EFTA01178963.pdf

From: US GIO < To: Undisclosed recipients:; Subject: JPM View 07.13.2012 Date: Fri, 13 Jul 2012 20:44:54 +0000 Attachments: JPM_View_07.13.2012-pclizip Inline-Images: image003.png EFTA01178963  Global Asset Allocation J.P. Morgan 13 July 2012 The J.P. Morgan View EM policy cavalry is saddling up • Asset Allocation — Position now for EM monetary easing through EM local Global Asset Allocation bonds. and wait with al FX and equity longs until EM data and growth Jan Loeys expectations have bottomed. • Economics — Q2. at 1.7%, is ending up as the weakest quarter in the recovery. ,WMagan Chase Bain NA so far. We project a rebound for II2. on falling inflation. but only to a still below potential pace of 2.5% EM policymakers have by far the greatest room John Normand to counteract economic weakness. • Fixed Income — We still prefer German Binds to LS Treasuries. J.P. Motor Securities plc NikobOs PanigirtZ0glou • Equities — The US reporting season is delivering a positive suiptise. supporting equities near terra J P. Skew Stash.. Me • Credit — Outright longs in US HG corporate and EL' bank bonds combine a safe and a risky asset and thus offer good diversification against changes in the Seamus Mar retrain growth outlook. • Foreign exchange — Still long dollar vs. euro. J P. Morgan Saturn*, pc Matthew Lehmann • Commodities — We lower our 2012 copper price forecast but raise next year's. • Fixed income continues to beat equities as investors are trimming growth J P. Magri $10.000$ pk expectations and wonder whether policy makers have tat it takes to reverse deflationary conditions. We similarly Sinned our Q2 estimate to 1.7%. the Leo Evans weakest quarterly pace, so far, in this recovery. Our economists maintain that the second half should be better. as falling inflation should boost real income. J.P. Morgan Startles Me But at a projected pace of 2.5%, If2 growth would still be a good half a point below what we consider the level needed to keep global inflation and YID returns through Jun 21 unemployment rates unchanged. %, 1gdaH am in lighter Wee. ti t Coss • The cause of the Q2 soft patch is not entirely clear, but it is quite plausibly ties4 related to the same force that has been keeping both investors and companies VS Mr Yost cautious over the past year — fundamental uncertainty about what the fixture ibpsU will bring. To some degree, this uncertainty is self fulfilling: "I will not invest if Le-CI El? I do not see others investing also." In past decades. the marloet has then looked Tope for policy leadership to break this logjam through decisive stimulus measures. US He Gob But here we believe that G4 policy makers are either unwilling or tumble to Waif preside mirth stimulus a in such internal disarray that they are actually adding EULeal Srde to economic and market uncertainty. EM policymakers, in contrast• still have the &ISO Euvos• ability and willingness to counteract an economic slump. and are thus creating VS Food Sow greater opportunities for active investors. Gbsel Got Ssrele PIM( • More concretely, policy makers can boost spending through monetary bocce nutKale stimulus, fiscal stimulus, or simply by providing more clarity about their US ash future actions. In the advanced economies, nominal monetary policy rates have God been cut to a GDP-weighted average of 0.5%, or more than 1% below inflation. C43C17 As a result, the G4 have added various QE programs to push bond yields down to new historic lows. We tact t another round of G4 QE this fall. through Sant JP. wept Simms Reins n USC. isms enemy. nringee hW VSO. boo ?UK men s 15ca °sari enWhit BAB* at See page 7 for analyst certification and important disclosures. elib Cap a JPsiroom Us I.:tot-1A. ins www.morganmarkets.corn EFTA01178964 This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities. accuracy and completeness of information. viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://www.Mmorgan.comtpagesidisclosureseemail. EFTA01178965