guide to the markets - j.p. morgan · 26. us growth monitor 27. us consumer finances 28. long-term...
Post on 25-May-2020
1 Views
Preview:
TRANSCRIPT
Guide to the MarketsEurope | |
MARKET INSIGHTS
1Q 2017 As of 31 December 2016
2
Global Market Insights Strategy Team
For China, Australia, Vietnam and Canada distribution: Please note this communication is for intended recipients only. In Australia for wholesale clients’ use only and in Canada for institutional clients’ use only. For further details, please refer to the full disclaimer. Unless otherwise stated, all data is as of 31 December 2016 or most recently available.
Americas Europe Asia
Dr. David P. Kelly, CFANew York
Stephanie H. FlandersLondon
Tai HuiHong Kong
Anastasia V. Amoroso, CFAHouston
Manuel Arroyo Ozores, CFAMadrid
Yoshinori ShigemiTokyo
Julio C. CallegariSão Paulo
Tilmann Galler, CFAFrankfurt
Marcella ChowHong Kong
Samantha M. AzzarelloNew York
Lucia Gutierrez-MelladoMadrid
Kerry Craig, CFAMelbourne
David M. LebovitzNew York
Vincent JuvynsLuxembourg
Dr. Jasslyn Yeo, CFASingapore
Gabriela D. SantosNew York
Dr. David StubbsLondon
Ian HuiHong Kong
Abigail B. Dwyer, CFANew York
Maria Paola ToschiMilan
Akira KunikyoTokyo
John C. ManleyNew York
Michael J. Bell, CFALondon
Ben LukHong Kong
Ainsley E. Woolridge, CFANew York
Alexander W. Dryden, CFALondon
Hannah J. AndersonNew York
Nandini L. RamakrishnanLondon
3
Page reference
Europe economy4. Europe: GDP and inflation5. Eurozone growth monitor6. Eurozone: Unemployment and labour costs7. Eurozone recovery monitor8. Eurozone credit conditions9. European Central Bank (ECB) policies10. European monetary policy and relative bond supplies11. European politics12. UK economic indicators13. Brexit: The UK and the EU
Global economy14. World economic data15. Global Purchasing Managers’ Index (PMI) for manufacturing16. Global inflation dynamics17. Nominal GDP and inflation outlook18. Global central bank policy19. Fed funds long-run expectations20. Global supply dynamics21. Developed market fiscal policy22. Global currency trends23. US: GDP and inflation24. US Federal Reserve outlook25. US labour market26. US growth monitor27. US consumer finances28. Long-term drivers of US economic growth29. US fiscal policy30. Japan: GDP and inflation31. Japan: Abenomics and the economy32. China: GDP, inflation and policy rate33. China economic indicators34. China financial dynamics35. Emerging market adjustments36. Globalisation and trade
Equities37. World stock market returns38. European sector returns and valuations39. MSCI Europe performance and drivers40. MSCI Europe equity valuations41. MSCI Europe Index at inflection points42. European small capitalisation equities43. UK equities44. US S&P 500 at inflection points45. US equities
46. US S&P 500 equity valuations47. Equity markets and reflation48. US bear markets49. Interest rates and equities50. Japanese equities performance and drivers51. Developed market equity valuations by country52. Emerging market equity valuations by country 53. Emerging markets: Valuations and returns54. Emerging markets: Investment drivers55. Emerging markets: Flows, earnings and income56. Equity income
Fixed income57. Global fixed income: Yields and returns58. Fixed income interest rate risk59. Inflation implications for fixed income60. Liquidity risks61. Historical yields of government bonds 62. Government bond yields63. Global investment-grade bonds64. Global investment-grade bond market65. US high yield bonds66. European high yield bonds67. Emerging market debt
Other assets68. Commodities69. Oil market drivers 70. Gold market dynamics71. Risk-adjusted returns and downside protection72. Alternative strategies73. Correlation of returns (EUR)74. Asset markets in coming decades
Investing principles75. Life expectancy 76. Cash investments77. The power of compounding78. Annual returns and intra-year declines79. Impact of being out of the market80. US asset returns by holding period81. Asset class returns (EUR)
4
|GTM – EuropeEurope: GDP and inflation
Real GDP InflationEU28, % change quarter on quarter EU28, % change year on year
Source: (Both charts) Eurostat, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding energy and unprocessed food. Guide to the Markets - Europe. Data as of 31 December 2016.
4
Average since 1999 3Q16
Real GDP 0,3% 0,4%
AverageEuro
pe e
cono
my Average
since 1999Nov2016
Headline CPI* 1,9% 0,6%Core CPI 1,6% 0,8%
-1
0
1
2
3
4
5
'00 '02 '04 '06 '08 '10 '12 '14 '16
5
GTM – Europe |
90
95
100
105
110
115
120
859095
100105110115120
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15
7
8
9
10
11
12
13
-500
0
500
1.000
1.500
2.000
'00 '02 '04 '06 '08 '10 '12 '14 '16
Eurozone growth monitor
Change in unemployment and unemployment rateThousands of people per three months (LHS); % rate (RHS)
Retail sales and industrial productionIndex level
Economic sentiment and GDPIndex level (LHS); % change year on year (RHS)
Source: (All charts) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns in all charts indicate recession. Guide to the Markets - Europe. Data as of 31 December 2016.
GDPEconomic sentiment
Unemployment rate
Change inunemployment
Recession
Euro
pe e
cono
my
5
Industrial production (LHS)Retail sales (RHS)
-6-4-202468
60708090
100110120130
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15
6
|GTM – Europe
90
100
110
120
130
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Eurozone: Unemployment and labour costs
Unit labour costsRebased to 100 as of December 1998
Unemployment rate%
Service sector productivityIndex level, rebased to 100 as of December 2006
Source: (Top and bottom left) Eurostat, FactSet, J.P. Morgan Asset Management. (Right) ECB, FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe.Data as of 31 December 2016.
FranceEurozone
Average of Portugal, Spain, Italy
Germany
Spain
Ireland
FranceGreece
Germany
US
Eurozone
Euro
pe e
cono
my
6
7
GTM – Europe |
-4
-3
-2
-1
0
1
2
3
4
5
6
'12 '13 '14 '15 '16
Eurozone recovery monitor
Contribution to eurozone GDP growth% change year on year
Eurozone government expenditure
Gross fixed capital formation% of GDP, non-residential
Source: (Left) Eurostat, Haver Analytics, J.P. Morgan Asset Management. (Top right) OECD, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) BEA, Eurostat, Haver Analytics, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Euro
pe e
cono
my
US
Eurozone
Change in inventories
Exports
Imports
Investment
Consumption
GDP
% change year on year
7
10
11
12
13
14
15
14
15
16
17
'99 '01 '03 '05 '07 '09 '11 '13 '15
-1
0
1
2
3
'99 '01 '03 '05 '07 '09 '11 '13 '15
8
GTM – Europe |
-8
-6
-4
-2
0
2
4
6
-200
-150
-100
-50
0
50
100
150
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Eurozone credit conditions
Credit demand and eurozone GDP growthNet % of banks reporting positive loan demand (LHS); % GDP growth (RHS)
Bank loans to households and non-financial corporations EUR billions, net lending flow, three-month moving average
Corporate lending rates to smaller companies% interest, non-financial corporations*
Source: (Left) ECB, Eurostat, FactSet, J.P. Morgan Asset Management. (Top right and bottom right) ECB, FactSet, J.P. Morgan Asset Management. *Interest on new business lending up to €1 million, on a 1-5 year maturity. Guide to the Markets - Europe. Data as of 31 December 2016.
Euro
pe e
cono
my
ItalyGermany
Stronger loan demand
Consumer credit (LHS)Eurozone GDP growth y/y (RHS)
Housing loans (LHS)
Overall corporate (LHS)
Weaker loan demand
SpainFrance
8
9
GTM – Europe |
0
100
200
300
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
European Central Bank (ECB) policies
ECB balance sheet: Assets*EUR trillions
Cumulative ECB sovereign bond purchases by countryEUR billions
Source: (Left) ECB, FactSet, J.P. Morgan Asset Management. *Balance sheet forecast does not include Targeted Longer Term Refinancing Operations (TLTRO). Expansion in balance sheet still to come assumes EUR 80bn per month expansion between now and March 2017 and EUR 60bn per month expansion between April 2017 and December 2017. **Inflation is Q4 to Q4 for each year. (Top right) ECB, J.P. Morgan Asset Management. Purchases up to December 23rd (Bottom right) FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Jan 2005 –Jul 2012: 249%
Aug 2012 –Sep 2014:-35%
Euro
pe e
cono
my
Trade-weighted euro and EUR/USDIndex level (LHS); price of euro in dollars (RHS)
9
'11 '12 '13 '14 '15 '16 '1790
95
100
105
110
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Trade-weighted euro
EUR/USD
ECB Dec 2016 forecasts2017 2018 2019
CPI inflation** 1,3 1,5 1,9
10
|GTM – Europe
1.681
1.153943
525367
528
211
418
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
European monetary policy and relative bond supplies
Available universe of corporate bonds for CSPP* Size of bond marketsEUR billions EUR billions
Source: (Left) Barclays POINT, BofA/ML, ECB, J.P. Morgan Asset Management. *CSPP is the corporate sector purchase programme. (Right) Bloomberg, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Euro
pe e
cono
my
CoCosBEuro govt. Euro IGex-financials
BB CCC
Ex-non-eligible corps
Euro IGEx-
financials
Ex-subordinated
debt70% ISIN
limit
6.080
1.153
200 70 12 1040
2.000
4.000
6.000
8.000
10
11
GTM – Europe |
40
50
60
70
80
90
European politics
Europe 2017 political timeline
Support for populist parties%
Survey results: Do you support the euro?% answering “yes” as of November 2016
Source: (Top) J.P. Morgan Asset Management. (Bottom left) National surveys, J.P. Morgan Asset Management. (Bottom right) European Commission, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Euro
pe e
cono
my
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
15 MarchNetherlandsGeneral election
23 April FranceFirst round of the presidential election
October GermanyLatest date for election
24 January ItalyCourt decision on “Italicum” electoral reform
11-18 June FranceLegislative election
22-29 January France Socialist presidential primaries
7 May FranceSecond round of the presidential election
September SpainPossible Catalonia independence referendum
31 March UK“Deadline” for formal activation of Article 50
20112016
Italy France Spain Belgium N’lands Germany
0
5
10
15
20
25
30
(Germany) (Spain)(Greece) (France)(Italy)
Alternative fürDeutschland PodemosSyriza Front NationalMovimento 5
Stelle
11
12
GTM – Europe |
Unemployment rate and consumer confidenceReal GDP growth comparison
Wage growthCurrent account
UK economic indicators
% of GDP % change year on year
Index level, rebased to 100 at 1Q08
USUKGermany
FranceJapan
Source: (Top left) OECD, J.P. Morgan Asset Management. (Bottom left) ONS, Thompson Reuters Datastream, J.P. Morgan Asset Management. (Top right) FactSet, GFK, ONS, J.P. Morgan Asset Management. (Bottom right) FactSet, ONS, J.P. Morgan Asset Management. *Nominal wages include bonuses. Guide to the Markets - Europe. Data as of 31 December 2016.
Headline CPIReal wage growth
Nominal wage growth*
Current account balanceTrade balanceInvestment income
Euro
pe e
cono
my
Index level, consumer confidence (LHS); %, unemployment rate (RHS)
12
Consumer confidence
Unemployment rate
-6
-3
0
3
6
'02 '04 '06 '08 '10 '12 '14 '16-8
-6
-4
-2
0
2
4
'05 '07 '09 '11 '13 '15
13
|GTM – Europe
-100
-80
-60
-40
-20
0
20
40
'99 '01 '03 '05 '07 '09 '11 '13 '15Source: (Top left) ONS, Eurostat, J.P. Morgan Asset Management. (Bottom left) Haver Analytics, J.P. Morgan Asset Management. *FDI is foreign direct investment and as measured in 2015. (Right) J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Brexit: The UK and the EU
Tradeoffs for the UK post EU exitTrade with the UK% of GDP, 2015
UK trade balance with the EUGBP billions
Euro
pe e
cono
my
GoodsServices
FDI* in the UK (£bn)From EU 431From US 252Rest of world 267
| 13
MARKET ACCESS TO THE EU
Participation in EU legislation process
Full market access
Market access by negotiation
Goods market access butnot services
Free movement of labour
No financial contribution EU member
Some financial contribution
WTO ACCESS
EU
SHARING OF SOVEREIGNTY
Switzerland
Turkey
Canada
Norway
0
5
10
15EU countries exports to the UKRegions exports to the UK
UK exports to the EU
14
Selectedcountries
Gross domestic product (GDP)
Real GDP%
Inflation%
Policy rate %
Unemployment %
EUR per capita
EUR billions 2017* 2018* 2017* 2018*
Switzerland 71.530 594 1,5 1,6 0,3 0,7 -0,75 3,3United States 51.645 16.618 2,2 2,3 2,3 2,4 0,50 4,6Sweden 45.156 442 2,2 2,2 1,6 1,9 -0,50 6,2Netherlands 41.124 696 1,6 1,6 1,0 1,3 -0,40 7,2Finland 38.749 213 1,0 1,0 1,1 1,3 -0,40 8,1Germany 38.555 3.111 1,4 1,5 1,6 1,7 -0,40 6,0Japan 36.911 4.672 1,0 0,9 0,6 1,0 0,10 3,1United Kingdom 35.211 2.279 1,2 1,3 2,4 2,5 0,25 4,8France 34.285 2.208 1,2 1,3 1,2 1,4 -0,40 9,7Eurozone 31.894 10.687 1,4 1,5 1,3 1,5 -0,40 9,8Italy 27.765 1.660 0,8 1,0 0,9 1,2 -0,40 11,6Spain 24.086 1.111 2,4 2,1 1,2 1,3 -0,40 18,9Greece 16.935 186 1,3 2,0 0,7 1,0 -0,40 22,6Russia 8.524 1.223 1,1 1,5 5,0 4,4 10,00 5,2Brazil 8.339 1.733 0,8 2,2 5,1 4,7 13,75 8,2China 7.347 10.109 6,5 6,1 2,2 2,2 4,35 4,0India 1.477 1.937 6,9 7,5 4,8 5,0 6,25 7,1
World economic data
Source: Bloomberg, FactSet, various national statistical agencies, J.P. Morgan Asset Management. Table ordered by GDP per capita. Nominal GDP figure is latest quarter annualised. *Forecasts are Bloomberg consensus estimates. Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
Glob
al e
cono
my
14
15
51,6 51,8 51,5 50,8 51,1 50,9 50,8 50,4 50,4 51,1 51,0 50,7 50,9 50,0 50,6 50,2 50,1 50,4 51,0 50,8 51,0 52,0 52,1 52,7
52,3 52,6 52,9 52,1 52,4 52,2 52,5 52,3 52,1 52,9 52,6 52,0 52,3 51,0 51,1 50,7 50,5 51,3 51,6 51,3 51,8 53,0 53,2 54,0
50,8 51,1 50,1 49,5 49,6 49,5 48,8 48,4 48,3 49,0 49,2 49,2 49,3 48,9 50,1 49,6 49,6 49,4 50,4 50,1 50,1 50,9 50,7 51,2
51,0 51,0 52,2 52,0 52,2 52,5 52,4 52,3 52,0 52,3 52,8 53,2 52,3 51,2 51,6 51,7 51,5 52,8 52,0 51,7 52,6 53,5 53,7 54,9
49,2 47,6 48,8 48,0 49,4 50,7 49,6 48,3 50,6 50,6 50,6 51,4 50,0 50,2 49,6 48,0 48,4 48,3 48,6 48,3 49,7 51,8 51,7 53,5
50,9 51,1 52,8 52,1 51,1 51,9 51,8 53,3 52,3 52,1 52,9 53,2 52,3 50,5 50,7 51,8 52,1 54,5 53,8 53,6 54,3 55,0 54,3 55,6
49,9 51,9 53,3 53,8 54,8 54,1 55,3 53,8 52,7 54,1 54,9 55,6 53,2 52,2 53,5 53,9 52,4 53,5 51,2 49,8 51,0 50,9 52,2 53,2
54,7 54,2 54,3 54,2 55,8 54,5 53,6 53,2 51,7 51,3 53,1 53,0 55,4 54,1 53,4 53,5 51,8 52,2 51,0 51,0 52,3 53,3 54,5 55,3
49,0 48,0 48,1 48,8 47,3 50,2 49,5 50,3 47,0 49,4 49,6 50,4 50,0 51,6 53,2 54,7 55,8 51,6 50,1 51,0 53,2 54,7 56,6 56,0
52,6 54,0 53,7 52,3 52,1 51,5 52,2 51,7 51,5 54,8 52,6 51,4 52,7 50,7 51,0 49,7 50,5 52,4 48,2 53,4 55,5 54,6 53,6 56,1
53,9 55,1 55,7 54,1 54,0 53,6 53,8 53,0 53,1 54,1 52,8 51,2 52,4 51,3 51,5 50,8 50,7 51,3 52,9 52,0 51,5 53,4 54,1 54,2
52,2 51,6 50,3 49,9 50,9 50,1 51,2 51,7 51,0 52,4 52,6 52,6 52,3 50,1 49,1 48,2 47,7 48,1 49,3 49,5 50,4 51,4 51,3 51,9
50,7 49,6 46,2 46,0 45,9 46,5 47,2 45,8 47,0 44,1 43,8 45,6 47,4 44,5 46,0 42,6 41,6 43,2 46,0 45,7 46,0 46,3 46,2 45,2
47,6 49,7 48,1 48,9 47,6 48,7 48,3 47,9 49,1 50,2 50,1 48,7 49,8 49,3 48,3 48,0 49,6 51,5 49,5 50,8 51,1 52,4 53,6 53,7
52,9 51,2 52,1 51,3 52,6 51,3 52,7 52,3 51,2 50,7 50,3 49,1 51,1 51,1 52,4 50,5 50,7 51,7 51,8 52,6 52,1 54,4 52,3 49,6
49,7 50,7 49,6 48,9 49,2 49,4 47,8 47,3 47,2 48,3 48,6 48,2 48,4 48,0 49,7 49,4 49,2 48,6 50,6 50,0 50,1 51,2 50,9 51,9
51,1 51,1 49,2 48,8 47,8 46,1 47,6 47,9 49,2 49,1 49,1 50,7 49,5 48,7 49,5 50,0 50,1 50,5 50,1 48,6 47,6 48,0 48,0 49,4
51,7 52,1 51,0 49,2 49,3 46,3 47,1 46,1 46,9 47,8 49,5 51,7 50,6 49,4 51,1 49,7 48,5 50,5 51,0 51,8 52,2 52,7 54,7 56,2
Global Purchasing Managers’ Index (PMI) for manufacturing
Source: FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers’ Index (PMI) assesses the economic health of the manufacturing sector by surveying output and employment intentions. Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
Lowest relative to 50 PMI Highest relative to 50 PMI50
Glob
al e
cono
my
Korea
Japan
Switzerland
EurozoneFrance
GermanyItaly
Spain
UKUS
BrazilRussia
IndiaChina
Taiwan
Global
Euro
zone
Dev
elop
edEm
ergi
ng
Developed
Emerging
15
Sep
Jun
Nov
Dec
Jan
Feb
Apr
Mar
May
Jul
Aug
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
2015 2016
Jun
Jul
Aug
Sep
Oct
16
|GTM – Europe
-1
0
1
2
3
4
'13 '14 '15 '16 '17 '18-2
-1
0
1
2
3
4
5
'93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15
UKEurozone
US
Japan
Global inflation dynamics
Developed economy inflation Headline inflation and forecasts% change year on year % change year on year
Average Jan 1993 to Dec 2008: 2,0%
Average Jan 2009 to Nov 2016: 1,2%
Glob
al e
cono
my
Source: (Left) Haver Analytics, J.P. Morgan Asset Management. (Right) BLS, Eurostat, J.P. Morgan Economic Research, Ministry of Internal Affairs and Communications, ONS, Thomson Reuters Datastream, J.P. Morgan Asset Management. *Inflation forecasts are from J.P. Morgan Economic Research Guide to the Markets - Europe. Data as of 31 December 2016.
Policy target
16
Forecasts*
17
|GTM – Europe
-2
-1
0
1
2
3
4
'11 '12 '13 '14 '15 '16 '17
Nominal GDP and inflation outlook
Nominal GDP growth Core inflationRebased to 100 at 1Q 2008 % change year on year
Source: (Left) FactSet, National Statistics Agencies, J.P. Morgan Asset Management. (Right) National Statistics Agencies, J.P. Morgan Asset Management. *Forecasts from J.P. Morgan Economic Research. Core inflation is CPI ex food and energy. Guide to the Markets - Europe. Data as of 31 December 2016.
'08 '09 '10 '11 '12 '13 '14 '15 '16 '1785
90
95
100
105
110
115
120
125
130
Eurozone
UK
US
Japan
Forecast*
Eurozone
UK
Japan
Glob
al e
cono
my
17
US
18
|GTM – Europe
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
0
10
20
30
40
50
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Global central bank policy
Market expectations for policy rate Percent of government bond market held by central banks% %
Source: (Left) Bloomberg, J.P. Morgan Asset Management. (Right) Bank of England, Bank of Japan, ECB, US Federal Reserve,J.P. Morgan Asset Management. *Projection from central banks, national sources and J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Glob
al e
cono
my
USUK
EurozoneJapan
Dec '17 Dec '19 Dec ‘21
Projection*
18
USUK
Eurozone
Japan
19
GTM – Europe |
0
1
2
3
4
5
6
7
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '25
Fed funds long-run expectations
Market expectations of Fed funds rate%
Source: Bloomberg, J.P. Morgan Asset Management. The lines show the market expectation for the path of interest rates at the stated date. Values shown are from the last day of the month. Guide to the Markets - Europe. Data as of 31 December 2016.
Mar 2001
Mar 2006Mar 2008
Mar 2012
Dec 2016
Sep 2016
Glob
al e
cono
my
19
20
GTM – Europe |
-8
-6
-4
-2
0
2
4
6
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
0
2
4
6
8
9
10
11
12
13
14
15
16
0,5
1,0
1,5
2,0
'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20
Global supply dynamics
Labour productivity% change year on year
Medium-term GDP growth projections% annual GDP growth for the next five years
Global population and old age share% change year on year (LHS); % of population (RHS)
Source: (Left) J.P. Morgan Economic Research, J.P. Morgan Asset Management.*Emerging markets productivity data excludes China and India due to data availability. (Top right) IMF, J.P. Morgan Asset Management. (Bottom right) J.P. Morgan Economic Research, United Nations, J.P. Morgan Asset Management.**Forecasts from UN. Guide to the Markets - Europe. Data as of 31 December 2016.
Population growth
Age 65+
Glob
al e
cono
my
DM pre-crisis average: 1,4%
DM post-crisis average: 0,2%
2011 2013 2015
World Developed markets Emerging markets
Emerging markets*Developed markets
Forecast**
20
21
|GTM – Europe
1,0
1,2
1,4
1,6
1,8
2,0
2,2
60
70
80
90
100
110
120
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Developed market fiscal policy
Change in deficit excluding debt interest Developed economy government debt and interest expense% of potential GDP % of GDP
Source: (Left) OECD, J.P. Morgan Asset Management. Figures correspond to the estimated change in the structural, or cyclically adjusted, budget balance excluding net interest payments as a share of GDP. *Forecasts from the OECD. (Right) IMF Fiscal Monitor October 2016, J.P. Morgan Asset Management. Government debt ratio is gross debt for all advanced economies in the G20. **Forecasts from the IMF. Guide to the Markets - Europe. Data as of 31 December 2016.
Gross debt
Interest expense
Glob
al e
cono
my
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
'06 '08 '10 '12 '14 '16 '18
Euro area
JapanUS
Rest of OECDOECD
Tighter policy
Looserpolicy
Forecast* Forecast**
2007 to 2016Change in
gross debt (% of GDP)
Change in interest costs
(% of GDP)US 44,2 -0,12Eurozone 26,8 -0,58UK 46,8 0,05Japan 67,3 0,08
21
22
GTM – Europe |
80
90
100
110
120
130
70
80
90
100
110
120
130
'73 '77 '81 '85 '89 '93 '97 '01 '05 '09 '13
Averagesince 1973 Nov 2016
US dollar index 95,7 101,3
Global currency trends
US dollar in historical perspectiveIndex level, broad real effective exchange rate (REER)
Source: (Top) US Federal Reserve, J.P. Morgan Asset Management. (Bottom left) FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. (Bottom right) Bloomberg, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
1978-1985:+52,7%
1985-1988:-29,5%
2002-2011:-28,9%
1995-2002:+34,2%
1973-1978:-21,8%
2011-2016:+26,2%
1985: Plaza Accord
1987: Louvre Accord
1988-1995:-7,1%
Glob
al e
cono
my
US dollar vs. market rate expectations in the next 12 monthsIndex (LHS); basis points (RHS)
Trends in key currenciesReal effective exchange rate, rebased to 100 as of Jan 2016
USDRMB
EUR JPYGBP Trade-weighted dollar
US rate hikes priced over 12 months
22
Sep '16Jan '16 Mar '16 May '16 Jul '16 Nov '16-10010203040506070
65
70
75
80
85
90
95
100
'13 '14 '15 '16
23
|GTM – Europe
-10
-8
-6
-4
-2
0
2
4
6
8
'00 '03 '06 '09 '12 '15
US: GDP and inflation
Real GDP Inflation% change quarter on quarter, SAAR % change year on year
Source: (Left) BEA, FactSet, J.P. Morgan Asset Management. (Right) BLS, FactSet, J.P. Morgan Asset Management. SAAR is seasonally adjusted annual rate. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Guide to the Markets - Europe. Data as of 31 December 2016.
Average since 1999 3Q16
Real GDP 1,8% 3,5%
Average
Average since 1999
Nov2016
Headline CPI* 2,2% 1,7%
Core CPI 2,0% 2,1%
Glob
al e
cono
my
23
Components of nominal GDP 3Q16
Consumption 68,7%Government 17,6%Investment ex-housing 12,4%Housing 3,7%Net exports -2,4%
-4
-2
0
2
4
6
8
'00 '03 '06 '09 '12 '15
24
GTM – Europe |US Federal Reserve outlook
Federal funds rate expectations% Fed funds rate, FOMC and market expectations
Source: Bloomberg, Federal Reserve Bank of New York, US Federal Reserve, J.P. Morgan Asset Management. *Forecasts of 17 Federal Open Market Committee (FOMC) participants, midpoints of central tendency except for Federal funds rate, which is a median estimate. Guide to the Markets - Europe. Data as of 31 December 2016.
Glob
al e
cono
my
Federal funds rate
FOMC long-run projectionMarket expectations on 31 Dec 2016
US Fed FOMC forecasts medianUS Fed FOMC forecasts range
24
0
1
2
3
4
5
6
7
'99 '03 '07 '11 '15 '19
3,0%
FOMC December 2016 forecasts* 2017 2018 2019 Long
run
Change in real GDP, 4Q to 4Q 2,1 2,0 1,9 1,8
Unemployment rate, 4Q 4,6 4,5 4,5 4,8
PCE inflation, 4Q to 4Q 1,9 2,0 2,0 2,0
25
GTM – Europe |US labour market
Unemployment rate and wage growth%, wage growth year on year, seasonally adjusted, wages of production and non-supervisory workers
Source: (Top) BEA, FactSet, J.P. Morgan Asset Management. (Bottom left) BLS, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) BEA, FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Unemployment
50-yr average: 4,2%
50-yr average: 6,1%
Wage growth
Glob
al e
cono
my
Productivity and wage growth% change year on year
Nov 2016: 4,6%
Nov 2016: 2,4%
% of GDPEmployee compensation and profitability
Corporate profitsEmployee compensation
25
-1
0
1
2
3
4
5
6
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Productivity
Wage growth
26
GTM – Europe |
020406080100120140160
200
300
400
500
600
700
'84 '94 '04 '140
1.000
2.000
3.000
5060708090
100110120130140
'84 '94 '04 '14
-8
-3
2
7
12
-40
-20
0
20
40
60
'84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
US growth monitor
Corporate profits, business investment and employment growth% change year on year
Source: (All charts) Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns in all charts indicate recessions determined by NBER. Guide to the Markets - Europe. Data as of 31 December 2016.
Initial jobless claims vs. consumer confidenceJobless claims in thousands (LHS); index level (RHS)
Consumer confidenceJobless claims
Glob
al e
cono
my
Housing starts and Conference Board Leading Economic Index Index level (LHS); thousands (RHS)
Housing starts
Leading indicator
Recession
26
Business investment
Profits
Employment
27
|GTM – Europe
0
10
20
30
40
50
60
70
80
90
100
US consumer finances
Consumer balance sheetUSD trillions outstanding, not seasonally adjusted, 3Q16
Household net worthUSD billions, SAAR
Household debt service ratio and savings rate% of disposable personal income, seasonally adjusted
Source: (Top left and right) FactSet, US Federal Reserve, J.P. Morgan Asset Management. (Bottom left) US Federal Reserve, Thomson Reuters Datastream, J.P. Morgan Asset Management. *Latest numbers for US household net worth and debt service ratio are J.P. Morgan Asset Management forecasts. **Taken from the Monthly Interest Rate Survey for 15-year and 30-year fixed mortgages. ***Revolving includes credit cards. Guide to the Markets - Europe. Data as of 31 December 2016.
Glob
al e
cono
my
Total assets: $105,1tn
Homes: 25%
Deposits: 10%
Pension funds: 21%
Other financial assets: 39%
Other tangible: 6%
Mortgages: 64%
3Q07 peak: $81,9tn1Q09 low: $68,7tn
% of total US mortgages that are fixed rate**
71%
Total liabilities: $14,9tn
4Q16*:$92.0962Q07:
$67.743
Savings rateDebt service ratio
27
Other non-revolving: 2%Revolving***: 7%
Auto loans: 7%Other liabilities: 11%
Student debt: 9%
0
2
4
6
8
10
12
14
9
10
11
12
13
14
'80 '85 '90 '95 '00 '05 '10 '15
28
|GTM – Europe
0
1
2
3
4
5
6
'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
0,0
0,5
1,0
1,5
2,0
'55-'64 '65-'74 '75-'84 '85-94 '95-'04 '05-'14 '15-'24
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
'56-'65 '66-'75 '76-'85 '86-'95 '96-'05 '06-'15
Drivers of US GDP growth
Long-term drivers of US economic growth
Average year on year % changeGrowth in US working age population% increase in civilian non-institutional population ages 16-64
Growth in investment in structures and equipmentNon-residential fixed assets, year on year % change
Source: (Top left) Census Bureau, DOD, DOJ, J.P. Morgan Asset Management. *Forecast by J.P. Morgan Asset Management (Bottom left) BEA BLS, J.P. Morgan Asset Management. (Right) BEA, BLS, J.P. Morgan Asset Management. GDP drivers are calculated as the average annualised growth between 4Q of the first and last year. Future working age population is calculated as the total estimated number of Americans from the Census Bureau, controlled for military enrollment, growth in institutionalised population and demographic trends. Guide to the Markets – Europe. Data as of 31 December 2016.
Growth in workers + Growth in real output per worker
Growth in real GDP
Forecast*
2015: 2,0%
1,3%
1,9%2,2%
1,5%
1,3%
0,5%
2,7% 1,1% 1,2% 1,4% 2,1% 0,9%
4,0%
3,0%
3,4%
2,9%
3,4%
1,4%
1,2%
1,9%
1,5%
1,0%
1,3%
0,7%
0,4%
Glob
al e
cono
my
28
29
GTM – Europe |
-12
-10
-8
-6
-4
-2
0
2
4
6
'65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
20
40
60
80
100
120
'40 '48 '56 '64 '72 '80 '88 '96 '04 '12 '20
US fiscal policy
US budget surplus/deficit% of GDP
US public investment% of GDP
US federal net debt% of GDP
Source: (Left) Haver, US Congressional Budget Office, J.P. Morgan Asset Management. Light grey columns in all charts indicate recessions determined by NBER. (Top right) US BEA, J.P. Morgan Asset Management. (Bottom right) US Congressional Budget Office, J.P. Morgan Asset Management. *Forecast is from the US Congressional Budget Office. Guide to the Markets - Europe. Data as of 31 December 2016.
2
3
4
5
6
7
'65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15Glob
al e
cono
my
2015:-2,5%
2026: 85,5%2016:
77,0%
Recession
Forecast*
29
30
|GTM – Europe
-6
-5
-4
-3
-2
-1
0
1
2
3
'00 '02 '04 '06 '08 '10 '12 '14
Average since 1999
Nov2016
Headline CPI* 0,0% 0,5%Core CPI -0,3% 0,1%CPI less food & consumption tax -0,1% -0,4%
Japan: GDP and inflation
Real GDP growth Inflation% change quarter on quarter % change year on year
Source: (Left) FactSet, Japan Statistics Bureau & Statistics Centre, J.P. Morgan Asset Management. (Right) Bloomberg, FactSet, Japan Ministry of Internal Affairs & Communications, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Guide to the Markets - Europe. Data as of 31 December 2016.
Average since 1999 3Q16
Real GDP 0,2% 0,3%
Average
Glob
al e
cono
my
30
-3
-2
-1
0
1
2
3
4
5
'08 '09 '10 '11 '12 '13 '14 '15 '16
31
|GTM – Europe
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
-8
-4
0
4
8
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Japan: Abenomics and the economy
Bank lending and job-to-applicant ratio% lending growth year on year (LHS); ratio of number of jobs to applicants (RHS)
Wage growth% change year on year, three-month moving average
Source: (Top left) FactSet, Japan Ministry of Internal Affairs & Communications, Japan Ministry of Health, Labour and Welfare, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. (Bottom left) FactSet, J.P. Morgan Asset Management. NIRP stands for negative interest rate policy. (Right) Bloomberg, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Nominal wage growthCore CPI*
Glob
al e
cono
my
Job-to-applicantratio
Bank lending (y/y)
Japanese yen effective exchange rate
31
Abe elected
NIRP
Yield curve targeting
Index level US election
32
GTM – Europe |China: GDP, inflation and policy rate
Real GDP growth% change year on year
Inflation% change year on year
Policy rate and reserve ratio requirement (RRR)***% policy rate on one-year renminbi deposits (LHS); % RRR (RHS)
Source: (Left and top right) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. **PPI is the Producer Price Index. (Bottom right) FactSet, People’s Bank of China (PBoC), J.P. Morgan Asset Management. ***Average RRR for large and small banks. Guide to the Markets - Europe. Data as of 31 December 2016.
Glob
al e
cono
my
Consumption
GDP growthInvestment
Net exports
3Q16:6,7%
PBoC policy rate
RRR
Nov 2016Headline CPI* 2,3%Core CPI 1,9%Headline PPI** 3,3%
32
-6
0
6
12
18
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
33
|GTM – Europe
-4
-3
-2
-1
0
1
'95 '00 '05 '10 '15
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '160
5
10
15
20
25
-10
0
10
20
30
40
'11 '12 '13 '14 '15 '16
China economic indicators
Source: (Top left) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Top right) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Bottom left) CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Bottom right) BofA/Merrill Lynch, CEIC, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
China industrial production and retail sales% change year on year, three-month moving average
Fixed asset investment (FAI)% change year on year
Central government fiscal deficit % of GDP
China home prices% change year on year
Glob
al e
cono
my
Tier 2 cities
Tier 1 cities
Tier 3 cities
Industrial productionRetail sales
33
Overall
PublicPrivate
2016 : -4,2%
34
GTM – Europe |
0
100
200
300
400
China financial dynamics
Public, household and non-financial corporate debt% of GDP, 2Q16
Chinese renminbiRebased index level (LHS); price of a dollar in RMB (RHS)
China foreign exchange reserves and external debtUSD trillions
Source: (Left) BIS, J.P. Morgan Asset Management. Household and NFC debt is market value. Government debt is gross and nominal value, except for Korea which is market value due to data limitations. All series adjusted for breaks by the BIS. (Top right) BIS, FactSet, J.P. Morgan Asset Management. (Bottom right) FactSet, People’s Bank of China, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Non-financial corporation debtPublic debt
Household debt
Glob
al e
cono
my
'11 '12 '13 '14 '15 '16 '1795
100
105
110
115
120
125
130 6,0
6,2
6,4
6,6
6,8
7,0USD/RMB
Trade-weighted RMB
Japan Eurozone China UK US Korea
34
External debt as a % of global GDP
EM Asia1998
US2008
China 2014
1,7% 21,8% 1,2%
35
GTM – Europe |
-25
-20
-15
-10
-5
0
5
10
'12 '13 '14 '15 '16
Emerging market adjustments
EM currencies vs .US dollar% from fair value, relative to US dollar
“Fragile Five” current account balance% of GDP
EM foreign exchange reserves vs. external debt% of GDP
Source: (Left) J.P. Morgan Asset Management. Based on nominal exchange rates relative to PPP-exchange rates and adjusted for GDP per capita. EM currencies used are a weighted average of JPM GBI-EM Global Diversified Index countries. (Top right) Haver Analytics, J.P. Morgan Asset Management. “Fragile Five” are Brazil, India, Indonesia, South Africa and Turkey. (Bottom right) J.P. Economic Research, J.P. Morgan Asset Management. Guide to the Markets - Europe.Data as of 31 December 2016.
Glob
al e
cono
my
35
-5
-4
-3
-2
-1
0
1
2
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14
External debt
EM reserves
20
25
30
35
5
10
15
20
25
30
35
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
+1 std. dev.
-1 std. dev.
Average
EM currencies cheap relative
to USD
EM currencies expensive
relative to USD
36
GTM – Europe |
50
100
150
200
250
'03 '05 '07 '09 '11 '13 '15
Globalisation and trade
Exports of goods% of GDP, 2015
Number of global discriminatory trade measures
World trade growthIndex level, 2005 = 100
Source: (Left) IMF World Economic Outlook October 2016, IMF Direction of Trade, J.P. Morgan Asset Management. (Top right) Centre for Economic and Policy Research, J.P. Morgan Asset Management. Discriminatory trade measures are measures taken by governments worldwide that harmed foreign traders, investors, workers, or owners of intellectual property. (Bottom right) Netherlands Bureau for Economic Policy Analysis, Thomson Reuters Datastream, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Glob
al e
cono
my
0 10 20 30 40 50
China
EM ex-China
US
Eurozone
Other
1991 – Aug 2008 trend
Actual
36
200
300
400
500
600
700
800
'09 '10 '11 '12 '13 '14 '15
Brazil
US
Eurozone
Canada
India
China
Russia
Mexico
Japan
Korea
37
26,7% Asia ex-Jp
38,0%
-23,0% TOPIX -40,6%
73,4% MSCI EM
62,8%
35,4% Small Cap
24,4%
5,5% US S&P 500
2,1%
20,8% Asia ex-Jp
19,7%
27,2% Small Cap
35,8%
29,5% US S&P 500
13,7%
24,4% TOPIX 12,1%
16,6% Small Cap
14,5%
10,6% US S&P 500
3,8%
9,4% US S&P 500
6,9%
26,1% MSCI EM
33,6%
-33,7% US S&P 500
-37,0%
67,2% Asia ex-Jp
67,2%
28,3% Asia ex-Jp
15,6%
3,5% HDY Equity
1,5%
18,1% Europe 16,4%
26,7% US S&P 500
32,4%
19,7% Asia ex-Jp
7,7%
12,9% US S&P 500
1,4%
15,3% US S&P 500
12,0%
9,6% Small Cap
6,1%
8,4% Small Cap
6,4%
4,6% Portfolio
11,1%
-37,9% HDY Equity
-34,4%
40,2% Small Cap
40,8%
27,5% MSCI EM
14,4%
-5,7% Small Cap
-8,7%
16,8% MSCI EM
17,4%
21,5% TOPIX 54,4%
16,5% Small Cap
6,7%
11,5% Small Cap
2,8%
14,9% MSCI EM
10,1%
6,6% HDY Equity
2,7%
6,3% Asia ex-Jp
5,1%
3,2% Europe 6,5%
-38,6% Small Cap
-40,4%
37,6% Portfolio
35,8%
23,9% TOPIX 1,0%
-5,8% Portfolio
-7,5%
16,3% Small Cap
18,4%
20,5% Europe 22,3%
16,2% HDY Equity
8,7%
8,8% Europe 5,4%
14,3% HDY Equity
13,1%
6,3% TOPIX 15,0%
6,1% HDY Equity
5,2%
-1,0% HDY Equity
4,7%
-40,3% Portfolio -40,1%
34,0% HDY Equity
30,2%
23,1% US S&P 500
15,1%
-7,5% Europe -8,8%
15,6% Portfolio
17,1%
15,3% Portfolio
23,6%
15,3% Portfolio
8,2%
8,3% Portfolio
1,9%
10,1% Portfolio
9,0%
6,2% Europe 5,5%
6,0% Portfolio
4,9%
-4,9% US S&P 500
5,5%
-43,3% Europe -38,5%
32,5% Europe 28,6%
20,9% Portfolio
11,1%
-9,6% TOPIX -17,0%
14,2% US S&P 500
16,0%
13,9% HDY Equity
20,5%
11,8% MSCI EM
5,6%
6,3% HDY Equity
0,2%
8,9% Asia ex-Jp
6,4%
6,1% Portfolio
3,9%
4,5% MSCI EM
4,7%
-8,8% Small Cap
-3,8%
-49,8% Asia ex-Jp
-47,7%
22,5% US S&P 500
26,5%
16,2% HDY Equity
8,0%
-14,3% Asia ex-Jp
-14,6%
13,6% HDY Equity
14,0%
-1,1% Asia ex-Jp
6,2%
10,1% TOPIX 10,3%
1,5% Asia ex-Jp
-5,3%
6,6% TOPIX 0,3%
2,2% MSCI EM
-1,4%
3,5% TOPIX 1,0%
-14,5% TOPIX -11,1%
-50,8% MSCI EM
-45,7%
1,5% TOPIX 7,6%
11,7% Europe 7,5%
-15,4% MSCI EM
-12,5%
5,9% TOPIX 20,9%
-6,5% MSCI EM
3,8%
7,4% Europe 5,2%
-4,9% MSCI EM
-5,4%
3,2% Europe 7,9%
-0,1% Asia ex-Jp
-3,5%
3,2% Europe 3,5%
World stock market returns
Source: FactSet, MSCI, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. Annualised return covers the period 2007 to 2016. HDY Equity: MSCI AC World High Dividend Yield Index; Small Cap: MSCI Europe Small Cap Index. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 30% Europe; 20% S&P 500; 15% EM; 10% Asia ex-Japan; 10% TOPIX; 10% HDY equity and 5% small cap. All indices are total return.Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
EUR
Local
Equi
ties
37
20102007 201620122008 2011 4Q162009 2013 2014 2015 10-yr ann.
38
European sector returns and valuations
Source: FactSet, MSCI, J.P Morgan Asset Management. All calculations are total return in local currency, not annualised. *Financials no longer includes real estate which is now a separate section making up 2,6% of the MSCI Europe Value index and 0,5% of the MSCI Europe growth index. It is not included in the chart due to a lack of historical data for the sector. **“Since market peak” represents period 9 October 2007 to end of latest quarter. ***“Since market low” represents period 9 March 2009 to end of latest quarter. Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
MSCI Europe Index
Europe weight
4Q16
2016
Since market peak**
Since market low***
Forward P/E ratio
15-year average
Trailing P/E ratio
15-year average
Dividend yield
15-year average
Growth weight
Value weight
Beta to Europe
Financials* Health care
Cons. staples
Cons. disc. Industrials Materials Energy Telecom Utilities Tech Europe
Equi
ties
38
20,4% 12,8% 13,8% 10,8% 12,8% 8,2% 7,8% 4,2% 3,5% 4,2% 100%
3,8% 20,6% 27,1% 12,3% 15,5% 8,9% 0,9% 2,5% 0,6% 7,5% 100%
36,2% 5,6% 1,2% 9,5% 10,2% 7,6% 14,2% 5,8% 6,3% 1,2% 100%
18,1 -0,9 -5,0 7,9 4,5 9,2 17,8 0,0 -3,8 -1,4 5,5
5,5 -6,0 5,8 4,4 14,9 33,7 46,1 -7,9 0,5 6,5 7,9
-27,8 100,8 116,2 77,2 38,4 10,5 39,9 42,0 -6,2 18,7 27,3
207,0 188,2 216,1 291,9 224,6 162,1 92,0 113,4 65,2 200,1 172,8
1,35x 0,65x 0,64x 0,96x 1,12x 1,28x 1,00x 0,81x 0,86x 0,98x 1,00x β
11,7x 15,2x 18,7x 13,1x 16,5x 15,8x 15,2x 16,0x 13,8x 18,8x 14,8x
10,6x 15,2x 15,9x 13,9x 14,1x 12,8x 11,9x 15,9x 13,2x 19,5x 13,0x
13,5x 16,0x 20,9x 14,6x 18,0x 19,4x 25,4x 17,5x 14,2x 21,8x 16,9x
12,4x 16,3x 17,1x 16,4x 16,1x 14,5x 12,1x 17,9x 13,8x 34,3x 14,4x
4,2% 3,0% 2,8% 2,9% 2,7% 2,2% 5,7% 4,9% 5,1% 1,7% 3,4%
3,9% 2,8% 2,8% 2,8% 2,8% 2,8% 4,3% 4,6% 4,9% 1,8% 3,4%
Wei
ghts
Ret
urn
P/E
Div
βW
eigh
tsR
etur
nP/
ED
iv.
39
GTM – Europe |MSCI Europe performance and drivers
MSCI Europe earnings and performanceIndex level, next 12 months’ earnings estimates (LHS); index level (RHS)
Source: (Left and bottom right) FactSet, MSCI, J.P. Morgan Asset Management. EPS is earnings per share. (Top right) FactSet, Eurostat, MSCI, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
MSCI Europe index levelMSCI Europe EPS
Equi
ties
% change year on yearMSCI Europe 12-month EPS growth and EU real GDP growth
39
Rebased to 100 in 2009 (LHS); % (RHS)MSCI Europe banks relative performance vs. German 10-year yields
MSCI Europe banks relative to index
German 10-yr yields
Real GDP growth
EPS growth
40
|GTM – Europe
0
10
20
30
40
'80 '84 '88 '92 '96 '00 '04 '08 '12 '16
MSCI Europe equity valuations
Dividend yield and 10-year bond yield% yield
MSCI Europe forward P/E ratiox, multiple
x, adjusted using trailing 10-year average inflation-adjusted earnings
Source: (Top left) FactSet, J.P. Morgan Asset Management. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. (Bottom left) FactSet, MSCI, J.P. Morgan Asset Management. (Right) FactSet, MSCI, Tullett Prebon, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties '02 '04 '06 '08 '10 '12 '14 '16
8
12
16
20
24
31 Dec 2016:14,8x
Average: 14,0x
Average: 17,8x 31 Dec 2016:16,0x
Dividend yield
10-year German Bund yield
31 Dec 2016:3,4%
31 Dec 2016:0,2%
40
MSCI Europe cyclically adjusted P/E ratio
41
GTM – Europe |
600
1.000
1.400
1.800
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
MSCI Europe Index at inflection points
MSCI Europe Index
Source: FactSet, MSCI, Tullett Prebon, J.P. Morgan Asset Management. Local currency returns. P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. Return calculations shown in green are based on the total return index. Guide to the Markets - Europe. Data as of 31 December 2016.
Characteristic Sep 2000 Jul 2007 Dec 2016Index level 1.623 1.641 1.469P/E ratio (fwd) 21,8x 13,0x 14,8xDividend yield 1,8% 2,8% 3,4%German 10-year 5,3% 4,6% 0,2% 16 Jul 2007:
P/E = 13,0x1.641
12 Mar 2003: P/E = 11,9x
676
4 Sep 2000: P/E = 21,8x
1.623
9 Mar 2009:P/E = 8,3x
714
-55% +180%
-54%
Total return:+133%
31 Dec 1996: P/E = 16,3x
714
31 Dec 2016:P/E = 14,8x
1.469
+173%
Equi
ties
41
42
GTM – Europe |
0,0
0,5
1,0
1,5
European small capitalisation equities
Small cap relative performance and economic performance%, relative performance indexed to Nov 2012 (LHS); change in PMI (RHS)
Risk-adjusted returns by company size and holding periodSharpe ratio level*
European small cap: Price-to-book ratiox, multiple
Source: (Left) FactSet, Thomson Reuters Datastream, ZEW, J.P. Morgan Asset Management. (Top right) Bloomberg, MSCI, J.P. Morgan Asset Management. *Risk-adjusted returns are calculated assuming the risk-free rate is equal to zero. (Bottom right) Citibank, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
MSCI small cap minus large cap performance
12-month net change in eurozone composite PMI
Equi
ties
Small capsMid capsLarge caps
Average: 1,8x
31 Dec 2016:1,8x
1-year 5-year 10-year
42
-20
-15
-10
-5
0
5
10
15
20
-40
-30
-20
-10
0
10
20
30
40
50
'05 '07 '09 '11 '13 '15
43
GTM – Europe |
0
25
50
75
100
1.500
2.000
2.500
3.000
3.500
4.000
170
190
210
230
250
270
290
310
330
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 0 1 2 3 4 5
UK equities
FTSE All-Share earnings and performanceIndex level, next 12 months’ earnings estimates (LHS); index level (RHS)
Dividend yield and ex-energy dividend yield% yield
Source: (Left) Thomson Reuters Datastream, FTSE, J.P. Morgan Asset Management. EPS is earnings per share. (Top right) Citi, MSCI, J.P. Morgan Asset Management. (Bottom right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. Japan is Topix, eurozone is Euro Stoxx 50, US is S&P 500. Guide to the Markets - Europe. Data as of 31 December 2016.
FTSE All-Share index levelFTSE All-Share EPS
Equi
ties
Dividend yieldDividend yield ex-energy
Source of UK company revenues% of revenues
International
UK
43
UK
Eurozone
MSCI EM
Japan
US
MSCI World
44
GTM – Europe |
600
800
1.000
1.200
1.400
1.600
1.800
2.000
2.200
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
US S&P 500 at inflection points
S&P 500 Index
Source: FactSet, Standard & Poor’s, Tullett Prebon, J.P. Morgan Asset Management. The P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. Return calculations shown in green are based on the total return index. Guide to the Markets - Europe. Data as of 31 December 2016.
24 Mar 2000:P/E = 27,3x
1.527
9 Oct 2002:P/E = 14,1x
777
9 Oct 2007:P/E = 15,8x
1.565
9 Mar 2009:P/E = 10,3x
677
31 Dec 1996:P/E = 16,0x
741
-47%
-55%
+121%Total return:
+116%
Characteristic Mar 2000 Oct 2007 Dec 2016Index level 1.527 1.565 2.239P/E ratio (fwd) 27,3x 15,8x 16,9xDividend yield 1,1% 1,7% 2,1%US 10-year 6,2% 4,6% 2,4%
+291%
31 Dec 2016:P/E = 16,9x
2.239
Equi
ties
44
45
GTM – Europe |
'08 '09 '10 '11 '12 '13 '14 '15 '16 '1750
60
70
80
90
100
110
120
130
140
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
US equities
S&P 500 earnings and performanceIndex level, next 12 months’ earnings estimates (LHS); index level (RHS)
Source: (Left) FactSet, Standard & Poor’s, J.P. Morgan Asset Management. (Top right) BLS, FactSet, Standard & Poor’s, J.P. Morgan Asset Management. (Bottom right) MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Index is MSCI USA. Guide to the Markets - Europe. Data as of 31 December 2016.
S&P 500 index levelS&P 500 EPS
Equi
ties
Earnings per share (EPS) growth% change year on year
Initial jobless claims vs. S&P 500 performanceThousands, four-week moving average (LHS); index level (RHS)
S&P 500 index levelInitial jobless claims
Index ex-energy
Total index
45
-20-15-10-505
101520
'13 '14 '15 '16
46
GTM – Europe |US S&P 500 equity valuations
Dividend yield and 10-year Treasury yield% yield
Forward P/E ratiox, multiple
S&P 500 Shiller cyclically adjusted P/Ex, adjusted using trailing 10-year average inflation-adjusted earnings
Source: (Left) FactSet, IBES, Moody’s, Standard & Poor’s, J.P. Morgan Asset Management. (Top right) FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. (Bottom right) FactSet, Robert Shiller, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Average: 16,5x
31 Dec 1999: 27,0x
31 Dec 2016:16,9x
'00 '10 '20 '30 '40 '50 '60 '70 '80 '90 '00 '100
10
20
30
40
50 31 Dec 2016:28,3x
Average:16,7x
10-year Treasury
Dividend yield31 Dec 2016:
2,1%
31 Dec 2016: 2,4%
Equi
ties
46
47
GTM – Europe |Equity markets and reflation
S&P 500 average P/E ratio in various inflation environments1872-2016
US bond yield vs. value/growth performance*Relative index level (LHS); % (RHS)
US bond yield vs. banks/staples performance**Relative index level (LHS); % (RHS)
Source: (Left) Robert Shiller, J.P. Morgan Asset Management. (Top right) FactSet, Russell, Tullett Prebon, J.P. Morgan Asset Management. (Bottom right) FactSet, MSCI, Tullett Prebon, J.P. Morgan Asset Management. *Value index is the Russell 1000 value index. The growth index is the Russell 1000 growth index.**MSCI USA index used for both banks and consumer staples. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties
8
9
10
11
12
13
14
15
16
17
18
US inflation ranges (% CPI y/y)
S&P
500
trai
ling
P/E
US 10-year yield
Value/growth
US 10-year yieldBanks/staples
47
-1 to 0 0 to 1 1 to 3 3 to 5 5 to 7 7 to 10 10 to 15 >15
Period 2 yrs 10 yrs
Correl. 0,87 0,36
48
|GTM – Europe
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
7
9
8
6
5
4
3
2
1
Market correctionsBear markets Macro environment Bull markets
Market Bear DurationRecession
Commodity Aggressive Extreme Bull Bull Durationpeak Return (months) spike Fed tightening valuations start date return (months)
1 Crash of 1929 – excessive leverage, irrational exuberance Sep 1929 -86% 33 Jul 1926 152% 382 1937 Fed tightening – premature policy tightening Mar 1937 -60 63 Mar 1935 129 243 Post WWII crash – post-war demobilisation, recession fears May 1946 -30 37 Apr 1942 158 504 Flash crash of 1962 – flash crash, Cuban Missile Crisis Dec 1961 -28 7 Oct 1960 39 145 Tech crash of 1970 – economic overheating, civil unrest Nov 1968 -36 18 Oct 1962 103 746 Stagflation – OPEC oil embargo Jan 1973 -48 21 May 1970 74 327 Volcker tightening – campaign against inflation Nov 1980 -27 21 Mar1978 62 338 1987 crash – programme trading, overheating markets Aug 1987 -34 3 Aug 1982 229 619 Tech bubble – extreme valuations, “dot com” boom/bust Mar 2000 -49 31 Oct 1990 417 11510 Global financial crisis – leverage/housing, Lehman collapse Oct 2007 -57 17 Oct 2002 101 61
Current cycle – – – Mar 2009 231 95Average – - 45% 25 – 154% 54
US bear markets
S&P 500 declines from all-time highs, %
Characteristics of past bear and bull markets*
Source: FactSet, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. *A bear market represents a 20% or more decline from the previous market high using a monthly frequency; a bull market represents a 20% increase from a market trough. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. “Commodity spike” is defined as significant rapid upward moves in oil prices. Periods of “extreme valuations” are those where S&P 500 last 12 months’ P/E levels were approximately two standard deviations above long-run averages. “Aggressive Fed tightening” is defined as US Federal Reserve monetary tightening that was unexpected and significant in magnitude. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties
20% market decline
48
Recession 10
49
GTM – Europe |
-0,6
-0,4
-0,2
0,0
0,2
0,4
0,6
0,8
0 2 4 6 8 10
Rolling two-year correlation of weekly returns of the S&P 500, MSCI Europe Index and the 2-year Treasury yield, 1983-2016
Interest rates and equities
Correlations between weekly equity returns and interest rate movements
Source: MSCI, Standard & Poor’s, Thomson Reuters Datastream, US Treasury, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Data for each of the rate hikes: '88-'89 is March 1988 to June 1989, '94-'95 is February 1994 to February 1995, '99-'00 is June 1999 to May 2000, '04-'06 is June 2004 to June 2006, '15-'16 is December 2015 to December 2016. Guide to the Markets - Europe. Data as of 31 December 2016.
S&P 500
MSCI Europe
Cor
rela
tion
2-year Treasury yield
Equi
ties
Positive relationship between yield movements and equity returns
Negative relationship between yield movements and equity returns
49
Market reaction when the US Fed raised rates
'88-'89 '94-'95 '99-'00 '04-'06 '15-'16
Change in Fed funds 3,13% 3,00% 1,75% 4,25% 0,5%
Change in 10-yr yields 0,85% 1,89% 0,49% 0,51% 0,17%
Initial market reaction -7% -10% -7% -8% -8%
Subsequent market reaction 24% 7% 18% 20% 19%
Total reaction 17% -2% 10% 11% 10%
50
GTM – Europe |
70
90
110
130
600
1000
1400
1800
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
0
4
8
12
16
20
'90 '95 '00 '05 '10 '15
Japanese equities performance and drivers
TOPIX earnings and performance
Listed companies’ dividend pay-out and share buybacksYen trillions
Source: (Left) FactSet, TOPIX, J.P. Morgan Asset Management. EPS is earnings per share. (Top right) FactSet, TOPIX, J.P. Morgan Asset Management. (Bottom right) Nomura, J.P. Morgan Asset Management. *Share buyback data is for repurchases of common stock, excluding repurchases from Resolution and Collection Corp. and repurchases of preferred stock collected by Nomura. Guide to the Markets - Europe. Data as of 31 December 2016.
Index level, next 12 months’ earnings estimates (LHS); index level (RHS)
TOPIX EPS TOPIX price level
Equi
ties
DividendsShare buybacks*
50
TOPIX vs. JPY/USDIndex level (LHS); price of US dollar in yen (RHS)
JPY/USD
TOPIX
51
|GTM – EuropeDeveloped market equity valuations by country
Developed markets
Source: FactSet, MSCI, J.P. Morgan Asset Management. Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (P/E), price to forward book value (P/B), price to forward cash flow (P/CF) and price to forward dividends. Results are then normalised using means and average variability since 2004. The grey bars represent valuation index variability relative to that of the All Country World Index (ACWI). DM Index is the MSCI The World Index. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties
Expensive relative to
own history
Expensive relative to
world
Cheap relative to own history Cheap
relative to world
How to interpret this chart
Average
Current
Std
dev
from
glo
bal a
vera
ge
Italy Spain UK France Germany Japan ACWI USSwitz.DM Index
+2,5 Std dev
Average
-2,5 Std dev
+5 Std dev
-5 Std dev
Current composite index
Current Average since 2004
Forward P/E Forward P/B Forward P/CF Fwd. Div yield Forward P/E Forward P/B Forward P/CF Fwd. Div yieldItaly -2,5 13,1x 1,0x 4,9x 4,5% 11,6x 1,2x 4,5x 4,5%Spain -2,2 13,3 1,2 5,0 4,2 11,7 1,6 5,0 4,9UK -0,8 14,3 1,7 8,7 4,4 12,4 1,8 7,8 4,0France -0,5 15,2 1,5 8,3 3,3 12,7 1,5 6,8 3,5Germany -0,4 13,7 1,6 8,3 3,0 11,9 1,5 6,5 3,3Japan 0,5 15,2 1,3 8,2 2,1 15,5 1,3 7,0 1,7ACWI 1,0 15,8 2,0 9,9 2,6 13,6 1,9 8,6 2,9DM Index 1,3 16,5 2,1 10,3 2,6 13,9 1,9 8,5 2,7Switz. 1,6 16,9 2,3 13,8 3,5 14,1 2,3 11,6 3,0US 3,0 17,5 2,7 11,6 2,1 14,6 2,3 9,7 2,1
51
52
|GTM – EuropeEmerging market equity valuations by country
Emerging markets
Source: FactSet, MSCI, J.P. Morgan Asset Management. Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (P/E), price to forward book value (P/B), price to forward cash flow (P/CF) and price to forward dividends. Results are then normalised using means and average variability since 2004 (inception of series). The grey bars represent valuation index variability relative to that of the All Country World Index (ACWI). Guide to the Markets - Europe. Data as of 31 December 2016.
How to interpret this chart
Std
dev
from
glo
bal a
vera
ge
Equi
ties
Current composite index
Current Average since 2004Forward P/E Forward P/B Forward P/CF Fwd. Div yield Forward P/E Forward P/B Forward P/CF Fwd. Div yield
Russia -4,7 6,2x 0,7x 3,7x 4,9% 6,9x 0,9x 4,6x 2,8%Brazil -1,8 11,0 1,4 7,4 3,6 9,6 1,7 7,9 4,2Taiwan -1,4 12,7 1,6 7,9 4,3 13,6 1,7 8,3 3,9Korea -1,2 10,0 1,0 5,2 1,9 9,6 1,2 5,9 1,7China -0,9 11,1 1,3 7,1 2,5 11,4 1,7 7,5 3,0EM -0,9 11,9 1,4 7,2 2,6 11,5 1,6 7,3 2,8S. Africa 0,1 13,8 1,9 10,9 3,5 11,8 2,0 8,7 3,7ACWI 1,0 15,7 2,0 9,8 2,6 13,6 1,9 8,6 2,9Mexico 1,3 16,4 2,3 7,9 2,4 14,8 2,6 8,7 2,3India 3,5 15,8 2,5 10,8 1,6 15,3 2,6 11,4 1,9
Russia Brazil Taiwan S. AfricaEMChinaKorea ACWI IndiaMexico
52
Expensive relative to
own history
Cheap relative to
own history
Expensive relative to
world
Cheap relative to
world
Average
Current
+2 Std dev
Average
-2 Std dev
+4 Std dev
-4 Std dev
+6 Std dev
-6 Std dev
53
|GTM – Europe
0,75
1,00
1,25
1,50
1,75
2,00
2,25
2,50
2,75
3,00
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15-20
-10
0
10
20
30
40
50
60
0,75 1,25 1,75 2,25 2,75 3,25
Emerging markets: Valuations and returns
MSCI Emerging Markets Index: Price-to-book ratio MSCI Emerging Markets Index: Price-to-book and returnsx, multiple Price-to-book ratio and next 5-year annualised % price return*
Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management.. *Dots represent monthly data points January 1997 through December 2016. Guide to the Markets - Europe. Data as of 31 December 2016.
Average: 1,79x
-2,0 std. dev.
+2,0 std. dev.
Equi
ties
31 Dec 2016:1,51x
Current level
53
54
GTM – Europe |
0
100
200
300
400
500
600
20
40
60
80
100
120
140
160
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Emerging markets: Investment drivers
Source: (Left) Consensus Economics, J.P. Morgan Asset Management. “EM – DM GDP Growth” is consensus estimates for EM growth in the next 12 months minus consensus estimates for DM growth in the next 12 months, provided by Consensus Economics. (Top right) Bloomberg, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) BIS, FactSet, MSCI, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties
% next 12 months’ growth estimates (LHS); index level (RHS)EM equity relative performance and commoditiesEM vs. DM growth and equity performance
EM growth & equity outperformance
EM growth & equity underperformance
EM minus DM GDP growth
MSCI EM relative to MSCI DM
MSCI EM relative to MSCI DM
Bloomberg Commodity Index
54
Relative EM / DM equity performance and USD REEREquity performance rebased to 100 at 1993 (LHS); index level (RHS)
10
30
50
70
90
110
130
150
170
-1
0
1
2
3
4
5
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15
USD REER (inverted)
MSCI EM / MSCI DM
55
GTM – Europe |
-40
-30
-20
-10
0
10
20
30
40
50
337
200
122
40
0
200
400
Emerging markets: Flows, earnings and income
Total non-resident flows into EM assetsUSD billion
EM earnings expectations by regionConsensus EPS for next 12 months, local currency, rebased to 100 in 2006
Number of companies yielding greater than 3% by regionConstituents of the MSCI All Country World Index
Source: (Left) IIF, J.P. Morgan Asset Management. (Top right and bottom right) FactSet, MSCI, J.P. Morgan Asset Management. EPS is earnings per share. Guide to the Markets - Europe. Data as of 31 December 2016.
Equi
ties
2010-2014 average: $23bn
EM Latin America
EM AsiaEM Europe
Emerging markets Europe US Japan
55
EM debt
EM equities
Aug ‘14 Feb ‘15 Feb ‘16 Aug ‘16Aug ‘15
56
GTM – Europe |
0,0 0,20,9
2,6 2,63,4
4,1
5,6 6,1
0
2
4
6
8
Equity income
S&P 500 total return index: Dividends and capital appreciation
MSCI Europe indices: Price vs. total return*
%, average annualised returns
Rebased to 100 at December 1999Sources of income% yield
Source: (Top) Ibbotson, Standard & Poor’s, J.P. Morgan Asset Management. (Bottom left) FactSet, FTSE, J.P. Morgan Asset Management. High dividend yield is the FTSE 350 Higher Yield Index. *Returns in local currency. (Bottom right) Barclays, BofA/Merrill Lynch, FactSet, FTSE, Tullett Prebon, J.P. Morgan Asset Management. Euro corporate: Barclays Euro Aggregate Credit - Corporate; Converts: Barclays Global Convertibles; EM equity: MSCI EM; Global REITs: FTSE NAREIT Index; High yield: BofA/Merrill Lynch Developed Markets High Yield Constrained; EM debt: J.P. Morgan EMBI Global. Yields for the bond indices are yield to worst and dividend yields for the equity indices. Guide to the Markets - Europe. Data as of 31 December 2016.
Eurozone average inflation: 0,2% (12 months to Nov 2016)
DividendsCapital appreciation
Equi
ties
High dividend yield total returnTotal returnPrice return
+156%
+67%
-3%
Bunds Eurocorp
Converts MSCIEurope
Global REITS
EMequity
Cash High yield
EM debt
56
4,7% 5,4% 6,0% 5,1% 3,3% 4,2% 4,4% 2,5%1,8%
2,1% 4,0%
13,9%
-5,3%
3,0%
13,6%
4,4%1,6%
12,6% 15,3%
-2,7%
10,5% 5,8%
-10
0
10
20
1926-1929 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010-2016 1926-2016
57
|GTM – Europe
8,8% Euro HY
8,8%
22,4% US IG 7,5%
13,4% EM Debt
1,8%
21,0% US HY 17,5%
8,6% US HY 1,9%
9,9% US HY 5,7%
2,8% US HY 7,4%
20,9% EM Debt
6,2%
12,3% US Treas .
0,8%
12,9% EM Debt
9,6%
3,5% US IG -2,8%
9,0% EM Debt
5,6%
2,4% Euro IG
2,4%
19,6% US Treas .
5,1%
10,6% US IG -0,7%
10,1% Euro HY 10,1%
2,5% US Treas .
-3,8%
7,8% US IG 4,8%
2,2% Euro Gov
2,2%
16,7% US HY 2,5%
6,5% Portfolio
0,2%
9,3% US IG 6,1%
1,9% Euro HY
1,9%
6,9% Portfolio
4,9%
-2,7% Portfolio
-0,4%
15,4% Portfolio
7,3%
6,3% US HY -4,6%
8,0% Portfolio
6,3%
1,2% Portfolio
-2,3%
6,9% Euro HY
5,8%
-3,9% Infl Linked
-3,9%
13,1% Euro Gov
13,1%
1,6% Euro Gov
1,6%
4,7% Euro IG
4,7%
0,9% EM Debt
-5,3%
6,3% US Treas .
3,9%
-5,8% US IG -1,5%
8,4% Euro IG
8,4%
0,8% Infl Linked
0,8%
4,1% US Treas .
1,0%
-0,9% Infl Linked
-0,9%
5,0% Euro Gov
4,7%
-7,0% US Treas .
-2,7%
5,5% Euro HY
5,5%
0,5% Euro HY
0,5%
3,8% Infl Linked
3,8%
-1,2% Euro IG -1,2%
4,5% Euro IG
4,0%
-12,3% EM Debt
-8,3%
5,3% Infl Linked
5,3%
-0,6% Euro IG -0,6%
3,2% Euro Gov
3,2%
-3,0% Euro Gov
-3,0%
3,0% Infl Linked
2,6%
Global fixed income: Yields and returns
Fixed income sector returns
Source: (All charts) Barclays, BofA/Merrill Lynch, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. YTM = Yield to maturity. Annualisedreturn covers period 2007 to 2016. US HY: BofA/Merrill Lynch US High Yield Constrained; EM Debt: J.P. Morgan EMBI+; Euro HY: BofA/Merrill Lynch Euro Non-Financial High Yield Constrained; US IG: Barclays US Agg. – Corporate – Investment Grade; US Treasuries: Barclays US Agg. Gov. – Treasury; Euro IG: Barclays Euro Agg. – Credit – Corporate; Euro Gov.: Barclays Euro Agg. Government; Infl Linked: Barclays Euro Gov. Inflation-Linked. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 20% Euro Gov.; 15% US Treasuries; 10% Linkers; 15% US IG; 10% Euro IG; 10% US HY; 5% Euro HY; 15% EM Debt. Returns are unhedged in euro and local currencies. 10 years of weekly data is used to calculate the correlation to the UST and bunds.Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
Fixe
d in
com
e
€:
Lcl:
EU IG
US Treasury
US Corporate IG
Euro HY
Infl Linked
Euro Gov
EM Debt
Portfolio
US HY
57
Characteristics Correlation to:
YTM(%)
Size
(EUR bns)Duration(years)
10-year Bund
10-year UST
6,5 1.253 3,9 -0,1 -0,1
6,1 321 6,7 0,0 0,1
3,8 242 3,2 -0,1 -0,1
3,4 4.652 7,3 0,5 0,5
2,7 - 6,4 0,4 0,4
1,9 6.536 6,0 0,6 0,7
0,9 1.682 5,3 0,4 0,3
0,4 5.955 7,4 0,5 0,3
-0,3 483 8,1 0,3 0,2
2016201510-yr ann.20142013 4Q16
58
|GTM – Europe
-5
0
5
10
15
20
25
Fixed income interest rate risk
Current and historical yields for selected indices
Illustration of the impact a 1% rise in local interest rates may have on selected indices
% yield, fluctuations over the last 10 years*
% change, assumes a parallel shift in the yield curve and spreads are maintained
Source: (Both charts) Barclays, Bloomberg, FactSet, J.P. Morgan Asset Management.
*Historical yield range based on the last 10 years of data, with the exception of local currency emerging markets debt, which is based on eight years, due to data availability.
Fixed income sectors shown are provided by Barclays and are represented by: Treasury Europe: Barclays Pan-European Aggregate Government – Treasury; Floating rate: Barclays US Floating Rate Notes (BBB); IG credit: Barclays Global Aggregate – Corporates; High yield: Barclays Global High Yield; Convertibles: Bloomberg Barclays Credit/Rate Sensitive;EMD sovereign USD: Barclays Emerging Markets –Sovereigns; EMD corporate ($): Barclays Emerging Markets – Corporates; EMD sovereign (LC): Barclays Emerging Market Local Currency Government. For illustrative purposes only.Change in bond price is calculated using both duration and convexity, with the exception of Convertibles, which is historical change.
Guide to the Markets - Europe.Data as of 31 December 2016.
How to interpret this chart
Average
Current
Max
Min
Treasury: Europe 1-3 years 5-7 years 10+ years
Investment-grade credit
Highyield
EMD USD sovereign
EMD USD corporate
EMD LC sovereign
Floatingrate
Price returnTotal return
Fixe
d in
com
e
58
-20
-15
-10
-5
0
5
Convertibles
Treasury: Europe
1-3 years 5-7 years 10+ years Investment-grade credit
High yield
EMD USD sovereign
EMD USD corporate
EMD LC sovereign
Floatingrate
Convertibles
59
GTM – Europe |
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 -15
-10
-5
0
5
10
-1
0
1
2
3
Inflation implications for fixed income
10-year breakeven inflation%
Breakdown of US Treasury yield increasesChange in yield, %
US Treasury and inflation-linked bond returns% total return
Source: (Left) Bloomberg, J.P. Morgan Asset Management. Breakeven inflation is the difference in yield between nominal and inflation protected government bonds. (Top and bottom right) Bloomberg, J.P. Morgan Asset Management. The 10 year Treasury return is the return of the Merrill Lynch 10-year U.S. Treasury Futures Total Return index, the 10 year TIPS return is the return of the S&P 10 year US TIPS Total Return Index. 2009 reflation is 1 Jan 2009 to 31 Dec 2009; Taper Tantrum is 14 Apr 2013 to 5 Sep 2013; 2016 Reflation is 8 July 2016 to 31 Dec 2016. Data as of 31 December 2016.
10-year US breakeven inflation change
10-year US real treasury yield change
US 10-year TIPS (inflation-linked) return
US 10-year Treasury return
UK
US
Germany
59
Fixe
d in
com
e
2009 reflation Taper Tantrum 2016 reflation
2009 reflation Taper Tantrum 2016 reflation
60
GTM – Europe |
0
30
60
90
120
Liquidity risks
US corporate debt outstanding and dealer inventoriesUSD billions
Factors affecting bond liquidity during Taper Tantrum
Dealer inventories US corporate debt outstanding Average trade size
greater than USD100.000
Average daily number (thousands)
|
Source: (Left) Federal Reserve Bank of New York, SIFMA, J.P. Morgan Asset Management. US corporate debt outstanding is the Barclays US Corporate Investment Grade. (Top right) TRACE, J.P. Morgan Asset Management. (Bottom right) Markit, IMF, J.P. Morgan Asset Management. The chart shows the contribution of each factor to a non-financial corporate bond’s liquidity performance during the Taper Tantrum episode. Liquidity is measured using Markit’s liquidity score, which is a composite index of market liquidity. The effects are normalised by the average change in liquidity (as per liquidity score) in the period. “Depth of market” is the ability for the market on a security to absorb larger buy and sell orders before a single order moves the price on the security. Guide to the Markets - Europe. Data as of 31 December 2016.
Fixe
d in
com
e
US investment-grade corporate bond tradesUSD millions (LHS); # of trades (RHS)
Index level, relative liquidity performance
Number of dealers
Depth of market
Size of issue
Investment-grade rating
Time to maturity
60
0
2.000
4.000
6.000
8.000
10.000
12.000
0
100
200
300
400
500
600
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
0
50
100
150
200
250
300
1,0
1,5
2,0
2,5
3,0
3,5
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
61
GTM – Europe |
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
0
6
12
18
Historical yields of government bonds
10-year bond yields%
Source: FactSet, Tullett Prebon, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Fixe
d in
com
e
UK
Germany
US
Japan
61
Fed QE32012
Fed QE22010
Fed QE2008
Oil shock1981
Black Friday1987
Asian currency crisis1997
9/11 attacks2001
Dot com bubbleFeb 2000
Fall of Berlin Wall1989
ECB QE2015
BoE QE2009
Britain leaves European Exchange
Rate Mechanism1992
Brexit vote2016
US election
2016
62
GTM – Europe |Government bond yields
Yield to maturity of government bonds% yield
Source: (Left) FactSet, Tullet Prebon, J.P. Morgan Asset Management. (Top right) Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) Bloomberg, BofA/Merrill Lynch, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Fixe
d in
com
e
Yield below 1%
Yield below 0%
Global government bond yields
Months Years
% of BofA/Merrill Lynch Global Government Bond Index
Japan
Germany
USUK
US yield curve%, 10-year yield minus 2-year yield
Recession
62
-1
0
1
2
3
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
-2
-1
0
1
2
3
4
1 3 6 1 2 3 5 7 10 15 200
30
60
90
'14 '15 '16
63
GTM – Europe |
0
100
200
300
400
500
600
700
'00 '02 '04 '06 '08 '10 '12 '14 '160
200
400
600
800
Global investment-grade bonds
Investment-grade spreadsBasis points, option-adjusted spread over local government bond yield
US IG leverage measuresx, leverage (LHS); x, interest coverage ratio (RHS)
US cumulative net investment-grade bond issuanceUSD billions
Source: (Left) BofA Merrill Lynch, Bloomberg, J.P. Morgan Asset Management. (Top right and bottom right) J.P. Morgan Securities, J.P. Morgan Asset Management. *Leverage is debt to earnings before interest, tax, depreciation and amortisation (EBITDA). **Interest coverage ratio is EBITDA over interest expense. Guide to the Markets - Europe. Data as of 31 December 2016.
Fixe
d in
com
e
Range of 2010 - 2014
2015 issuance
2016 issuance
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
UK IG
US IG energy
US IGEuro IG
63
Leverage*
Interest coverage**6
8
10
12
14
16
0,8
1,3
1,8
2,3
2,8
3,3
3,8
'00 '02 '04 '06 '08 '10 '12 '14 '16
64
|GTM – EuropeGlobal investment-grade bond market
Global investment-grade bond marketUSD billions; % of total
Market capitalisation by duration bucket% of total in each currency
Cumulative number of issuers, as a % of total index issuers%, of total index issuers
Source: (All charts) J.P. Morgan Economic Research, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
GBPUSD
EUR
Fixe
d in
com
e
1-3 years 3-7 years 7-10 years +10 years
USD EUR GBP
USD EUR GBP CAD Other
Number of issuers
64
$5.668,68%
$1.77321%
$4365%
$2163%
$2343%
0
25
50
75
100
0 200 400 600 800 1000
0
20
40
60
65
GTM – Europe |
0
500
1.000
1.500
2.000
2.500
0
5
10
15
'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15
US high yield bonds
US high yield spreads and defaults
US HY yields
%, Fed funds rate and defaults (LHS); basis points, spread over 10-year US Treasury (RHS)
%, yield to worstUS high yield leverage measuresx, leverage and interest coverage ratio
Source: (Top) Credit Suisse, J.P. Morgan Economic Research, US Treasury, J.P. Morgan Asset Management. HY index is the J.P. Morgan Domestic High Yield index. 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 Economic Research, J.P. Morgan Asset Management. (Bottom right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Leverage is net debt to earnings before interest, tax, depreciation and amortisation (EBITDA). **Interest coverage ratio is EBITDA over interest expense. Guide to the Markets - Europe. Data as of 31 December 2016.
Fixe
d in
com
e
Federal funds rate (LHS)
Asset class Average since 1986 LatestHY spread – bps (RHS) 561 449
HY defaults (LHS) 4,0%3,6% total index14,6% energy
US high yield ex-energy
US high yield energy Leverage*
Interest coverage ratio**
65
3,5
4,0
4,5
5,0
5,5
'08 '09 '10 '11 '12 '13 '14 '15 '164
8
12
16
20
'14 '15 '16
66
GTM – Europe |
0
5
10
15
20
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 160
500
1.000
1.500
2.000
2.500
-40
-20
0
20
40
60
'08 '09 '10 '11 '12 '13 '14 '15 '16
Asset class Average LatestHY spread - bps (RHS) 631 370HY defaults (LHS) 4,8% 1,2%
B
European high yield bonds
European high yield: Spread to worst and default rates
European high yield issuance by credit ratingEUR billions
European high yield earnings and revenue growth%, change year on year
Source: (Top) BofA/Merrill Lynch, Credit Suisse, FactSet, J.P. Morgan Asset Management. Spread to worst is BofA/Merrill Lynch Euro Non-Financial High Yield Constrained. Default rate is as of 3Q 2016 due to data availability. (Bottom left) FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.(Bottom right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. *EBITDA is earnings before interest, tax, depreciation and amortisation. Guide to the Markets - Europe. Data as of 31 December 2016.
Default rate 2002: 34%
BB
CCCUnrated
Fixe
d in
com
e
EBITDA*Revenue
%, defaults (LHS); basis points, spread (RHS)
66
0
30
60
90
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
2016€58.3bn
67
GTM – Europe |
-6.000
-1.000
4.000
9.000
14.000
19.000
-1012345
4
5
6
7
8
9
10
11
12
13
14
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Emerging market debt
Emerging market debt % yield
Real 10-year government bond yields% yield, local currency
Cumulative emerging markets debt flowsUSD millions, 2016
Source: (Left) FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. (Top right) FactSet, J.P. Morgan Asset Management.(Bottom right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. EM sovereign (local currency) is the J.P. Morgan GBI-EM; EM sovereign (USD) is the J.P. Morgan EMBI+; EM corporate (USD) is the J.P. Morgan CEMBI. Blend is flows into funds with all three EMD sub-types. Guide to the Markets - Europe.Data as of 31 December 2016.
Developed markets
Emerging markets
Fixe
d in
com
e
EM sovereign (USD)
EM sovereign (local currency)
EM corporate (USD)
67
Hard currency corporateHard currency government
BlendLocal currency government
Total
Mar AprFebJan May Jun Jul Aug Sep Oct Nov Dec
68
GTM – Europe |
0
2
4
6
0
40
80
120
2000 2005 2010 2015
Commodities
Commodity pricesIndex level, rebased to 100 at Dec 2012
China’s imports of key commoditiesMillions of metric tonnes
Gross fixed capital formation in commodity industryIndex level, rebased to 100 at Jan 1995
Source: (Left) Bloomberg, FactSet, J.P. Morgan Asset Management. (Top right) Thomson Reuters Datastream, China Customs, J.P. Morgan Asset Management. (Bottom right) Australia Bureau of Statistics, Worldscope, Thomson Reuters Datastream, J.P. Morgan Asset Management. *Global data defined as global listed integrated oil and gas. Guide to the Markets - Europe. Data as of 31 December 2016.
Bloomberg Commodity Index weightsLivestock 6% Industrial metals 17%Energy 31% Precious metals 15%Crops 31%
Oth
er a
sset
s
Iron ore (LHS)
Copper (RHS)Crude oil (LHS)
Global oil and gas*
Australian mining
68
50
150
250
350
450
550
0
200
400
600
800
'95 '00 '05 '10 '15
69
GTM – Europe |
0
20
40
60
80
100
120
140
160
'80 '84 '88 '92 '96 '00 '04 '08 '12 '16
Oil market drivers
Crude oil pricesUSD per barrel
US rig count vs. oil inventories*Thousands of barrels (LHS); rigs (RHS)
Global oil supply and demand Millions of barrels per day
Source: (Left) Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) Baker Hughes, Bloomberg, US Department of Energy, J.P. Morgan Asset Management. *Excluding US strategic petroleum reserve. (Bottom right) Bloomberg, EIA, J.P. Morgan Asset Management. Forecast from EIA, 3 month moving average. Guide to the Markets - Europe. Data as of 31 December 2016.
2016 changeBrent crude +58,9%
Oth
er a
sset
s
Forecast
Demand
Supply
Rigs
Inventories
Average: $42
69
0
600
1.200
1.800
200
400
600
'00 '02 '04 '06 '08 '10 '12 '14 '16
80
85
90
95
100
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
70
|GTM – Europe
-1,0
-0,5
0,0
0,5
1,01.000
1.300
1.600
1.900
'12 '13 '14 '15 '16 '17
-500
0
500
1.000
1.500
2.000
2.500
Gold market dynamics
Gold priceGold vs. US 10-year Treasury real yields$ per Troy ounce (LHS), % inverted (RHS)
Breakdown of world gold demand by sectorTonnes
Source: (Top left) Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom left) World Gold Council, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Oth
er a
sset
s
Inflation-adjusted gold priceGold price
Real yields (inverted)
Gold
Jewellery Technology Bar & coin demand
ETFs & similar
products
Central banks & other inst.
20153Q 2016 ann.
$ per Troy ounce
70
71
GTM – Europe |
1,4
-1,1
0,5 0,4
3,1
-3,8
1,0
-0,7
-4
-2
0
2
4
Risk-adjusted returns and downside protection
Risk-adjusted returns of a 50/50 portfolioSharpe ratio of a portfolio of 50% global equities and 50% global bonds*
Six-month stock and bond correlationsOf total return on US equities (S&P 500) and US Treasuries (10-yr)
Hedge fund returns in different market environments%, average total return in up and down months, 2001-2015
Source: (Left) MSCI, J.P. Morgan Asset Management. *The equity index is the MSCI World (EUR hedged) and the bond index is the JP Morgan Global Bond index (EUR hedged). The portfolio is rebalanced monthly. Sharpe ratio is calculated as (Return - Risk free rate) / Volatility. (Top right) Bloomberg, J.P. Morgan Asset Management. (Bottom right) Barclays, Thomson Reuters Datastream, Hedge Fund Research, Standard & Poor’s, J.P. Morgan Asset Management. **HFRI FW is Hedge Fund Research Index Fund Weighted. ***US bonds is the Barclays US Aggregate Bond Index. Downside protection refers to attempting to minimise the impact of any falls in the underlying investments. Guide to the Markets - Europe. Data as of 31 December 2016.
HFRI FW**US bonds***
HFRI FW**S&P 500
S&P 500 up S&P 500 down Bond downBond up
5-year Sharpe ratio
3-year Sharpe ratio
Oth
er a
sset
s
71
-1,0
-0,5
0,0
0,5
1,0
'91 '96 '01 '06 '11 '16
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
'99 '01 '03 '05 '07 '09 '11 '13 '15
72
GTM – Europe |
-5
0
5
10
15
20
25
30
0
4
8
12
16
'70 '80 '90 '00 '10
Alternative strategies
Manager dispersion: Public and private markets*%, annual returns
Public vs. private equity returns%, MSCI AC World total return vs. Global Buyout & Growth Equity Index**
Infrastructure returns%, OECD allowed RoE over cost of debt
Source: (Left) Lipper, Cambridge Associates. *Manager dispersion is based on the time period from 31 December 2009 through 31 December 2014, except for private equity, which is based on the five-year period ending 31 March 2014 due to returns being reported with a lag. (Top right) National Venture Capital Association, MSCI, Cambridge Associates, Deutsche Bank, FactSet, J.P. Morgan Asset Management. **Data as of 3Q16. (Bottom right) Bloomberg, Regulatory Research Associates, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
MSCI ACWI
Recession
Electric
Natural gas
10-yr US Treasury
Utility bond
Median
Public Private
25th percentileGlobal Buyout & Growth Equity Index
Oth
er a
sset
s
5 years
72
10 years 15 years 20 years
11,2%
4,9%
7,0% 6,3%
10,7% 10,5%12,0%
12,8%
02468
10121416
73
Correlation of returns (EUR)
Source: Barclays, Bloomberg, Citigroup, J.P. Morgan Economic Research, MSCI, NCREIF, Standard & Poor’s, US Federal Reserve, J.P. Morgan Asset Management. Pan Europe bonds: Citigroup Europe Government Bond; EM debt: JP Morgan EMBI Global; High yield bonds: JP Morgan Domestic High Yield; Global bonds: Barclays Global Aggregate; Cmdty: Bloomberg Commodity; Hedge Funds: CS/Tremont Multi-Strategy; Real estate: blended index, which includes NCREIF Property Index data and Federal Reserve estimates of changes in capital value. All indices except Real Assets are total return based on quarterly return data in euros; real asset correlations are based on quarterly data and lagged by one quarter. Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |10-year correlations
3-year correlations
MSCIEurope S&P 500 MSCI EM MSCI Asia
ex-JapanPan Europe
bonds EM debt High yieldbonds
Globalbonds Cmdty Hedge
fundsReal
estateMSCI Japan
MSCIEurope
S&P 500
MSCI EM
MSCI Asiaex-Japan
Pan Europebonds
EM debt
High yieldbonds
Global bonds
Cmdty
HedgefundsRealestate
MSCI Japan
Oth
er a
sset
s
73
1,00 0,81 0,85 0,65 0,83 -0,11 -0,13 0,76 -0,21 0,47 0,79 -0,18
0,82 1,00 0,69 0,72 0,70 -0,06 -0,03 0,47 0,08 0,44 0,56 -0,18
0,83 0,73 1,00 0,56 0,97 -0,09 -0,09 0,80 -0,12 0,58 0,81 -0,30
0,93 0,84 0,82 1,00 0,60 -0,02 0,01 0,30 0,17 0,34 0,39 -0,15
0,86 0,80 0,96 0,89 1,00 0,01 -0,06 0,71 -0,01 0,45 0,72 -0,30
0,23 0,28 0,28 0,15 0,35 1,00 0,51 -0,15 0,66 -0,32 -0,25 0,06
0,20 0,24 0,40 0,21 0,36 0,57 1,00 -0,18 0,58 -0,20 -0,31 -0,07
0,12 -0,14 0,42 -0,02 0,25 -0,04 0,42 1,00 -0,39 0,51 0,85 -0,23
0,56 0,61 0,53 0,54 0,60 0,85 0,65 -0,08 1,00 -0,07 -0,43 -0,10
0,44 0,32 0,47 0,30 0,33 -0,04 0,31 0,55 0,27 1,00 0,57 -0,23
0,62 0,45 0,58 0,58 0,68 0,56 0,28 0,10 0,62 0,17 1,00 -0,20
-0,29 -0,05 0,02 -0,11 -0,03 -0,07 0,35 0,24 -0,13 -0,04 -0,24 1,00
74
|GTM – Europe
0
3
6
9Expected return in next decade
Asset markets in coming decades
Past and expected returns Past asset class returns and future expectations% per year % per year
Source: (Left) 2017 Long-term capital market assumptions, J.P. Morgan Multi-Asset Solutions, J.P. Morgan Asset Management, October 2016. Returns are in euro. (Right) Diminishing returns: Why investors may need to lower their sights by McKinsey Global Institute, J.P. Morgan Asset Management. “European” comprises data from 14 Western European countries, including the UK. For historical fixed-income returns McKinsey utilised the Dimson-Marsh-Staunton Global Returns database, which targets a bond duration of 20 years. Future returns show ranges across a set of countries, and are based on ten-year bonds; numbers reflect the range between the low-end of McKinsey’s slow-growth scenario and the high end of their growth-recovery scenario.Guide to the Markets - Europe. Data as of 31 December 2016.
Oth
er a
sset
s
Return in past decade
74
Last 30 years
Next 20 years (Growth recovery)
Next 20 years (Slow recovery)
US equities Europeanequities US govt. bonds European govt.
bonds
EM equity
Private equity
UK large cap
Eurozone large cap
EM local currency debt
US direct real estate
US large cap
Global direct infrastructure equity
Diversified hedge funds hedged
Commodities
European high yield bonds
Euro cash
Euro government bonds
World government bonds
US high yield bonds hedged
-4 0 4 8 12
75
GTM – Europe |
66
23
76
35
92
50
0
20
40
60
80
100
Life expectancy
Probability of reaching ages 80 and 90% probability, persons aged 65, by gender and combined couple
Source: ONS 2012-2014 Life Tables, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 31 December 2016.
Men
Women
Couple – at least one lives to specified age
80 years 90 years
Inve
stin
g pr
inci
ples
75
76
|GTM – Europe
0
1
10
100
1.000
1899 1914 1929 1944 1959 1974 1989 2004-1
0
1
2
3
4
5
-1.000
0
1.000
2.000
3.000
4.000
5.000
'00 '02 '04 '06 '08 '10 '12 '14 '16
Cash investments
Income generated by €100.000 in a three-month bank deposit Total return of $1 in real termsEUR (LHS); % change year on year (RHS) USD, log scale, total returns
Source: (Left) Bloomberg, Eurostat, J.P. Morgan Asset Management. (Right) Barclays, FactSet, Shiller, Siegel, Standard & Poor’s, J.P. Morgan Asset Management.Pre 2010 returns: Shiller, Siegel; from 2010: Equities: S&P 500; Bonds: Barclays US Treasury 20+ year Total Return Index; Cash: Barclays US Treasury Bills Total Return Index. Guide to the Markets - Europe. Data as of 31 December 2016.
2016: Dec €0
2007: €4.650 Inflation (y/y)IncomeEquities: $1.691
Bonds: $12
Cash: $2
Annualised real returns
1899–2015 2000–2016
Equities 6,5% 3,1%
Bonds 2,2% 4,4%
Cash 0,6% -0,6%
Inve
stin
g pr
inci
ples
76
77
|GTM – Europe
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
0
100.000
200.000
300.000
400.000
500.000
600.000
700.000
25 30 35 40 45 50 55 60 65
The power of compounding
€5.000 invested annually with 5% growth per year €5.000 investment with/without income reinvestedEUR EUR, MSCI Europe returns
Source: (Left) J.P. Morgan Asset Management. For illustrative purposes only, assumes all income reinvested, actual investments may incur higher or lower growth rates and charges. (Right) Bloomberg, MSCI, J.P. Morgan Asset Management. Based on MSCI Europe index and assumes no charges. Guide to the Markets - Europe. Data as of 31 December 2016.
Inve
stin
g pr
inci
ples
Starting at age 35
Starting at age 25
Without dividends reinvested
With dividends reinvested
Age
€63.827
€25.426
77
€353,803
€639,199
78
GTM – Europe |
13
2
15
34
16
39
21
-18
22
28
-19
13
6
34
-8
12
20
35
20
28
-4
-18
-31
17
9
22
16
3
-41
23
4
-12
12
18
2 24
-11-15
-7-4
-11
-3
-10
-35
-6
-11
-24
-11
-18
-4
-16
-6 -5
-12
-31
-9-12
-35 -37
-22
-8-6
-12 -12
-48
-26
-15
-25
-15-12 -12
-17-15
-50
-40
-30
-20
-10
0
10
20
30
40
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Annual returns and intra-year declines
MSCI Europe Index intra-year declines vs. calendar-year returnsDespite average intra-year drops of 15,6% (median 12,0%), annual returns are positive in 29 of 37 years%
Source: FactSet, MSCI, J.P Morgan Asset Management. Returns are based on local price only and do not include dividends. Intra-year decline refers to the largest market fall from peak to trough within a short time period during the calendar year. Returns shown are calendar years from 1980 to 2016.Guide to the Markets - Europe. Data as of 31 December 2016.
Intra-year decline
Calendar-year return
Inve
stin
g pr
inci
ples
78
79
GTM – Europe |
3,4%
-0,8%
-5,7%
-9,5%
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
Impact of being out of the market
Returns of MSCI EuropeEUR, value of a €10.000 investment between 2001 and 2016 with annualised return (%)
Source: FactSet, MSCI, J.P. Morgan Asset Management. For illustrative purposes only. Assumes all income is reinvested; returns calculated daily over the time period assuming no return on each of the specified number of best days. Guide to the Markets - Europe. Data as of 31 December 2016.In
vest
ing
prin
cipl
es
Initial investment
Fully invested
79
Missed 10 best days Missed 30 best days Missed 50 best days
80
GTM – Europe |US asset returns by holding period
Range of equity and bond total returns%, annualised total returns, 1950-2016
Source: Strategas/Ibbotson, J.P. Morgan Asset Management. Large cap equity represents the S&P 500 Composite and Bonds represents the Strategas/Ibbotson US Government Bond Index and US Long-term Corporate Bond Index. Returns shown are per annum and are calculated based on monthly returns from 1950 to November 2016 and include dividends. Guide to the Markets - Europe. Data as of 31 December 2016.
1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling
Large cap equityBonds50/50 portfolio
Inve
stin
g pr
inci
ples
48% 49%
30%24% 24% 21%
17% 17% 18%13% 15%
-18%-24%
-7% -3% -1% -3% 0%1%
4%1%
4%
-50
-25
0
25
50
75
61%
-43%
80
81
Asset class returns (EUR)
Source: Barclays, Bloomberg, FactSet, FTSE, MSCI, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Annualised return covers the period from 2006 to 2015. Vol. is the standard deviation of annual returns. Govt bonds: Barclays Global Aggregate Government Treasuries; HY bonds: Barclays Global High Yield; EMD: J.P. Morgan EMBI+; IG bonds: Barclays Global Aggregate – Corporates; Cmdty: Bloomberg UBS Commodity; REITS: FTSE NAREIT All REITS; DM Equities: MSCI World; EME: MSCI EM; Hedge funds: Credit Suisse/Tremont Hedge Fund; Cash: JP Morgan Cash Index ECU (3M). Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 30% DM equities; 10% EM equities; 15% IG bonds; 12,5% government bonds; 7,5% HY bonds; 5% EMD; 5% commodities; 5% cash; 5% REITS and 5% hedge funds. Returns are unhedged, total return, in EUR. Guide to the Markets - Europe. Data as of 31 December 2016.
GTM – Europe |
Inve
stin
g pr
inci
ples
20102007 20122008 2011 20162009 2013 2014 201510-yr ann. Vol.4Q16
81
EME 26,1%
Govt bonds 15,9%
EME 73,4%
REITS 36,4%
EMD 12,9%
REITS 18,3%
DM Equities 21,9%
REITS 44,8%
REITS 13,9%
HY bonds 17,7%
Cmdty 9,3%
HY bonds 9,8%
EME 30,8%
Hedge Funds 10,6%
Cash 5,7%
HY bonds 54,4%
EME 27,5%
REITS 10,9%
HY bonds 17,8%
Hedge Funds 9,1%
EMD 20,9%
EMD 13,4%
Cmdty 15,2%
DM Equities 8,6%
EMD 9,0%
REITS 23,5%
Cmdty 5,1%
IG bonds -3,9%
DM Equities 26,7%
Cmdty 24,9%
Govt bonds 9,9%
EME 16,8%
Portfolio 3,6%
DM Equities 20,1%
DM Equities 11,0%
EME 14,9%
HY bonds 6,3%
REITS 7,1%
HY bonds 19,2%
Cash 4,4%
EMD -5,0%
Portfolio 25,8%
HY bonds 22,8%
IG bonds 7,8%
EMD 16,2%
HY bonds 2,7%
IG bonds 17,5%
HY bonds 8,4%
EMD 12,9%
Portfolio 3,9%
DM Equities 6,8%
DM Equities 17,7%
Portfolio 0,7%
Hedge Funds -19,0%
REITS 23,5%
DM Equities 20,1%
HY bonds 6,6%
DM Equities 14,7%
Cash 0,2%
Portfolio 15,7%
Govt bonds 7,7%
REITS 12,6%
REITS 3,4%
Portfolio 6,5%
Cmdty 16,6%
Govt bonds -0,3%
Portfolio -20,8%
EMD 22,0%
EMD 19,6%
Cash 1,7%
Portfolio 10,9%
REITS -1,3%
HY bonds 13,9%
IG bonds 7,4%
DM Equities 11,4%
EME 2,2%
IG bonds 6,4%
Portfolio 12,0%
DM Equities -1,2%
HY bonds -23,1%
Hedge Funds 18,6%
Portfolio 18,7%
Portfolio 1,4%
IG bonds 9,5%
IG bonds -4,0%
Govt bonds 13,0%
Portfolio 6,0%
Portfolio 9,9%
IG bonds 2,1%
Govt bonds 5,3%
EMD 11,6%
IG bonds -3,7%
Cmdty -32,7%
Cmdty 15,8%
Govt bonds 13,3%
DM Equities -1,8%
Hedge Funds 7,3%
EME -6,5%
EME 11,8%
Cash 0,1%
IG bonds 7,4%
EMD 0,9%
EME 4,5%
Hedge Funds 9,8%
EMD -4,0%
REITS -34,1%
IG bonds 15,5%
IG bonds 13,2%
Hedge Funds -2,4%
Cash 1,2%
Govt bonds -8,4%
Hedge Funds 3,7%
Hedge Funds -1,1%
Govt bonds 4,7%
Hedge Funds -0,0%
Hedge Funds 3,0%
IG bonds 7,6%
HY bonds -7,0%
DM Equities -37,2%
Cash 2,3%
Hedge Funds 10,2%
Cmdty -10,4%
Govt bonds 0,3%
EMD -12,3%
Cash 0,3%
EME -4,9%
Cash -0,2%
Cash -0,1%
Cash 1,7%
Govt bonds 7,4%
REITS -25,9%
EME -50,8%
Govt bonds -0,6%
Cash 1,1%
EME -15,4%
Cmdty -2,6%
Cmdty -13,4%
Cmdty -5,5%
Cmdty -16,1%
Hedge Funds -1,7%
Govt bonds -3,3%
Cmdty -3,4%
Cash 1,9%
J.P. Morgan Asset Management: Index definitionsAll indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The S&P 400 Mid Cap Index is representative of 400 stocks in the mid-range sector of the domestic stock market, representing all major industries.The Russell 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The Russell 1000 Index ® measures the performance of the 1,000 largest companies in the Russell 3000. The Russell 1000 Growth Index ® measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index ® measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index ® measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Growth Index ® measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index. The Russell Midcap Value Index ® measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value index. The Russell 2000 Index ® measures the performance of the 2,000 smallest companies in the Russell 3000 Index.The Russell 2000 Growth Index ® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Value Index ® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Top 200 Index ® measures the performance of the largest cap segment of the U.S. equity universe. It includes approximately 200 of the largest securities based on a combination of their market cap and current index membership and represents approximately 68% of the U.S. market. The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWIconsisted of 45 country indices comprising 23 developed and 22 emerging market country indices. The MSCI Small Cap IndicesSM target 40% of the eligible Small Cap universe within each industry group, within each country. MSCI defines the Small Cap universe as all listed securities that have a market capitalization in the range of USD200-1,500 million.The MSCI All Country Asia Pacific ex-Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed and emerging markets in the Pacific region. The MSCI All Country Asia Pacific ex-Japan Index consists of the following 11 developed and emerging market countries: Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, and Thailand.
The MSCI China Index is an unmanaged index considered representative of stocks of China.The MSCI KOKUSAI Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets excluding Japan. The MSCI KOKUSAI Index consists of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States*.The Nikkei 225 Index is a price-weighted average of the 225 top-rated Japanese companies listed in the first section of the Tokyo Stock Exchange.The Tokyo Price Index (TOPIX) is a capitalization-weighted index lists all firms that are considered to be under the 'first section' on the TSE, which groups all of the large firms on the exchange into one pool. The second section groups all of the remaining smaller firms.The FTSE 100 Index is an index of the 100 largest companies (by market capitalization) in the United Kingdom.The FTSE All Share Index is an index of the 630 largest companies (by market capitalization) in the United Kingdom.The MSCI Value and Growth IndicesSM cover the full range of developed, emerging and All Country MSCI Equity indexes. As of the close of May 30, 2003, MSCI implemented an enhanced methodology for the MSCI Global Value and Growth Indices, adopting a two dimensional framework for style segmentation in which value and growth securities are categorized using different attributes - three for value and five for growth including forward-looking variables. The objective of the indexdesign is to divide constituents of an underlying MSCI Standard Country Index into a value index and a growth index, each targeting 50% of the free float adjusted market capitalization of the underlying country index. Country Value/Growth indices are then aggregated into regional Value/Growth indices. Prior to May 30, 2003, the indices used Price/Book Value (P/BV) ratios to divide the standard MSCI country indices into value and growth indices. All securities were classified as either "value" securities (low P/BV securities) or "growth" securities (high P/BV securities), relative to each MSCI country index.The following MSCI Total Return IndicesSM are calculated with gross dividends:This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits.The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore. Credit Suisse/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted hedge fund index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under management, a 12-month track record, and audited financial statements. It is calculated and rebalanced on a monthly basis, and shown net of all performance fees and expenses. It is the exclusive property of Credit Suisse Tremont Index, LLC. The NCREIF Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment. The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry performance, and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the American Stock Exchange or the NASDAQ National Market List.
J.P. Morgan Asset Management: Index definitionsThe Dow Jones Industrial Average measures the stock performance of 30 leading blue-chip U.S. companiesThe Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities and represents twenty two separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc.West Texas Intermediate (WTI) is underlying commodity in the New York Mercantile Exchange's oil futures contracts. The S&P GSCI Index is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully collateralized basis with full reinvestment. The Barclays U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. This U.S. Treasury Index is a component of the U.S. Government index. The Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. The Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. The Barclays Euro-Aggregate Index consists of bond issued in the euro or the legacy currencies of the sovereign countries participating the European Monetary Union (EMU).The Global Bond Index Emerging Market Broad Diversified Index (GBI-EM) is a comprehensive global local emerging markets index, and consists of liquid, fixed-rate, domestic currency government bonds.The Barclays Global Aggregate Corporate Index consists of corporate issues in Europe, the US and Asia-pacific regions. The Barclays Global High Yield Index is an unmanaged index considered representative of fixed rate, noninvestment-grade debt of companies in the U.S., developed markets and emerging markets.The Barclays Emerging Markets Index includes USD-denominated debt from emerging markets in the following regions: Americas, Europe, Middle East, Africa, and Asia. As with other fixed income benchmarks provided by Barclays Capital, the index is rules-based, which allows for an unbiased view of the marketplace and easy replicability.The Barclays MBS Index covers the mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. Aggregate components must have a weighted average maturity of at least one year, must have $250 million par amount outstanding, and must be fixed rate mortgages.The Barclays Corporate Bond Index is the Corporate component of the U.S. Credit index.The Barclays TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.The Li Keqiang Index is a composite measure composed of China’s electricity production, financial institution loans and railway freight.The Euro Stoxx 600 Index represents large, mid and small capitalisation companies across 18 European countries. The JPMorgan GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index.The JPMorgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an investable universe of corporate bonds. Both indices are also available in Diversified version. The JPMorgan CEMBI Index is a USD denominated external debt index tracking bond issued by sovereigns and quasi-sovereigns in the developing nations. The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market.
The CS/Tremont Equity Market Neutral Index takes both long and short positions in stocks with the aim of minimizing exposure to the systematic risk of the market (i.e. a beta of zero).*The CS/Tremont Multi-Strategy Index consists of funds that allocate capital based on perceived opportunities among several hedge fund strategies. Strategies adopted in a multi-strategy fund may include, but are not limited to, convertible bond arbitrage, equity long/short, statistical arbitrage and merger arbitrage.The Barclays U.S. Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated floating rate note market.*Market Neutral returns for November 2008 are estimates by J.P. Morgan Funds Market Strategy, and are based on a December 8, 2008 published estimate for November returns by CS/Tremont in which the Market Neutral returns were estimated to be +0.85% (with 69% of all CS/Tremont constituents having reported return data). Presumed to be excluded from the November return are three funds, which were later marked to $0 by CS/Tremont in connection with the Bernard Madoff scandal. J.P. Morgan Funds believes this distortion is not an accurate representation of returns in the category. CS/Tremont later published a finalized November return of -40.56% for the month, reflecting this mark-down. CS/Tremont assumes no responsibility for these estimates.The Office of National Statistics (ONS) Index is a mix-adjusted average housing price index. The index is calculated monthly using mortgage financed transactions from the Regulated Mortgage Survey by the Council of Mortgage Lenders. The Nationwide House Price Index is a mix adjusted index constructed from Nationwide lending data across the UK.The Halifax House Price Index is constructed from mortgage data derived from Halifax lending data across the UK.The MSCI AC World High Dividend Yield Index is composed of those securities that have higher-than-average dividend yield within its parent index, a track record of consistent dividend payments and the capacity to sustain future dividend payments.
J.P. Morgan Asset Management: Risks and disclosures
The Market Insights programme provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand themarkets and support investment decision-making, the programme explores the implications of current economic data and changing market conditions.
The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EEA jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.
In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.
Copyright 2017 JPMorgan Chase & Co. All rights reserved
Activity ID: 4d03c02a800327efMaterial ID: 0903c02a816d0028
Prepared by: Stephanie Flanders, Tilmann Galler, Vincent Juvyns, Dr. David Stubbs, Maria Paola Toschi, Michael Bell, Alexander Dryden, Nandini Ramakrishnan.
Unless otherwise stated, all data as of 31 December 2016 or most recently available.
Guide to the Markets - Europe
JP-LITTLEBOOK
top related