EFTA01169774.pdf

From: US GIO < > To: Undisclosed recipients:; Subject: WPM View 10.07.2011 Date: Fri, 07 Oct 2011 21:13:53 +0000 Attachments: The_WM_View_10.07.2011-pdf2ip image003.png J.P.Morgan Global Asset Allocation JP.Magan Owe Bank NA, J P Morgan Seosoro Lid Oct 7.2011 The J.P. Morgan View It is all up to fiscal policy. Monetary is done. Jan Loeysc • Emmanuel — Cnoroh forecasts reduced for UK.EM Asia. and Latin America. bringing 2012 EM growth down by 0.2%. US data are tracking a soft growth picrun, but one that is not falling into recession at the moment. John Normand • Pert folio strategy— Monetary policy has provided great help to the world economy but is now neatly done. Fiscal and regulatory policy makers have done mote damage than good, by creating huge uncertainty We do not see filloslaos Paladin:adieu imminent changes here and thus remain defensive on risk assets. • Fixed Income— EM bonds are at risk of farther foreign outflows. • Equities — The market rebound over the past week was largely driven by Seamus Mae Gorain short covering. induced by rumours and speculation. We stay with a defensive stance. uncle/weighting Cyclical sectors. • Credit —Keep a preference for EM sovereign vs. EM corporate credit and Matthew Lehmann US vs. Euro credit as flight to gnainynievaits. • Foreign exchange — Take profits on the last USD short (vs NOK). but keep sovereign hedges in USD4PY.EUPJJPY and OBPOPY. • Commodities— Copper prices below S7.000/mt are likely to encourage restocking in China. YID Sums through Oil 6 k. saes remits cobs. • With the exception of credit. most riskier asset classes — equities. conunodi- ties. and EM FX — art on net up this week, and bond yields rose amidst still Oro sky-high volatility. US economic data came out better than expected across the us Fins owes board. punctuated by an upward surprise on US Payrolls today. while roves- us no Groot ton keep speculating about imminent action on a TARP-like recapitalization of 0kbri Gov Birelt" Europe's banks. EM LocalBade SW would love to be proven too pessimistic, but feel instead merely realistic ELM about the uncertainties that investors face. We retain n defensive stance, hope cued west undenverghtmg riskier asset classes versus cash and safe government debt. Wm* Of the quartet that we monitor to signal a need to change our defensiveness US roatirok — position:, data, value, and policy — the first two are at least pattially in EMS Cow place for a rebound. It is om sense that tactical investors are now indeed underweight riskier asset classes. though not by as much as during the 2007- BIM OS ni sis. US data are now beating expectations, with modest upside risk on O3 SSP500 GDP. earn as the test of the wand is still showing quite a mixed pause China 0SCWR is stabilizing with its PMI above 50. but the rest ofEM Asia is much weaker. as Wane WM? industrial and trade data there have clearly disappointed. IISCIEneW • Value is harder to assess as markets are priced as a probability-weighted tame average of two binary risks — developed economy recession, and Euro MSCIEW breakdown Risk markets are dirt cheap if anther of these risks materialist:. or at • If but remain expensive done or more of these become reality. We project a taCi . rT SS" Man WO WI recession in Europe but not in the US. at the moment. even as the US economy mow ...wpmis uta cos e••••01•• kite OMNI rs hostage to the amount of fiscal tightening next year. We consider a euro Vat uw-rrtec ad011.00•10P10 Yea CM nattyIn breakdown very unlikely, but do telieve that conditions in the Euro area will, and need. to become much worse before EMU member countries are forced to a vnew.morganmancats.eom The certifying analyst is indicated by an At. See page 7 for analyst certification and important legal and regulatory disclosures. EFTA01169774 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://vmAv.jpmorgan.com/pagesidisclosureskmail. EFTA01169775