege or Greater

10%

12%$56,665

$50,000

$60,000

Econ

om

+26K

Aug. 2014:6.2%

Aug. 2014:9.1%

4%

6%

8%

$30,627

$20 000

$30,000

$40,000

Aug. 2014:5.4%

0%

2%

4%

$0

$10,000

$20,000

Aug. 2014:3.2%

26

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 High School Graduate Bachelor's Degree Advanced Degree

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

Unemployment rates shown are for civilians aged 25 and older.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Consumer Price Index

CPI Components

Weight in CPI

12-month change (sa)

Food & Bev. 14.9% 2.6%15%

CPI and Core CPI50-yr. Avg. Aug. 2014

Headline CPI: 4.2% 1.7%

% change vs. prior year, seasonally adjusted

Housing 41.4% 2.6%

Apparel 3.4% 0.1%

Transportation 16.4% -0.4%

12%

my

Core CPI: 4.1% 1.7%

Medical Care 7.6% 2.1%

Recreation 5.8% 0.0%

Educ. & Comm. 7.1% 1.5%

Other 3 4% 1 6%

6%

9%

Econ

om

Other 3.4% 1.6%

Headline CPI 100.0% 1.7%

Less:

Energy 9.0% 0.3%0%

3%

Food 13.9% 2.7%

Core CPI 77.1% 1.7%'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-3%

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

27

CPI used is CPI-U and values shown are % change vs. one year ago and reflect August 2014 CPI data. CPI component weights are as of December 2013. Core CPI is defined as CPI excluding food and energy prices.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Trade and the U.S. Dollar

115-8%

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

100

105

110

-6%

4Q05:-6.2%

my

90

95

100

-4%

2Q14: Mar 2009

Econ

om

80

85

-2%

2Q14:-2.3%

Mar. 2009: 84.0

Sept. 2014*: 79.8

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

70

75

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14

0% Mar. 2008: 70.4

28

96 98 00 02 04 06 08 10 12 1496 98 00 02 04 06 08 10 12 14Source: BEA, Federal Reserve, FactSet, J.P. Morgan Asset Management. *September average of the U.S. Dollar Index is a J.P. Morgan Asset Management estimate.

Data are as of 9/30/14.

Guide to the Markets – U.S.

Energy and the Economy

30

35 Gbl. Natural Gas PricesJapan $17.25

$Kuwait

%Syria

Middle East Energy Production & Chokepoints Percent of global liquid fuel production, 2012*

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

Forecast

10

15

20

25

30Germany $10.38U.S. $3.88

my

Iran3.9%

Iraq3.9%

3.4%Syria0.2%Suez Canal

2.2%

Other**

Shale Gas

0

5

10

1990 1995 2000 2005 2010 2015 2020 2025

Econ

om Libya1.8%

Egypt0.8%

Sudan

Saudi Arabia12.9%

Strait of Hormuz17 0% Consumption of Imports of Liquid Fuels

40%

50%

60%

70%

Sudan0.1%

UAE3.5%

17.0%

Bab el-Mandeb

p p qNet imports of liquid fuels as a percent of total US consumption

EIA Forecast

10%

20%

30%

40%3.4%

Major ProducersPercent of global total, 2012

Saudi Arabia 13% China 5%United States 12% Canada 4%

Major ConsumersPercent of global total, 2012

United States 21% India 4%China 11% Russia 4%

29

0%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Source: (Left) EIA, J.P. Morgan Asset Management. (Top right) EIA, IMF, FactSet, J.P. Morgan Asset Management. (Bottom right) EIA, J.P. Morgan Asset Management. Forecasts are from EIA Annual Energy Outlook and start in 2013. *Production numbers as of 2012, while chokepoints are 2011 data. **Other includes conventional on and offshore natural gas drilling , tight gas, and coalbed methane. Natural gas prices are $/mmbtuand are as of August 2014. Guide to the Markets – U.S. Data are as of 9/30/2014.

United States 12% Canada 4%Russia 12% Iran 4%

China 11% Russia 4%Japan 5% Saudi Arabia 3%

Consumer Confidence and the Stock Market

130Consumer Sentiment Index – University of Michigan

0 8 t10% i i li iImpact on Consumer Sentiment from a…

110

120

my

Mar 1984

Jan. 2000-2.0%

Jan. 2004+4.4%

Aug 1972

-0.8 pts+1.9+2.8-5.2

10% y-o-y rise in gasoline prices10% y-o-y rise in home prices10% y-o-y rise in the S&P 5001% y-o-y rise in the unemployment rate

80

90

100

Average: 84.8

Econ

om

Mar. 1984+13.5%

May 1977+1.2%

Aug. 1972-6.2% Jan. 2007-4.2%

Sep. 2014:84.6

60

70

80

Oct. 1990

Mar. 2003+32.8% Oct. 2005

+14.2%

'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '1440

50

Feb. 1975+22.2%

May 1980+19.2%

+29.1%Nov. 2008

+22.3%Aug. 2011

+15.4%Sentiment Cycle Low and subsequent 12-month S&P 500 Index return

30

'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14Source: University of Michigan, FactSet, J.P. Morgan Asset Management.

Peak is defined as the highest index value before a series of lower lows, while a trough is defined as the lowest index value before a series of higher highs. Subsequent 12-month S&P 500 returns are price returns only, which excludes dividends. Impact on consumer sentiment is based on a multivariate monthly regression between 1/31/2000 – 5/31/2014. Guide to the Markets – U.S.

Data are as of 9/30/14.

Fixed Income Sector Returns

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 3Q14 Cum. Ann.

EMD LCL. EMD USD EMD LCL. EMD LCL. Treas. Gbl. HY EMD LCL. TIPS Gbl. HY Gbl. HY EMD USD Muni EMD LCL. EMD LCL.

23.0% 10.2% 15.2% 18.1% 13.7% 59.4% 15.7% 13.6% 19.6% 7.3% 8.0% 1.5% 148.3% 9.5%

10-yrs. '04 - '13

Gbl. HY EMD LCL. Gbl. HY TIPS Gbl. Sov. EMD USD Gbl. HY Muni EMD USD Gbl. Corp. Muni Treas. Gbl. HY Gbl. HY

13.2% 6.3% 13.7% 11.6% 9.4% 29.8% 14.8% 12.3% 17.4% 1.8% 7.2% 0.3% 143.6% 9.3%

Gbl. Sov. Gbl. HY EMD USD Gbl. Sov. MBS Gbl. Corp. EMD USD Treas. EMD LCL. Asset Alloc. MBS MBS EMD USD EMD USD

12.1% 3.6% 9.9% 10.9% 8.3% 23.7% 12.2% 9.8% 16.8% -1.3% 4.2% 0.2% 119.7% 8.2%

EMD USD TIPS Gbl. Corp. Treas. Barclays Agg EMD LCL. Asset Alloc.Barclays

Agg Gbl. Corp. MBSBarclays

AggBarclays

Agg Asset Alloc. Asset Alloc.

11 6% 2 8% 8 3% 9 0% 5 2% 22 0% 7 5% 7 8% 12 5% 1 4% 4 1% 0 2% 75 4% 5 8%11.6% 2.8% 8.3% 9.0% 5.2% 22.0% 7.5% 7.8% 12.5% -1.4% 4.1% 0.2% 75.4% 5.8%

Gbl. Corp. Treas. Gbl. Sov. Asset Alloc. Muni Asset Alloc. Gbl. Corp. EMD USD Asset Alloc. Barclays Agg Asset Alloc. EMD USD Gbl. Corp. Gbl. Corp.

10.0% 2.8% 7.3% 7.2% 1.5% 16.2% 7.0% 7.3% 8.3% -2.0% 3.8% -0.6% 72.2% 5.6%

TIPS Muni Asset Alloc. Barclays Agg Asset Alloc. TIPSBarclays

Agg Asset Alloc. TIPS Muni TIPS Asset Alloc. TIPS TIPS

8.5% 2.7% 6.9% 7.0% -1.5% 11.4% 6.5% 6.9% 7.0% -2.2% 3.7% -1.2% 60.6% 4.8%

A t All MBS MBS MBS TIPS M i TIPS MBS M i T T TIPS M i M incom

e

Asset Alloc. MBS MBS MBS TIPS Muni TIPS MBS Muni Treas. Treas. TIPS Muni Muni

8.2% 2.6% 5.2% 6.9% -2.4% 9.9% 6.3% 6.2% 5.7% -2.7% 3.1% -2.0% 57.5% 4.6%

MBS Barclays Agg Muni EMD USD EMD LCL.Barclays

Agg Gbl. Sov. Gbl. Sov.Barclays

Agg Gbl. Sov. Gbl. Corp. Gbl. Corp. MBS MBS

4.7% 2.4% 4.7% 6.2% -5.2% 5.9% 6.1% 5.2% 4.2% -4.9% 2.9% -2.3% 57.0% 4.6%Barclays

AggAsset Alloc. Barclays

AggGbl. Corp. Gbl. Corp. MBS Treas. Gbl. Corp. MBS EMD USD Gbl. HY Gbl. HY Barclays

AggBarclays

Agg4 3% 1 7% 4 3% 6 1% 11 2% 5 9% 5 9% 4 0% 2 6% 5 3% 2 6% 3 3% 56 0% 4 5%

Fixe

d In

4.3% 1.7% 4.3% 6.1% -11.2% 5.9% 5.9% 4.0% 2.6% -5.3% 2.6% -3.3% 56.0% 4.5%

Muni Gbl. Corp. Treas. Muni EMD USD Gbl. Sov. MBS Gbl. HY Treas. TIPS Gbl. Sov. Gbl. Sov. Treas. Treas.

4.1% -2.7% 3.1% 4.3% -12.0% 4.3% 5.4% 3.1% 2.0% -8.6% 0.3% -5.3% 51.3% 4.2%

Treas. Gbl. Sov. TIPS Gbl. HY Gbl. HY Treas. Muni EMD LCL. Gbl. Sov. EMD LCL. EMD LCL. EMD LCL. Gbl. Sov. Gbl. Sov.

3.5% -8.8% 0.4% 3.2% -26.9% -3.6% 4.0% -1.8% 1.8% -9.0% 0.0% -5.7% 50.2% 4.1%Source: Barclays Capital FactSet J P Morgan Asset Management Past performance is not indicative of future returns Fixed income sectors shown above are provided by Barclays

31

Source: Barclays Capital, FactSet, J.P. Morgan Asset Management. Past performance is not indicative of future returns. Fixed income sectors shown above are provided by Barclays Capital unless otherwise noted and are represented by Broad Market: Barclays Capital U.S. Aggregate Index; MBS: Fixed Rate MBS Index; Corporate: Gbl. Corporates; Municipals: Muni Bond 10-Year Index; Emerging Debt USD: J.P. Morgan EMBIG Diversified Index; Emerging Debt LCL: J.P. Morgan EM Global Index; Gbl. High Yield: Global Corporate High Yield Index; Treasuries: Barclays Capital; U.S. Treasury; TIPS: Barclays Capital TIPS; Gbl. Sovereigns: Global Treasury ex U.S.. The “Asset Allocation” portfolioassumes the following weights: 20% in MBS, 20% in Gbl. Corporate,15% in Municipals, 5% in Emerging Debt USD, 5% in Emerging Debt LCL, 10% in Gbl. High Yield, 15% in Treasuries, 5% in TIPS, 5% in Gbl. Sovereigns. Asset allocation portfolio assumes annual rebalancing. Guide to the Markets – U.S. Data are as of 9/30/14.

Interest Rates and Inflation

20%Nominal and Real 10-year Treasury Yields

S 30 1981

15%

Sep. 30, 1981: 15.84%

Average(1958 – 2014 YTD) 9/30/14

Nominal Yields 6.32% 2.52%Real Yields 2.51% 0.79%Inflation 3 81% 1 73%

10%

ncom

e

Nominal 10-year Treasury Yield

Inflation 3.81% 1.73%

5%

Fixe

d In Sep. 30, 2014: 2.52%

Real 10-year Treasury Yield

5%

0%

Sep. 30, 2014: 0.79%

Treasury Yield

Rising Rate Corp. Bonds S&P 500 1958-1981 3.0% 8.6% Ann. Inflation 5.0% 5.0% Ann. Real Return -2.0% 3.5%

Falling Rate Corp. Bonds S&P 500 1982-2013 9.7% 11.6% Ann. Inflation 3.0% 3.0% Ann. Real Return 6.5% 8.4%

32

'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10-5%

Source: Federal Reserve, BLS, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for September 2014, where real yields are calculated by subtracting out August 2014 year-over-year core inflation. All returns above reflect annualized total returns, which include reinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance. Guide to the Markets – U.S.Data are as of 9/30/14.

Fixed Income Yields and Returns

Price Impact of a 1% Rise/Fall in Interest Rates*

+1%-1%-2.0%

5 0%

1.0%2y USTUS Treasuries# of

issuesCorrelation to

10-yearAvg.

Maturity 9/30/2014 6/30/2014 3Q14 YTD

2 Y 93 0 64 2 0 58% 0 47% 0 04% 0 49%

Yield Return

-17.4%

-8.6%

-6.4%

-4.7%

22.7%

9.5%

7.5%

5.0%

30y UST

10y UST

TIPS

5y UST 2-Year 93 0.64 2 years 0.58% 0.47% 0.04% 0.49%

5-Year 96 0.91 5 1.78% 1.62% -0.19% 1.73%

10-Year 17 1.00 10 2.52% 2.53% 0.75% 6.93%

30-Year 20 0.92 30 3.21% 3.34% 3.33% 17.56%

ncom

e

-3.8%

-3.1%

-0.1%

4 0%

3.6%

3.5%

0.1%

ABS

Convertibles

Floating Rate

TIPS 35 0.58 10 0.55% 0.27% -2.04% 3.67%

Sector

Broad Market 8,908 0.85 7.7 years 2.36% 2.22% 0.17% 4.10%

MBS 427 0.81 7.2 2.88% 2.79% 0.18% 4.22%

Fixe

d In

-5.9%

-5.7%

-5.6%

-4.1%

5.5%

3.9%

5.6%

4.0%

Munis

MBS

US Aggregate

US HY Municipals 9,057 0.46 9.9 2.13% 2.25% 1.46% 7.24%

Corporates 5,111 0.46 10.5 3.10% 2.91% -0.08% 5.60%

High Yield 2,157 -0.24 6.5 6.13% 4.91% -1.87% 3.49%

Floating Rate 49 -0.21 3.0 0.98% 1.01% 0.40% 1.53%

Source: U.S. Treasury, Barclays Capital, FactSet, J.P. Morgan Asset Management.Fixed income sectors shown above are provided by Barclays Capital and are represented by – Broad Market: Barclays U.S. Aggregate; MBS: U.S. Aggregate Securitized - MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond 10-year Index; High Yield: Corporate High Yield Index; TIPS: Treasury Inflation Protection Securities (TIPS). Floating Rate: Barclays FRN (BBB); Convertibles: Barclays U.S. Convertibles Composite; ABS: Barclays ABS + CMBS. Treasury securities data for # of issues based on U.S. Treasury benchmarks

-6.7%7.7%

-30% -10% 10% 30%

IG Corps Convertibles 521 -0.30 -- 1.16% 1.19% -1.51% 7.56%

ABS 1,666 -0.04 4.2 2.18% 1.90% -0.18% 2.15%

33

Barclays FRN (BBB); Convertibles: Barclays U.S. Convertibles Composite; ABS: Barclays ABS CMBS. Treasury securities data for # of issues based on U.S. Treasury benchmarks from Barclays Capital. Yield and return information based on bellwethers for Treasury securities. Sector yields reflect yield to worst, while Treasury yields are yield to maturity. Correlations are based on 10-years of monthly returns for all sectors. Change in bond price is calculated using both duration and convexity according to the following formula: New Price = (Price + (Price * -Duration * Change in Interest Rates))+(0.5 * Price * Convexity * (Change in Interest Rates)^2). *Calculation assumes 2-year Treasury interest rate falls 0.58% to 0.00%,as interest rates can only fall to 0.00%. Chart is for illustrative purposes only. Past performance is not indicative of future results. Guide to the Markets – U.S.Data are as of 9/30/14.

Sources of Bond Returns

Coupon Return2014 YTD “C”

Total Return2014 YTD “A + B + C”

Treasury Base Rate Return2014 YTD “A”

Spread to Treasury Return2014 YTD “B”

2014 YTD0.5%5-yr. 1.2% 1.7% 5-yr. 2013

5.0%

14.9%

10-yr.

30-yr.

2.0%

2.6%

6.9%

17.6%

10-yr.

30-yr.

ncom

e

4.0%

-2.8%

10-yr. Muni

U.S. HY

EM (USD)

1.3%

2 9%

3.2%

5.1%

4 2%

7.2%

3.5%

6 6%

10-yr. Muni

U.S. HY

EM (USD)

Fixe

d In -0.5%

1.8%

1.0%

EM (USD)

IG Corp.

U.S. MBS

2.9%

0.6%

0.4%

4.2%

3.2%

2.8%

6.6%

5.6%

4.2%

EM (USD)

IG Corp.

U.S. MBS

1.3%

-1.0%

-20% -10% 0% 10% 20%

U.S. Agg.

FRN (BBB)

0.4%

1.6%

-20% -10% 0% 10%

2.4%

1.0%

-20% -10% 0% 10%

4.1%

1.5%

-20% -10% 0% 10% 20%

U.S. Agg.

FRN (BBB)

34

Source: Federal Reserve, Barclays, J.P. Morgan Asset Management.All returns reflect year to date returns. Treasury base, spread, and coupon returns based on Barclays and J.P. Morgan Asset Management estimates. The sum of charts A and B equate to price return for each sector. Indices used include Barclays US Treasury Bellwethers (10Y), Barclays US Aggregate, Barclays US Aggregate Credit – Corporate Investment Grade, Barclays US Aggregate Credit – Corporate High Yield, Barclays Muni 10-year Index, Barclays US MBS Index, Barclays Floating Rate Index, and Barclays Emerging Markets USD. Guide to the Markets – U.S. Data are as of 9/30/14.

20% 10% 0% 10% 20% -20% -10% 0% 10% 20% 10% 0% 10% 20% 10% 0% 10% 20%

The Fed and Interest Rates

Yield Curve Steepness10-yr. U.S. Treasury minus effective Fed Funds rate

Fed’s Balance Sheet: Assets$ trillions

Oth

4% Sep. 2014: 2.4%$4.0

$4.5

OtherU.S. TreasuriesAgency MBS

1%

2%

3%

Average: 1.6%

2.4%

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

Fed’s Balance Sheet: Liabilities$ t illinc

ome

Federal Reserve Summary of Economic Projections

'85 '90 '95 '00 '05 '10-1%

0%

$0.0

$0.5

$1.0

'04 '05 '06 '07 '08 '10 '11 '12 '13 '14

$2.5$3.0$3.5$4.0$4.5$ trillions

Fixe

d In

Other LiabilitiesExcess Reserves

Required Reserves

Fed's September 2014 Forecasts* Percent

2014 2015 2016 2017 Long Run

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

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0.0$0.5$1.0$1.5$2.0 Unemployment Rate, Q4 6.0 5.5 5.3 5.1 5.4

PCE Inflation, Q4 to Q4 1.6 1.8 1.9 2.0 2.0

Federal Funds Rate, end of year 0.25 1.38 2.88 3.75 3.75

35

05 06 07 08 09 10 11 12 13 14Source: 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. *Forecasts of 17 FOMC participants, midpoints of central tendency except for federal funds rate which is a median estimate. Guide to the Markets – U.S.

Data are as of 9/30/14.

Owners of Treasury Securities

1,600

Net Purchases of Treasuries – Year Ended 2Q14Billions of dollars

Treasuries Outstanding – 2Q14Billions of dollars, end of period, not seasonally adjusted

Total Outstanding Treasury Securities: $12,544

State and local gov'ts

7%

Financial institutions

6%

Other1%

1,000

1,200

1,400

PensionsFinancial institutions

Other*

Foreign private

Foreign official32%

Mutual funds9%

Households 7%

400

600

800

ncom

e

Total net purchases: $690

Foreign official

Federal Reserve19%

Foreign private15%

Federal Reserve Balance -200

0

200

Fixe

d In

Mutual funds

Federal Reserve

Households

< 3 yrs: 15%3-5 yrs: 29%

5-10 yrs: 31%> 10 yrs: 25%

Federal Reserve Balance Sheet by Treasury Maturity

-600

-400

S F d l R J P M A t M t

State and local gov’ts*

36

Source: Federal Reserve, J.P. Morgan Asset Management.Treasuries outstanding include total issues of Treasury securities plus budget agency securities and federal mortgage borrowing. “Other” includes Nonfinancial corporate business, Nonfinancial noncorporate business, Issuers of asset-backed securities and Holding companies. Net Purchases is the average of the annual rates over the past four quarters. *Other had net inflows of $6.6 billion and State and local gov’ts had net outflows of $4.9 billion.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Credit Conditions

14%

Common Equity as a % of Total AssetsAll FDIC insured institutions, 1934 – 2013

2013:12%

Residential Mortgages

Delinquency RatesAll banks, seasonally adjusted

8%

10%

12% 11.1%

Average: 7.7%4%

6%

8%

10% Consumer LoansResidential Mortgages

Commercial and Industrial Loans

7.4%

2 3%

4%

6%

'34 '41 '48 '55 '62 '69 '76 '83 '90 '97 '04 '11 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '140%

2%

ncom

e

0.8%

2.3%

Lending Standards for Approved Mortgage LoansA FICO b d i i ti d t

Loan GrowthYoY gro th in loans o tstanding at commercial banks seasonall adj sted

720

740

760

0%

10%

20%

30%

Fixe

d In Average FICO score based on origination date Aug. 2014:

743

YoY growth in loans outstanding at commercial banks, seasonally adjustedReal Estate Loans

Sep. 2014:12.1%

660

680

700

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14-30%

-20%

-10%

0%

Commercial and Industrial LoansSep. 2014:

2.5%

37

00 01 02 03 04 05 06 07 08 09 10 11 12 13 1400 01 02 03 04 05 06 07 08 09 10 11 12 13 14Source: (Top left) FDIC, J.P. Morgan Asset Management. (Top right) Federal Reserve, FactSet, J.P. Morgan Asset Management. (Bottom left): Federal Reserve, FactSet, J.P. Morgan Asset Management. (Bottom Right) McDash, J.P. Morgan Securitized Product Research, J.P. Morgan Asset Management. All data reflect most recently available releases. Guide to the Markets – U.S.Data are as of 9/30/14.

High Yield Bonds

Average Latest HY Spreads 5.9% 4.4%HY Defaults Rates 4.0% 1.9%

High Yield Spreads and Defaults

HY D f lt R tHY Spreads

15%

20%

HY Default Rates

5%

10%

15%

ncom

e

Historical High Yield Recovery RatesHigh yield bonds, cents on the dollar

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

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

40¢

50¢

60¢

70¢

$40

$60

$80

Fixe

d In

g y e d bo ds, ce ts o t e do a

Average: 41.3¢

,YTD 2014: -$10.0bn

High YieldLeveraged Loans

0¢

10¢

20¢

30¢

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14-$20

$0

$20

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

38

Source: (Top chart): U.S. Treasury, J.P. Morgan, Strategic Insight, J.P. Morgan Asset Management. Default rates are defined as the par value percentage of the total market trading at or below 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. (Bottom left): J.P Morgan, Fitch, J.P. Morgan Asset Management. (Bottom right): Strategic Insight, J.P. Morgan Asset Management. Spreads indicated are benchmark yield to worst less comparable maturity Treasury yields. 2014 recovery rate is a weighted average number as of September 2014. Yield to worst is defined as the lowest potential yield that can be received on a bond without the issuer actually defaulting and reflects the possibility of the bond being called at an unfavorable time for the holder. Flows include ETFs and are as of August 2014. Past performance is not indicative of comparable future results. Guide to the Markets – U.S.Data are as of 9/30/14.

Municipal Finance

9%

10%

State & Local Government Debt Service% of current expenditures

10-Year Muni Taxable Equivalent Yield

2Q14: 8.1%12%Taxable equivalent Muni and Treasury yields

5%

6%

7%

8%Taxable Equivalent 10-Yr Muni Yield

10%

3%

4%

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

ncom

e

Municipal Bond Issuance*Billions USD, revenue and GO issues

6%

8%

Fixe

d In

o s US , e e ue a d GO ssues

10-Year Treasury Yield4%

$300

$400

$500

Spread

0%

2%

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

$100

$200

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14

39

Source (Left chart): Barclays Capital, U.S. Treasury, FactSet, J.P. Morgan Asset Management. (Top right) BEA, J.P. Morgan Asset Management. (Bottom right) SIFMA, J.P. Morgan Asset Management.Taxable equivalent yields are calculated for the highest federal marginal tax bracket. 2014 tax rate includes the net investment income tax of 3.8%. *Excludes maturities of 13 months or less and private placements. Interest payments include interest accrued on defined benefit liabilities. 2014 issuance data is as of June 2014. Guide to the Markets – U.S.Data are as of 9/30/14.

Global Fixed Income

$100

Global Bond MarketUSD, trillions

EM: $14tn

Yield Return

Aggregates Correl to 10-year Duration 9/30/2014 6/30/2014 3Q14 YTD

$70

$80

$90 12/31/89 3/31/14 U.S. 60.7% 37.6%Dev. ex U.S. 38.2% 48.1%EM 1.1% 14.2%

U.S. 0.83 5.6 Yrs 2.36% 2.22% 0.17% 4.10%

Gbl. ex. U.S. 0.38 6.9 1.46% 1.56% -4.83% 0.40%

Japan 0.53 8.1 0.52% 0.53% -7.01% -2.11%

$50

$60

ncom

e Developed ex U.S.: $48tn

Germany 0.26 5.9 0.76% 0.94% -5.31% -1.87%

U.K. 0.17 9.0 2.36% 2.54% -2.03% 4.19%

Italy 0.08 6.4 1.67% 2.00% -4.86% 2.69%

$20

$30

$40

Fixe

d In

U S $3

Spain 0.11 5.6 1.32% 1.68% -4.71% 2.60%

Sector

EMD ($) 0.19 7.0 5.39% 5.10% -0.59% 8.02%

EMD (LCL) 0 07 4 8 6 74% 6 42% 5 66% 0 01%

$0

$10

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14Source: Barclays Capital, BIS, FactSet, J.P. Morgan Asset Management. Fixed income sectors shown above are provided by Barclays Capital and are represented by the global

U.S.: $37tnEMD (LCL) 0.07 4.8 6.74% 6.42% -5.66% -0.01%

Euro Corp. 0.09 4.8 1.20% 1.48% -6.04% -2.15%

Euro HY. -0.40 3.9 4.58% 4.37% -7.79% -2.85%

40

aggregate for each country except where noted. EMD sectors are represented by the J.P. Morgan EMBIG Diversified Index (USD) and the J.P. Morgan GBI EM Global Diversified Index (LCL). European Corporates are represented by the Barclays Euro Aggregate Corporate Index and the Barclays Pan-European High Yield index and returns are in USD. Sector yields reflect yield to worst. Duration is modified duration. Correlations are based on 7-years of monthly returns for the all sectors. Past performance is not indicative of future results. Guide to the Markets – U.S. Data are as of 9/30/14.

Emerging Market Debt

10%

12%Index AverageSpread

Spread(9/30/14)

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

Index Breakdown – USD Denominated EMDMiddle East &

Africa 9%Middle East &

Africa 21%100%

4%

6%

8%

10% EMBIG 3.8% 3.3%CEMBI 3.3% 3.3%

Asia 38%

Europe 30%Europe 13%

Latin America41% Latin America

28%

20%

40%

60%

80%

0%

2%

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

ncom

e

Annual Flows into EMD Mutual Funds & ETFsBillions USD

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

Asia 20%Asia 38%

0%

20%

Sovereigns(EMBIG)

Corporates(CEMBI)

$15

$20

$25

$30

Fixe

d In

g y g

Aug. 2014: BBB-BB+

BBB-

BB

BB- YTD 2014:

-$5

$0

$5

$10

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14'93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13

B-

B

B+$1.4 bn

41

Source: J.P. Morgan, Morgan Markets, FactSet, Strategic Insight, J.P. Morgan Asset Management. Spreads measure the credit risk premium over comparable maturity U.S. Treasury bonds. The J.P. Morgan EMBI Global (EMBIG) Index is a USD-denominated external debt index tracking bonds issued by sovereigns and quasi-sovereigns in developing nations. The J.P. Morgan Corporate Emerging Bond Index Broad (CEMBI) is a USD-denominated external debt index tracking bonds issued by corporations in developing nations. Flow data is as of August 2014. Past performance is not indicative of comparable future results. Index breakdown may not equate to 100% due to rounding.Guide to the Markets – U.S.Data are as of 9/30/14.

Global Equity Markets

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

Country / Region

3Q14 YTD 2014

Local USD Local USD

United States50%

Europe ex-U.K.16%

U.K. 8%

EmergingMarkets

%

Regions / Broad IndexesU.S. (S&P 500) - 1.1 - 8.3

EAFE 1.0 -5.8 4.5 -1.0

Europe ex-U.K. 0.1 -7.4 7.2 -1.611%

Japan7%

Can

ada

4%

Global Equity Market Correlations

Europe ex U.K. 0.1 7.4 7.2 1.6

Pacif ic ex-Japan -0.9 -5.9 2.7 1.2

Emerging Markets 0.7 -3.4 5.5 2.7

MSCI: Selected Countries

0 50

0.60

0.70

0.80

0.90

onal

Rolling 1-year correlations, 30 countriesUnited Kingdom -0.9 -6.0 1.0 -1.2

France -0.6 -8.3 5.4 -3.4

Germany -3.7 -11.2 -1.2 -9.4

Japan 5.9 -2.2 3.0 -1.4

0.00

0.10

0.20

0.30

0.40

0.50

Inte

rnat

io

Sep. 2014: 0.37

China 1.7 1.5 1.2 1.0

India 5.1 2.3 24.5 24.7

Brazil 1.6 -8.6 5.1 1.2

Russia -4.3 -15.1 -6.6 -19.5

42

0.00'95 '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 9/30/14.

Global Economic Growth

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

3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Historical

2Q15

JPMSI Forecast

8%

10%

0%

2%

4%

6%

8%

Developed Market Country Real GDP GrowthHi t i l JPMSI F t

-4%

-2%

0%

Emerging Markets China India Korea Mexico South Africa Russia Brazil

Year-over-year % chg. – forecasts from JPMSIp y

onal

3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Historical

2Q15

JPMSI Forecast

4%

6%

8%

10%

Inte

rnat

i

-4%

-2%

0%

2%

4%

Developed U K U S Canada Germany France Japan Italy

43

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

Forecast and aggregate data come from J.P. Morgan Global Economic Research. Historical growth data collected from FactSet Economics.Guide to the Markets – U.S.

Data are as of 9/30/14.

Developed Countries

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

Manufacturing Momentum

Global Purchasing Managers’ Index for Manufacturing

Oct

'12

Nov

'12

Dec

'12

Jan'

13

Feb'

13

Mar

'13

Apr

'13

May

'13

Jun'

13

Jul'1

3

Aug

'13

Sep'

13

Oct

'13

Nov

'13

Dec

'13

Jan'

14

Feb'

14

Mar

'14

Apr

'14

May

'14

Jun'

14

Jul'1

4

Aug

'14

Sep'

14

Global 48.9 49.7 50.1 51.4 50.8 51.0 50.2 50.4 50.4 50.6 51.5 51.6 51.9 52.9 52.9 53.0 53.2 52.4 51.9 52.2 52.6 52.4 52.5 52.2U.S. 51.0 52.8 54.0 55.8 54.3 54.6 52.1 52.3 51.9 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 57.5Canada 51.4 50.4 50.4 50.5 51.7 49.3 50.1 53.2 52.4 52.0 52.1 54.2 55.6 55.3 53.5 51.7 52.9 53.3 52.9 52.2 53.5 54.3 54.8 53.5U.K. 47.7 48.0 50.6 51.0 48.1 50.2 50.6 52.2 52.8 55.0 57.4 56.4 56.1 57.9 57.0 56.5 56.4 55.6 57.2 56.8 57.2 54.7 52.2 51.6Euro Area 45.4 46.2 46.1 47.9 47.9 46.8 46.7 48.3 48.8 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 50.3Germany 46.0 46.8 46.0 49.8 50.3 49.0 48.1 49.4 48.6 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 49.9France 43.7 44.5 44.6 42.9 43.9 44.0 44.4 46.4 48.4 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 48.8Italy 45.5 45.1 46.7 47.8 45.8 44.5 45.5 47.3 49.1 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 50.7Spain 43.5 45.3 44.6 46.1 46.8 44.2 44.7 48.1 50.0 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 52.6Greece 41.0 41.8 41.4 41.7 43.0 42.1 45.0 45.3 45.4 47.0 48.7 47.5 47.3 49.2 49.6 51.2 51.3 49.7 51.1 51.0 49.4 48.7 50.1 48.4Ireland 52.1 52.4 51.4 50.3 51.5 48.6 48.0 49.7 50.3 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

onal

Australia 42.8 44.3 44.3 40.2 45.6 44.4 36.7 43.8 49.6 42.0 46.4 51.7 53.2 47.7 47.6 46.7 48.6 47.9 44.8 49.2 48.9 50.7 47.3 46.5Japan 46.9 46.5 45.0 47.7 48.5 50.4 51.1 51.5 52.3 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 51.7China 49.5 50.5 51.5 52.3 50.4 51.6 50.4 49.2 48.2 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 50.2Indonesia 51.9 51.5 50.7 49.7 50.5 51.3 51.7 51.6 51.0 50.7 48.5 50.2 50.9 50.3 50.9 51.0 50.5 50.1 51.1 52.4 52.7 52.7 49.5 50.7Korea 47.4 48.2 50.1 49.9 50.9 52.0 52.6 51.1 49.4 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 48.8T i 47 8 47 4 50 6 51 5 50 2 51 2 50 7 47 1 49 5 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

Source: Markit J P Morgan Asset Management

Inte

rnat

i Taiwan 47.8 47.4 50.6 51.5 50.2 51.2 50.7 47.1 49.5 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 53.3India 52.9 53.7 54.7 53.2 54.2 52.0 51.0 50.1 50.3 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 51.0Brazil 50.2 52.2 51.1 53.2 52.5 51.8 50.8 50.4 50.4 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 49.3Mexico 55.5 55.6 57.1 55.0 53.4 52.2 51.7 51.8 51.3 49.7 50.8 50.0 50.2 51.9 52.6 54.0 52.0 51.7 51.8 51.9 51.8 51.5 52.1 52.6Russia 52.9 52.2 50.0 52.0 52.0 50.8 50.6 50.4 51.7 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

44

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

Heatmap colors are based on PMI relative to the 50 level, which indicates acceleration or deceleration of the sector, for the time period shown.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Sovereign Debt Stresses

10%Bubble size = 10-year

government bond yield

GDP Growth, Gross Debt to GDP and Borrowing Costs

China

India

IndonesiaMalaysia

10%

5%

6%

8%

014F

)

g y

BrazilSouth Africa

Mexico

U.S.

Turkey

Korea

France

GermanyJapan

Russia

Singapore

EU

Australia

U.K.

0%

2%

4%

Gro

wth

(201

2 –

2

Greece

ItalySpain

Portugal

-4%

-2%

Rea

l GD

P G

onal

-8%

-6%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

G D b GDP R i (2013F)

Developed MarketsEmerging Markets

Inte

rnat

i

245%

45

Gross Debt-to-GDP Ratios (2013F)Source: IMF, FactSet, Bloomberg, J.P. Morgan Economics, Barclays, J.P. Morgan Asset Management.Growth and debt data are based on the April 2014 World Economic Outlook.Borrowing costs based on local currency debt. EU overall borrowing cost based on Barclays Capital Euro-Aggregate 7-10 year treasury. South Africa’sborrowing cost is based on 7-year government bond yield due to data availability. Guide to the Markets – U.S.

Data are as of 9/30/14.

Global Monetary Policy

6%

7%60%

Central Bank Assets – Percent of Nominal GDP

5 G B d

Nominal 5-Year Interest Rates 9/30/14

United States 1.76%Germany 0 09%

2%

3%

4%

5%

50%

5-yr U.S. Treasury

5-yr German Bund

5-yr Japanese Gov’t

Germany 0.09%Japan 0.17%

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

1%

30%

40%

Bank of Japan

5-yr Japanese Gov t

Real Policy Rates – Monthly8%

20%

onal European Central Bank

U S Federal Reserve

Emerging Markets

2%3%4%5%6%7%

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

10%

Inte

rnat

i U.S. Federal Reserve

Developed Markets

-3%-2%-1%0%1%2%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

46

Source: J.P. Morgan Global Economics Research, FactSet, J.P. Morgan Asset Management.Real policy rates represent GDP weighted aggregates estimated by J.P. Morgan Global Economics Research. Real policy rates are short-term target interest rates set by central banks minus year-over-year inflation. Guide to the Markets – U.S.Data are as of 9/30/14.

Europe: Cyclical Headwinds and Tailwinds

14 4%

16%35%9/26/14

Government Fiscal Drag% of potential GDP, reduction in structural deficits from one period to the next

European Sovereign Funding Costs10-year benchmark bond yield

14.4%

12%

14%

25%

30%

9/26/14 Greece 6.08%Portugal 3.10%Spain 2.17%Italy 2.38%Ireland 1.66%Germany 0.93%

2010-2013

2013-2016

ore

fisca

l dra

g

5.9%

4 7%6%

8%

10%

20%

25%

Mo

LTRO

3.4%

4.7%

3.5% 3.5% 3.3%2.9%

0.7%1.5% 1.5%

1.9%

0.3%

1.2%2%

4%

10%

15%

onal

OMT

ss fi

scal

dra

g

-1.0%-0.1%

-2%

0%

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

5%

Inte

rnat

i

Les

47

Source: Tullett Prebon, FactSet, IMF, J.P. Morgan Asset Management. Data are based on the April 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 9/30/14.

Europe: Unemployment, Inflation and Credit Markets

20%

11%

13% Aug. 2014: 11.5%

Unemployment Rates Euro Area Credit Growth% year-over-year loan growth

5%

10%

15%

7%

9%

11%

U.S.

Euro Area-16

A 2014 6 1%

Nonfinancial Corporations

Aug. 2014: -2.2% Aug. 2014: -0.4%Households

-5%

%

'06 '07 '08 '09 '10 '11 '12 '13 '14'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '143%

5%

Europe InflationYear over year % change

U.S. Aug. 2014: 6.1%

Euro Area Asset-Backed Securities Outstanding€ billionsYear-over-year % change Core

Euro AreaPeriphery

€ billions

onal

2%

3%

4%

5%

€2 000

€3,000

Inte

rnat

i

-1%

0%

1%

2%

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

€2,000

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

48

Source: Eurostat, BLS, SIFMA, ECBC, FactSet, IMF, J.P. Morgan Asset Management.(Top left) Unemployment rate levels for the U.S. and Euro Area-16 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.Guide to the Markets – U.S.Data are as of 9/30/14.

Europe: Revenues, Margins and Earnings

7015% €13 $140

Economic Growth and Revenue Growth Estimates12- month revenue growth & manufacturing PMI (advanced 12-months)

Earnings Per ShareNext 12- month consensus EPS

S&P 500

40

50

60

-10%

-5%

0%

5%

10%

€11

€12

$

$120

$130

20

30

-20%

-15%

10%

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 €9

€10

$90

$100

$110Manufacturing PMIRevenue Growth

U.S. and European Operating Profit MarginsLTM EPS/SPS

€6

€7

€8

$

$70

$80

9%

10%

11%

onal

LTM, EPS/SPS

S&P 500

'00 '02 '04 '06 '08 '10 '12 '14€4

€5

$40

$50

$60

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '146%

7%

8%

Inte

rnat

i

MSCI Europe

MSCI Europe

49

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

Revenue growth reflects next twelve month forward estimates from FactSet for the MSCI Europe Index.

Data are as of 9/30/14.

Japan: Economic Snapshot

9%

¥120

¥130

¥18,000

¥20,000Inflation and Japanese Government Bond Yields Year-over-year % change for inflation Japanese Yen per U.S. Dollar

Nikkei 225

Japanese Yen and the Stock Market

7%

¥90

¥100

¥110

¥10,000

¥12,000

¥14,000

¥16,000Owners of Japanese Gov. BondsOther Domestic 71%Bank of Japan 25%Foreign 4%

3%

5%

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14¥70

¥80

¥6,000

¥8,000

Nominal 10-year Yield Government Fiscal Balance% of GDP IMF

1%

-12%

-10%

-8%

-6%

-4%onal

% of GDP IMFforecast

'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13-3%

-1%-2%

0%

2%

4%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Inte

rnat

io

Core CPI

50

Source: (Left) Bank of Japan, OECD, IMF, FactSet, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management.

Core CPI is defined as CPI excluding fresh food. Other Domestic includes banks, insurance and pensions, public pensions, and households. Values may not sum to 100% due to rounding. Government bond data is calculated from the Bank of Japan’s September 2014 flow of funds.

Guide to the Markets – U.S.

Data are as of 9/30/14.

International Equity Earnings and Valuations

18x

Forward Price to EarningsP/E ratios for next 12-month consensus EPS

Earnings per ShareEPS for next 12-month consensus, local currency, rebased to 100280 ’07/’08 Peak Current % Change

MSCI EM 217 200 8%Average Current

MSCI EM 11 3 10 8

16x

220

240

260MSCI EM 217 200 -8%S&P 500 150 191 27%MSCI Europe 161 128 -20%

MSCI EM 11.3x 10.8xS&P 500 13.8x 15.3xMSCI Europe 12.0x 13.9x

12x

14x

180

200

220

onal

10x

120

140

160

Source: MSCI FactSet J P Morgan Asset Management

Inte

rnat

io

'05 '06 '07 '08 '09 '10 '11 '12 '13 '146x

8x

'05 '06 '07 '08 '09 '10 '11 '12 '13 '1480

100

51

Source: MSCI, FactSet, J.P. Morgan Asset Management. Forward Price to Earnings Ratio is based on each index price, divided by consensus estimates for earnings per share (EPS) in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Past performance is not indicative of future returns.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Exports, Demographics and Development

Demographic Snapshot

Investment(% of GDP)

GDP Per Capita

Population % of Pop. under 20

Exports as a % of GDP2013, goods exported

Russia

China

India

BrazilDeveloped

U.S. $54,980 319 mm 26% 20%

Canada 49,838 35 22 24

U.K. 43,830 65 24 15

(% of GDP)p

24.9%

26 2%

10.8%

16.0%

Japan

U.S.

RussiaGermany 47,893 81 18 17

France 45,123 64 24 20

Japan 38,142 127 18 22

Italy 36,216 60 19 18

U.S.

Europe

BRIC

26.2%

9.4%

14.6%

France

UK

Eurozone

onal

Emerging

Korea 25,931 50 22 27

India 1,584 1,260 38 35

Brazil 11,080 200 33 18

Other

BRIC

18.5%

19.6%

20.7%

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

Germany

Italy

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

Inte

rnat

i

Mexico 10,767 120 38 22

Russia 14,645 143 21 24

China 7,333 1,368 20 48

24.6%

37.6%

52

India, J.P. Morgan Asset Management.

GDP Per Capita, Population and Investment as % of GDP are IMF estimates for 2014.

Guide to the Markets – U.S.

Data are as of 9/30/14.

Emerging Market Currencies

China (Mainland)

9%EM Current Accounts and Currency Performance

ger

ency

Mexico

China (Mainland)

Korea

Russia

Taiwan-9% -6% -3% 0% 3% 6% 9%

ceS

tron

Cur

r e

14%

Mexico

Brazil

India-9%

cy P

erfo

rman

c

Indonesia

South Africa

Turkey

-27%

-18%

onal

Cur

renc

2013 Currency Performance & 2013 Current Account

Currency Performance since

Graph Key

-36%

Current Account (% of GDP)

Inte

rnat

i Currency Performance since Jan. 2013 & 2014 Current Account

Wea

ker

Cur

renc

y

Current Account SurplusCurrent Account Deficit

53

Source: IMF – World Economic Outlook, FactSet, J.P. Morgan Asset Management.

Current accounts as a percentage of GDP are IMF figures for full year 2013 and latest available quarterly data for 2014.

Russia current account reflects IMF estimates for 2014. Guide to the Markets – U.S.

Data are as of 9/30/14.

Emerging Market Diversity

Brazil

EM GDP growth: Sensitivity to DM growthEstimated increase in real GDP growth from a 1% increase in DM growth

U.S.

Emerging Markets: Service vs. Commodity Orientation % of exports in service or commodity sectors, 2012

Service-Percent of

E t Mf & Commodity-Percent of E t

Emerging Markets: Commodities vs. Services% of exports in service or commodity sectors, 2012

Mexico

Russia Japan

Europe

Commodities Services

Service Oriented

Exports, Mfg. & Services

CommodityOriented

Exports, Commodities

China 94.7 Chile 72.5

Korea 89.2 Russia 70.9

0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7%

Korea

MSCI EM Country Index by Sector

Mexico 78.6 Indonesia 54.5

India 73.8 Brazil 52.3

y y

Other

Commodities

Financialsonal

23%

14%33%

63%

19% 17%18%

12%

13% 10% 18% 22% 31%15%

60%

80%

100%

TechConsumer

Inte

rnat

i

22%7%

17% 11%

34%22%

3%23%

11%

37%29%

19%

38% 17%

0%

20%

40%

Brazil Russia India China Mexico* Korea

54

Source: MSCI, FactSet, MacData, IMF, J.P. Morgan Asset Management. “Other” is comprised of Health Care, Industrials, Telecom, and Utilities sectors. *Mexican telecom sector accounts for 20.2% of the country’s market capitalization. Values may not sum to 100% due to rounding. (Top Right) Assumes a 1% increase in GDP growth from Japan, Europe, and the U.S., 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. Increases in industrial production are estimated while controlling for emerging market domestic demand in order to limit feedback loops and isolate the impulse from developed market demand only. The sample period tested ranges between 1993 and 2013 reflecting quarterly data. Guide to the Markets – U.S. Data are as of 9/30/14.

China: Economic and Credit Growth

16%

China Real GDP ContributionYear-over-year % change Year-over-year % change, 3-month moving average for credit

Credit* vs. GDP Growth

40%

12%

InvestmentConsumptionNet Exports

9.6%

9.2%

10.4%9.3%

Credit

Real GDP

GDP Deflator30%

35%

4 3%

4.5%

8.1%5.5% 4.4%

3.6% 4.2%

4%

8% 7.7%7.7%

20%

25%

0.8%

-3.4%

0.4%

-0.4% -0.2% -0.3%

4.3%4.6% 4.5% 5.3% 4.2% 3.9%

0%

onal

5%

10%

15%

-8%

-4%

2008 2009 2010 2011 2012 2013

Inte

rnat

io

-5%

0%

5%

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

55

2008 2009 2010 2011 2012 2013

Source: National Bureau of Statistics of China, The People’s Bank of China, EM Advisors Group, FactSet, CEIC, J.P. Morgan Asset Management.Values may not sum to 100% due to rounding. *As defined by Total Social Financing: RMB bank loans, bankers acceptance bills, trust loans, entrusted loans, corporate bond financing, foreign currency loans, and non-financial equity financing. TSF data uses an assumption of outstanding credit in Dec. 2001. Guide to the Markets – U.S. Data are as of 9/30/14.

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

Global Equity Valuations – Developed Markets

+5 Std Dev+4 Std Dev

+6 Std Dev+7 Std Dev

Developed Market Countries

vera

ge Expensive relative to

ld

Example

+3 Std Dev+2 Std Dev+1 Std Dev

Average-1 Std Dev-2 Std Dev-3 Std Dev

+4 Std Dev

Dev

from

Glo

bal A

v

Expensive relative to own

history

world

Cheap relative to own history

Average

Current

Cheap-4 Std Dev-5 Std Dev

Std

own history Cheap relative to

world

F d P/E P/B P/CF Di Yld F d P/E P/B P/CF Di Yld

Current Composite

Current 10-year avg.

World (ACWI)

EAFE Index

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

onal

Fwd. P/E P/B P/CF