EFTA01181901.pdf

From: US GIO To: Undisclosed recipients:; Subject: WPM View 10.19.2012 Date: Fri, 19 Oct 2012 20:11:03 +0000 Attachments: JPM_View_l0.19.2012-pdtzip Inline-Images: image003.png Global Asset Allocation IS October 9012 The J.P. Morgan View The mean and the mode • Asses allocation — Our modal forecasts on the economy and eaniauts are still Global Asset Allocation edging down but so are downside risks. such that the probabihry-weighted Joni S ht means are instead rising We stay long risk assets. and add longs en euro prophecy bonds and slats m overall bond duration With event risks moving from China and Eueope to the US. we mow makeweight US equities and !Mayan Chase aria NA overweight USTs vs_ Europe. while staying short the dollar. John Normand • Eninsamies — US 2013 growth is lowered by 01% to 1.7% as we raise 2013 fiscal drag to -2% JP Mins Starers ph • Find latoesis —Look fee the rally in Euro area preipberals too:canoe. Nikoloos Pan istroglou • Equities —UW US equities within a global portfolio into 2013 Jp Popo .Aesecies pr • Credit — We lower our YE US HO speed target to 135bp, down from 150bp Seamus Mac Gonda • Currencies — A Romney win shoukl be dollar bearish. as it boosts risk assets • Commodities — We stay long base metals J P Mover Soartos Pe Matthew Lehmann • Risk markets continue to yo-yo, with this week being up. while last week was gloms. Bond markets are =tonne the move, in reverse Most Matteis remain within thew 2-month range. but credit is ourperfomung with spreads J.P. mew Slats as reaching new lows for the year Leo Evans • We continue to see risk markets supported by a bettor mean, despite a poorer mode. That is statistics language for saying that out best-guess modal forecasts 1JP. Magri stases Vs for global economic growth and earnings next year are still edema gently down. but the probability weighted mean of different outcomes for next year is. in YTO returns through Oct It contrast, still slowly improving This is because we and the market are M. 'toter we n l,*at. color. gradually seeing less downside risk emanating Sons China and Europe. even as contents me rising about the so-called US fiscal cliff Ma50/ wale • The economic data flow cairmues to show signs of a bottoming and a coming ELI $ COP rebound in growth A few weeks ago. we got upward moves in PMls. and LISCI AC War especially in orders relative to inventories. This week, we received wrong 11%' Ember demand-ode data on consumption fee September ws the US. UK and China Business capital spending remains weak. though Watch out next week for US US sup nua durables and flash PMIs foe babel confinnamon of the coming rebound. On the MSCIEW policy side. ow US economists reassessed the likely fiscal tightening next year Geld and upgraded the total fiscal drag to -2%. thus forcing 2013 US growth down USHga Ora from 1.9% to 1.7% (see Michael Feroh. 77se LS Fiscal ehit on update and a Seep. Fetid Ine downgrade. in today's GDW) Ell FX • In event risk tams. concern that gndlock in Washington will push the US into FM LOOP Be recession is rising. if wily because decision trine is nearing and both odes will Tcpte try to show how commined they are to thew positions At the global level. we US FatalIcon believe these greater concerns are offset by reduced wanes about a Chinese OaCi TR hard landing and a Euro implosion. Obtel Our Gear UScash s is so See page 7 for analyst certification and important disclosures. seem. Morgan. Btxtnbers See Nue emit • Thisanal] is confidential rd sublets to Swoon( disclaimos and conditions includine on pars feediepurelase or sale of sereuritimaecoracy and compteteness of infonnatien. Oros«. confidentiality. legal privilege. and Iota entity disclaimers, available m EFTA01181901