09.07.12 jpm fiscal cliff white paper

7/31/2019 09.07.12 JPM Fiscal Cliff White Paper

1/16

The scal choice:Clif, ledge or ladderBy Dr. David Kelly, David Lebovitz,

Anshul Mohan and Anthony Wile


2/16

MARKETINSIGHTS

2

Foreword

For American investors, the current economic environment seems mor

disappointing than dangerous. While the European recession and deb

crisis continues, the European Central Bank should be able to avoid a

absolute nancial panic. Although the Chinese economy has slowed

both monetary and scal policies are being employed to recharg

growth going into 2013. In the United States, while neither the Federa

Reserve nor the ederal government is in a position to help the econom

it does appear to still be on a slow expansion track. Additionally, secon

quarter earnings or the S&P 500 companies were the highest on recorwhile ination remains very much under control. Given all o this, alon

with a wide valuation gap avoring stocks over xed income, it seem

strange that investors continue to pile money into bond unds and cas

accounts while still shunning stocks.1

One reason or this behavior may be ear o the scal clif. Without new legislatio

at the end o 2012, the Bush tax cuts, the temporary payroll tax cut and extende

unemployment benets will all expire just as higher Medicare taxes and both round

o cuts to discretionary spending agreed to last August take efect. According to th

Congressional Budget Oce (CBO), this would cut the budget decit rom 7.3% o GD

in scal year 2012 (which ends in a month) to 4.0% in scal 2013. 2 Even this understate

the extent o the scal clif, since scal 2013 includes three months beore these chang

are scheduled to take efect. On a calendar year basis, the projected drop in the dec

is closer to 4% o GDP.

Legislation to avoid the ull impact o these changes is likely ater the election. Whi

Republicans and Democrats will disagree about how the decit should be reduced, wh

should see higher taxes and what areas should be cut, in theory, there should be les

debate about the appropriate pace o decit reduction. However, one o the greate

dangers in the current environment is that a compromise is reached that still impose

huge scal drag on the economy in 2013 a scal ledge rather than a scal clif. O

course, what America needs is not a scal clif or a scal ledge but rather a scal ladde a plan to reduce the decit steadily but slowly.

In the pages ahead, we examine potential scenarios or the budget going orward an

what these scenarios imply or the economy and investing. Big changes are coming ro

Washington, and while investors can hope that common sense prevails and leads t

a balanced, steady reduction in the decit, they should be prepared to deal with th

consequences o a variety o scal outcomes.

Table of contents

The scal choice: Clif, ledge or ladderForeword p. 2

The ederal budget

and how we got here p. 3

The scal clif p. 4

Four scenarios ater the election p. 5

The Democratic sweep:

Bush tax cuts end or

upper-income households p. 6

The Republican sweep:

A ocus on spending cuts p. 8

Divided government I:

The scal ledge p. 10

Divided government II:

The scal ladder p. 12

Conclusion p. 14

1 On August 23, 2012, the gap between the earningsyield on stocks (the inverse o the broad market

lagged P/E ratio and the yield on BAA corporatebonds) was wider than in more than 96% o thedays since the start o 1986. Meanwhile, throughthe end o July, investors have added a net $177billion to bond mutual unds while withdrawing $40billion rom stock mutual unds, according to theInvestment Company Institute.

2 See An Update to the Budget and EconomicOutlook: Fiscal Years 2012 to 2022, CongressionalBudget Oce, August 22, 2012.


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The scal choice: Clif, ledge or ladder

The federal budget and how we got hereBeore looking at Washingtons scal choices going into 2013, it is important to understand the

basic math behind the ederal budget. Three things should be noted beore going any urther:

First, the decit is the gap between government spending and revenues in any one scal

year. Fiscal years run rom October 1 o the prior year to September 30 o the current year

and, as an approximation3, the debt grows by the amount o the decit each year.

Second, in measuring the impact o decits and debt, we look at these numbers relative to

GDP, the overall output o goods and services in the economy. The key issue, when it comes

to scal sustainability, is the size o debt and decits relative to the overall economy.

Third, in measuring the total debt, we look at what is known as debt held by the public,currently $11.2 trillion, rather than total public debt subject to limit, which currently

amounts to $15.9 trillion. Debt held by the public excludes money the ederal government

owes to its own trust unds, most notably, the Social Security trust und. This measure is the

ocus o most debt projections and we believe is a better measure to use in assessing both

the sustainability o debt and its impact on global nancial markets.

Bearing this in mind, Chart A shows the evolution o ederal government budget decits over

the past 40 years, while Chart B shows the impact o these decits on the ederal debt. The

economy experienced high decits in the early 1980s, reecting the impacts o a deep recession

and a combination o a deense buildup and tax cuts. However, rom the mid-1980s to the year

2000, the scal situation improved substantially with only one recession, a strong stock market

and the impact o the end o the Cold War on deense spending. By 2000, the ederal budgetwas in surplus and the debt/GDP ratio was alling rapidly.

Since then, America has experienced a series o shocks and slumps. Two wars, two recessions

and two huge bear markets in stocks led to a surge in the decit, as did attempts by both the

Bush and Obama administrations to stimulate the economy through tax cuts and increased

government spending. By scal 2009, the decit had climbed to $1.416 trillion or 10.1% o GDP,

with ederal debt rising sharply.

Over the last three years, the decit has retreated somewhat, with the CBO estimating a decit

o $1.128 trillion, or 7.3% o GDP, or the current scal year. While this does represent some

progress, we estimate that the decit would need to all to below 4% in order or the debt to

grow less quickly than GDP, thus stabilizing the debt/GDP ratio, albeit at a high level.

3 This isnt actually exact because o changes in ederal assets rom year to year.


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MARKETINSIGHTS

4

The scal cliRemarkably, we are currently on trac

to reach these levels as early as ne

year. The Baseline Forecast o thCongressional Budget Oce, portrayed

Charts C and D, assumes that current la

prevails over the orecast period.

Under current law, as o December 3

2012:

All the Bush tax cuts are set to expir

This would, among other things, boo

the top tax rate on ordinary incom

rom 35% to 39.6%, increase the tax o

dividends rom 15% to 39.6%, increasthe tax on long-term capital gains ro

15% to 20% and increase the estat

tax rate rom 35% to 55%, with th

exemption amount alling rom mo

than $5 million to more than $1 million

The 2% payroll tax cut is set to expire.

The extra 0.9% Medicare tax or uppe

income households and the broadenin

o the Medicare tax base to includ

investment income or the sam

households is set to take efect.

The extended unemployment bene

program is set to expire.

The two rounds o discretiona

spending cuts agreed to in August 20

take efect, rst adhering to ormal cap

on discretionary spending over the ne

decade, and then urther reducing th

spending due to the ailure o the s

called super committee to agree on a

alternative decit reduction plan.

On paper, i all o this were implemente

it could reduce the decit substantially;

practice, it would likely push the econom

into a new recession as consumers reduced spending in reaction to lower ater-tax incom

the stock market ell in response to higher dividend and capital gains taxes and reduce

government spending increased layofs throughout the economy.

Sources: Congressional Budget Office, U.S. Treasury, BEA, J.P. Morgan Asset Management.

1970 through 2011 numbers are actuals. 2012 Federal deficit based on the CBOs August 2012 projections.

Data are as of 8/28/12.

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

-12%70 74 78 82 86 90 94 98 02 06 10

CHART A: Federal decitsFederal decit as a % of GDP

100%

80%

60%

40%

20%

0%

70 74 78 82 86 90 94 98 02 06 10


1970 through 2011 numbers are actuals. 2012 Federal debt based on the CBOs August 2012 projections.


2012: 72.8%

CHART B: Federal debtFederal debt held by the public as a % of GDP


5/16

The charts below show the impact o these policies. The decit would all rom 7.3% o GDP

in scal 2012 to 4.0% o GDP in scal 2013 and 2.4% o GDP in scal 2014. In calendar years,

the drop in the decit would be more severe rom 7.0% o GDP in 2012 to 3.1% o GDP in 2013,

imparting a 3.9% o GDP scal drag on the U.S. economy. This would very likely lead toanother recession.

Four scenarios after the electionMost politicians o both major parties

recognize the basic nature o this

problem. However, or political reasons,

no legislation to avoid the scal clif is

likely to be enacted beore the election.

Ater the election, action is likely but what

type o action depends on the balance o

power determined by the voters.

Beore going any urther, it is worth

considering what that balance o power

might be. As o right now, just over two

months beore election day, there are

three realistic scenarios: a Democratic

sweep o Congress and the White House,

a Republican sweep o Congress and the

White House or a divided government

in which the president is re-elected but

Republicans at least retain control o

the House o Representatives. (A ourth

scenario, whereby Mitt Romney is elected

president but the Democrats at least

retain control o the Senate seems less

likely based on polling.)

Given these potential political outcomes,

we outline our separate scal outcomes

in the pages ahead:

The Democratic sweep: Bush tax cuts

end or upper-income households

The Republican sweep: A ocus on

spending cuts

Divided government I: The scal ledge

Divided government II: The scal ladder

100%

80%

60%

40%

20%

0%

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22



2011 actual: 67.7%

2022: 58.5%

CBO baseline

CHART D: Federal debtProjected federal debt held by the public as a % of GDP



0%

-2%

-4%

-6%

-8%

-10%

-12%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

-3.2%

CBO baseline

CHART C: Federal decitsProjected federal decit as a % of GDP


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MARKETINSIGHTS

6

The Democratic sweep: Bush tax cuts end for upper-income households

Assumptions

I President Obama is re-elected and his victory is big enough to achieve control o both thSenate and the House, it can be assumed that taxes will rise or upper-income Americans.

this scenario, we assume:

The Bush tax cuts are extended only or households earning less than $250,000 per ye

along with the annual AMT x. The top dividend tax and capital gains tax rates rise rom 15%

to 20%.

The payroll tax cut is phased down to a 1% cut or 2013 through 2015 and eliminated ro

2016 on in order to mitigate the scal drag rom the partial expiration o the Bush tax cuts

Extended unemployment benets expire on schedule.

Higher Medicare taxes to pay or President Obamas health care plan take efect.

Only the rst round o spending cuts agreed to last all are implemented. The second roun

does not take efect.

Economic eects & investment implications

The table and charts on the ollowing page show the impact o these policies on the budget an

the economy.

From an investment perspective, the good news is that this scenario would only impose

moderate scal drag on the economy, with the budget decit alling rom 7.3% o GDP

scal 2012 to 6.3% o GDP in scal 2013 and 5.3% in 2014. On a calendar year basis, th

scal drag is similar, with the decit alling rom 7.0% o GDP this year to 6.0% next year. (

all these scenarios we assume a multiplier o 1 so a decit increase o 1% leads to 1% mornominal GDP.)

On the negative side, the combination o higher income taxes on dividends and capital gain

and the imposition o a 3.8% Medicare tax on these sources o income would amount to

signicant reduction in the ater-tax cash ow rom equities. It is uncertain whether relie

rom avoiding a sharper dose o scal austerity would ofset the impact o these tax hikes i

investor decisions. It could be a positive or municipal bonds as the value o the tax breaks o

municipals would increase and smaller cutbacks in discretionary spending would have less o

an impact on state and local nances.


7/16

Sources: Congressional Budget Office, U.S. Treasury, BEA, J.P. Morgan

Asset Management. Data are as of 8/28/12.

0%

-2%

-4%

-6%

-8%

-10%

-12%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Democratic sweep scenario

-1.0%

CHART E1: Federal decitsProjected federal decit as a % of GDP

The Democratic sweep scenario

TABLE E3: Democratic sweep scenario

Fiscal Year 12 13 14 15 16 17 18 19 20 21 22CBO Baseline Decit, billions $ -$1,128 -$641 -$387 -$213 -$186 -$123 -$79 -$130 -$142 -$144 -$213

Adjustments:

Extend Expiring Tax Provisions, Lower ForeignTroops & Doc Fix - -72 -71 -40 -23 -13 -8 -6 -10 -16 -24

Interest Cost - 0 -1 -1 -3 -5 -7 -8 -9 -11 -13

Partial Extension o Bush Tax Cuts and AMT Fix - -205 -280 -309 -332 -357 -384 -413 -443 -475 -510

Interest Cost - -1 -3 -5 -15 -31 -56 -80 -105 -132 -161

Extend Payroll Tax Cut - -44 -60 -62 -16 0 0 0 0 0 0

Interest Cost - 0 -2 -3 -4 -4 -4 -4 -4 -4 -4

Automatic Enorcement (BCA) does not occur - -54 -96 -102 -104 -105 -105 -105 -105 -104 -93

Interest Cost - 0 -1 -2 -5 -10 -17 -24 -30 -37 -43

Cumulative Cost - -375 -507 -513 -474 -475 -497 -524 -557 -595 -628

Cumulative Interest Cost - -1 -6 -12 -26 -49 -83 -116 -148 -184 -221Total - -376 -513 -525 -500 -525 -580 -640 -705 -779 -849

Revised Decit -$1,128 -$1,017 -$900 -$738 -$686 -$648 -$660 -$770 -$847 -$923 -$1,06

% of GDP -7.3% -6.3% -5.3% -4.1% -3.6% -3.2% -3.1% -3.4% -3.6% -3.8% -4.2%



100%

80%

60%

40%

20%

0%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Democratic sweep scenario

2022: 58.5%

2011 actual: 67.7%2022: 80.0%

CHART E2: Federal debtProjected federal debt held by the public as a % of GDP


8/16

MARKETINSIGHTS

8

The Republican sweep: A focus on spending cuts

Assumptions

I Mitt Romney is elected president and the Republicans maintain control o the House and takcontrol o the Senate, the ocus o decit reduction would likely be on spending cuts. In th

scenario we assume:

All the Bush tax cuts are extended along with the annual AMT x.

The payroll tax cut and extended unemployment benets expire on schedule.

Higher Medicare taxes to pay or President Obamas health care plan do not take efect.




The table and charts on the ollowing page show the impact o these policies on the budget anthe economy. The budget decit alls rom 7.3% o GDP in scal 2012 to 6.4% o GDP in sc

2013 and 5.3% in 2014. On a calendar year basis, the decline is similar rom 7.0% o GDP th

year to 6.2% next year.

This scenario, like the Democratic sweep scenario, would impose only moderate scal drag o

the overall economy.

It should be noted that this scenario would probably only be a starting point. I there were

Republican sweep o the White House and Congress, a Romney administration might also try t

pass both tax reorm and entitlement reorm in 2013. It is also worth noting that stabilizing th

debt to GDP ratio should only be an interim goal as it would leave the budget very vulnerab

to another recession, another war or even a sharp increase in interest rates.For investors, an all-Republican administration could avor stocks relative to bonds.

particular, removing the threat o higher taxation on dividends and capital gains should he

the stock market more than removing the threat o higher taxes on interest income. Howeve

it could be a negative or municipal bonds, as the value o the tax break on municipals wou

not be as great and cuts in discretionary spending could have knock-on efects on state an

local nances.


9/16

The Republican sweep scenario

TABLE F3: Republican sweep scenario


Adjustments:


Interest Cost - 0 -1 -1 -3 -5 -7 -8 -9 -11 -13

Full Extension o Bush Tax Cuts and AMT Fix - -247 -319 -372 -404 -439 -474 -511 -548 -588 -630

Interest Cost - -1 -3 -6 -18 -37 -68 -97 -128 -161 -197

Repeal o the Expanded Medicare Tax - -20 -10 -25 -29 -32 -35 -38 -41 -43 -46

Interest Cost - 0 -1 -1 -2 -2 -3 -4 -5 -5 -6


Interest Cost - 0 -1 -2 -5 -10 -17 -24 -30 -37 -43

Cumulative Cost - -393 -495 -540 -560 -589 -622 -660 -703 -750 -793


Revised Decit -$1,128 -$1,035 -$888 -$763 -$772 -$766 -$796 -$923 -$1,017 -$1,109 -$1,266

% of GDP -7.3% -6.4% -5.3% -4.2% -4.0% -3.8% -3.7% -4.1% -4.3% -4.5% -4.9%



0%

-2%

-4%

-6%

-8%

-10%

-12%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Republican sweep scenario

-0.9%

CHART F1: Federal decitsProjected federal decit as a % of GDP



100%

80%

60%

40%

20%

0%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Republican sweep scenario

2022: 58.5%

2011 actual: 67.7%

2022: 83.5%

CHART F2: Federal debtProjected federal debt held by the public as a % of GDP


10/16

MARKETINSIGHTS

10

Divided government I: The scal ledge

Assumptions

Even in the case o divided government, an outright scal clif is unlikely. However, there is signicant risk that a compromise could involve an agreement to abide by signicant spendin

cuts (to satisy the Republicans) along with higher taxes on upper income households (to ge

agreement rom the Democrats). Under this scenario, we assume:

The Bush tax cuts are extended only or households earning less than $250,000 per ye

along with the annual AMT x. The top dividend tax and capital gains tax rates rise rom 15%

to 20%.

The payroll tax cut expires on schedule.


Higher Medicare taxes to pay or President Obamas health care plan do take efect.

Both sets o spending cuts agreed to last all are implemented.


The table and charts on the ollowing page show the impact o these policies on the budget an

the economy. Under this scenario, the budget decit alls very sharply rom 7.3% o GDP th

scal year to 5.7% next scal year and 4.4% in scal 2013. In calendar years, the decit wou

all rom 7.0% o GDP this year to 5.3% next year and 4.2% o GDP in 2013.

This is probably the greatest scal danger acing the economy, simply because most vote

and investors dont recognize its implications. We estimate that in calendar 2012, the decit a

a share o GDP will all by about 1.3 percentage points and that this decline has had a majo

impact in holding real GDP growth to an anemic 2.1%. A compromise that cut the decit bymore severe 1.7 percentage points in 2013 could push the economy to the brink o recessio

entirely unnecessarily.

Under a scal ledge scenario, even i the economy avoided outright recession, stocks wou

be negatively afected by a combination o very weak economic growth and higher taxes o

dividends and capital gains. Treasury yields might well stay at close to current levels, althoug

a urther bond market rally might not materialize as investors recognized that Washington wa

incapable o ostering economic growth by a moderate reduction in ederal decits.


11/16

Divided government: Fiscal ledge scenario

TABLE G3: Fiscal ledge scenario


Adjustments:


Interest Cost - 0 -1 -1 -3 -5 -7 -8 -9 -11 -13

Partial Extension o Bush Tax Cuts and AMT Fix - -205 -280 -309 -332 -357 -384 -413 -443 -475 -510

Interest Cost - -1 -3 -5 -15 -31 -56 -80 -105 -132 -161

Cumulative Cost - -276 -351 -349 -355 -370 -392 -420 -452 -491 -534

Cumulative Interest Cost - -1 -3 -7 -18 -36 -63 -88 -115 -143 -174

Total - -277 -355 -356 -372 -406 -455 -508 -567 -635 -708

Revised Decit -$1,128 -$918 -$742 -$569 -$558 -$529 -$534 -$638 -$709 -$779 -$921

% of GDP -7.3% -5.7% -4.4% -3.2% -2.9% -2.6% -2.5% -2.9% -3.0% -3.2% -3.6%



0%

-2%

-4%

-6%

-8%

-10%

-12%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Fiscal ledge scenario

-1.6%

CHART G1: Federal decitsProjected federal decit as a % of GDP



100%

80%

60%

40%

20%

0%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Fiscal ledge scenario

2022: 58.5%

2011 actual: 67.7% 2022: 75.1%

CHART G2: Federal debtProjected federal debt held by the public as a % of GDP


12/1612

Divided government II: The scal ladder

Assumptions

A better scenario is one in which the decit comes down more slowly in 2013. Under thscenario we assume:

The Bush tax cuts are extended in ull or 2013. From 2014 on they are extended only o

households earning less than $250,000 per year along with the annual AMT x. The to

dividend tax and capital gains tax rates rise rom 15% to 20% in 2014.

The payroll tax cut is maintained in 2014, phased down to a 1% cut or 2013 and eliminated o

2014 on in order to mitigate the scal drag rom the partial expiration o the Bush tax cuts


Higher Medicare taxes to pay or President Obamas health care plan do take efect.




Under this scenario, the budget decit alls moderately rom 7.3% o GDP this scal year t

6.5% next scal year, 5.5% in scal 2015 and 4.5% in scal 2016. In calendar years, the dec

would gradually all rom 7.0% o GDP this year to 4.2% o GDP in 2016.

The stock market would be negatively impacted by higher taxes on dividends and capital gain

However, by ostering economic growth while gradually reducing the decit, this scenar

could enhance investor condence. It would likely be a negative or Treasury bonds as mo

responsible scal policies could set the stage or a gradual tightening by the Federal Reserve

Municipal bonds could potentially are better than Treasuries because o reduced credit risand the enhanced value o tax exemption or upper income households.

MARKETINSIGHTS


13/16

Divided government: Fiscal ladder scenario

1

TABLE H3: Fiscal ladder scenario


Adjustments:


Interest Cost - 0 -1 -1 -3 -5 -7 -8 -9 -11 -13

Full Extension o Bush Tax Cuts and AMT Fix - -247 -319 -372 -404 -439 -474 -511 -548 -588 -630

Interest Cost - -1 -3 -6 -18 -37 -68 -97 -128 -161 -197

Partial Extension o Payroll Tax Cut - -44 -60 -62 -16 0 0 0 0 0 0

Interest Cost - 0 -2 -3 -4 -4 -4 -4 -4 -4 -4


Interest Cost - 0 -1 -2 -5 -10 -17 -24 -30 -37 -43

Cumulative Cost - -417 -545 -577 -546 -557 -587 -622 -662 -707 -747


Revised Decit -$1,128 -$1,059 -$939 -$802 -$761 -$735 -$762 -$885 -$975 -$1,064 -$1,217

% of GDP -7.3% -6.5% -5.5% -4.5% -4.0% -3.6% -3.5% -3.9% -4.1% -4.3% -4.7%



0%

-2%

-4%

-6%

-8%

-10%

-12%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Fiscal ladder scenario

-0.7%

CHART H1: Federal decitsProjected federal decit as a % of GDP



100%

80%

60%

40%

20%

0%07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CBO baseline

Fiscal ladder scenario

2022: 58.5%

2011 actual: 67.7%

2022: 83.2%

CHART H2: Federal debtProjected federal debt held by the public as a % of GDP


14/1614

Conclusion

It must be said that all o these scenarios just represent a start. Even i the decit comes dow

slowly, in the Democratic sweep, Republican sweep or scal ladder scenarios, the decit wou

stabilize at about 4% o GDP by the middle o this decade. This would only be enough to caus

the debt-to-GDP ratio to plateau at 80%+ o GDP, a level which is dangerously high given th

possibility o any urther recession or national emergency that could result in some utu

surge in the decit. In addition, as both sides should acknowledge, the Federal budget is

chronic need o both tax reorm and entitlement reorm.

In the short run, we ace a scal clif and need a scal ladder. Investors would be well advise

to watch the political winds to see i we get this ladder or something worse. They will also wan

to consider the mix o tax increases and spending cuts likely to take hold starting in 2013

designing an appropriate and tax ecient investment strategy.

However, in the long run, the scal problem acing America requires budget reorm so that ou

system o government can once again be a key competitive advantage rather than a growin

disadvantage o the U.S. economy.

MARKETINSIGHTS

The greatest struggle acing many nancial

advisors is over-coming investor emotion.

The Market Insights program is designed to provide our

nancial advisor partners with a way to address the markets

and the economy based on logic rather than emotion, enabling

their clients to make rational investment decisions. To learn

more, visit us at www.jpmorganunds.com/mi.


15/16

Dr. David Kelly is the Chie Global Strategist or J.P. Morgan Funds.

With more than 20 years o experience, David provides valuable

insight and perspective on the markets to thousands o nancial

advisors and their clients.

Throughout his career, David has developed a unique ability to

explain complex economic and market issues in a language that

nancial advisors can use to communicate to their clients. He is a

keynote speaker at many national investment conerences. David is

also a requent guest on CNBC and other nancial news outlets and

is widely quoted in the nancial press.

Dr. David Kelly, CFA

Managing Director

Chie Global Strategist

J.P. Morgan Funds

David M. Lebovitz, Associate, is a Market Analyst on the Global

Market Insights Strategy Team. In this role, David is responsible or

supporting the teams Market Strategists in delivering timely market

and economic insight to clients across the country. Since joining the

team, David has primarily ocused on enhancing the groups xed

income research eforts.

David M. Lebovitz

Associate

Market Analyst

J.P. Morgan Funds

Anshul Mohan, MAP Associate, works on the Global Market Insights

Strategy Team. Ater receiving a Master o Finance rom Princeton

University in 2010, Anshul spent time working on both the U.S.Equity and Credit Valuation teams. Anshul has primarily ocused on

helping build out the teams Asian Market Insights program.

Anshul Mohan

Market Analyst

J.P. Morgan Funds

Anthony M. Wile, Market Analyst, works on the Global Market

Insights Strategy Team, reporting to Dr. David Kelly. He, along with

the team, is responsible or publications such as the quarterly Guide

to the Markets and perorming research on the global economy and

capital markets.

Anthony joined the rm in 2011 ater graduating rom Loyola

University Chicago with a Bachelors degree, magna cum laude, in

nance and economics.

Anthony M. Wile

Market Analyst

J.P. Morgan Funds


16/16

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The inormation in this brochure is intended solely to report on various investment views held by J.P. Morgan Asset Management.

Opinions, estimates, orecasts, and statements o nancial market trends that are based on current market conditions constitute o

judgment and are subject to change without notice. We believe the inormation provided here is reliable but should not be assum

to be accurate or complete. The views presented are subject to change. The views and strategies described may not be suitable or

investors. Reerences to specic securities, asset classes and nancial markets are or illustrative purposes only and are not intend

to be, and should not be interpreted as, recommendations. This brochure is or inormational purposes only and is not intended as

ofer or solicitation with respect to the purchase or sale o any security. The inormation in this brochure is not intended to provide a

should not be relied on or investment recommendations. Past perormance is no guarantee o uture results.

J.P. Morgan Asset Management does not predict outcomes o any political events, nor do we voice rm-wide opinions on any politiccandidates.

J.P. Morgan Asset Management is the marketing name or the asset management businesses o JPMorgan Chase & Co. Those business

include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J

Morgan Alternative Asset Management, Inc.

JPMorgan Distribution Services, Inc., member FINRA/SIPC

JPMorgan Chase & Co., September 2012

WP-MI-FISCALCLIFF

To learn more about the

Market Insights program,

please visit us at

www.jpmorganunds.com/mi .

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