Download - Jp Littlebook 2Q13 CDN
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As of March 31, 2013
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Table of Contents
EQUITIES
ECONOMY
4
7
INTERNATIONAL
ASSET CLASS
9
56
U.S. Market Strategy Team
Dr. David P. Kelly, CFA [email protected]
Joseph S. Tanious, CFA [email protected]
-. . . .
Anastasia V. Amoroso, CFA [email protected]
Brandon D. Odenath [email protected]
David M. Lebovitz [email protected]
Gabriela D. Santos [email protected]
2
. . . .
Past performance is not indicative of future returns.
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Page Reference
4. Returns by Style
5. Returns by Sector
6. S&P 500 Index at Inflection Points
35. Credit Conditions
36. High Yield Bonds
37. Municipal Finance
38. Emerging Market Debt
Equities
7. Stock Valuation Measures: S&P 500 Index
8. Earnings Estimates and Valuations by Style
9. Corporate Profits
10. Sources of Earnings per Share Growth
11. Confidence and the Capital Markets
12. Interest Rates and Equities
13. De lo in Cor orate Cash
39. Global Equity Markets: Returns
40. Global Equity Markets: Composition
41. Global Economic Growth
42. The Importance of Exports
43. The Impact of Global Consumers
44. Soverei n Debt Stresses
14. Broad Market Lagged Price to Earnings Ratio
15. P/E Ratios and Equity Returns
16. Equity Correlations and Volatility
17. Economic Growth and the Composition of GDP
45. Global Manufacturing Wages
46. Global Monetary Policy
47. Europe: Economic Growth
48. Europe: Inflation and Unemployment
49. Eurozone: Sovereign Bond Yields50. China: Growth and Economic Policy
Economy
.
19. The Aftermath of the Housing Bubble
20. Consumer Finances
21. Corporate Finances
22. Federal Finances: Outlays and Revenues
23. Federal Finances: Deficits and Debt
24. Trade and the U.S. Dollar
.
52. Japan: Economic Snapshot
53. Global Equity Valuations Developed Markets
54. Global Equity Valuations Emerging Markets
55. Emerging Market Equity Composition
Asset Class
.
26. Employment and Income by Educational Attainment
27. Consumer Price Index
28. Oil and the Economy
29. Global Energy Supply
30. Consumer Confidence and the Stock Market
.
57. Correlations: 10-Years
58. Mutual Fund Flows
59. Yield Alternatives: Domestic and Global
60. Global Commodities
61. Gold
62. Historical Returns by Holding Period
3
31. Fixed Income Sector Returns32. Interest Rates and Inflation
33. Fixed Income Yields and Returns
34. The Fed and the Money Supply
63. Diversification and the Average Investor
64. Annual Returns and Intra-year Declines65. Cash Accounts
66. Corporate DB Plans and Endowments
67. Stock Market Since 1900
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Returns by Style
1,600
S&P 500 Index1Q 2013 2012
Charts reflect index levels (price change only). All returns and annotations reflect total return, including dividends.
Value Blend Growth Value Blend Growth
1,350
1,400
1,450
1,500
1,550
Equ
ities
+10.6%
Large
12.3% 10.6% 9.5%Large
17.5% 16.0% 15.3%
Mid 14.2% 13.0% 11.5% M
id 18.5% 17.3% 15.8%
Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13
1,250
1,300
S&P 500 Index
2012: +16.0%
Since 10/9/07 Peak:Since Market Low (March 2009)Since Market Peak (October 2007)
Small
11.6% 12.4% 13.2%Small
18.1% 16.3% 14.6%
Value Blend Growth Value Blend Growth
1,000
1,200
1,400
, .
Since 3/9/09
Large
6.2% 13.2% 23.5%Large
164.7% 153.0% 151.8%
M
id
25.6% 25.9% 24.5% Mid
220.8% 203.8% 187.8%
Dec-06 Mar-08 Jun-09 Sep-10 Dec-11 Mar-13600
800
Source: Russell Investment Group, Standard & Poors, FactSet, J.P. Morgan Asset Management.
Low: +153.0%
Small
17.9% 21.6% 24.7%Small
191.6% 193.2% 194.2%
4
, . ,market returns since the most recent S&P 500 Index high on 10/9/07. Since Market Low represents period 3/9/09 3/31/13, illustrating market returns since the S&P500 Index low on 3/9/09. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with the exception of thelarge blend category, which is reflected by the S&P 500 Index. Past performance is not indicative of future returns.
Data are as of 3/31/13.
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S&P 500 Index at Inflection Points
1,600
Index level 1,527 1,565 1,569P/E ratio (fwd.) 25.6x 15.2x 13.8x
S&P 500 Index
Mar. 24, 2000P/E fwd. = 25.6x
Mar. 31, 2013P/E (fwd.) = 13.8x
1,569
Oct. 9, 2007P/E (fwd.) = 15.2x
Characteristic Mar-2000 Oct-2007 Mar-2013
1,400
. . .10-yr. Treasury 6.2% 4.7% 1.9%
Equ
ities
1,527,
1,200
-49% -57% +132%
+106%
800
1,000
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
600
Source: Standard & Poors, First Call, Compustat, FactSet, J.P. Morgan Asset Management.
ct. ,P/E (fwd.) = 14.1x
777
. ,P/E (fwd.) = 16.0x
741
Mar. 9, 2009P/E (fwd.) = 10.3x
677
6
v en y e s ca c u a e a s e annua ze v en r a e v e y pr ce, as prov e y ompus a . orwar r ce o arn n gs a o s a o om-up ca c u a on a se
on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates.Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of futurereturns.
Data are as of 3/31/13.
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Stock Valuation Measures: S&P 500 Index
S&P 500 Index: Valuation Measures Historical Averages
Valuation
Measure Description Latest*
1-year
ago
3-year
avg.
5-year
avg.
10-year
avg.
15-year
avg.
Equ
ities P/E Price to Earnings 13.8x 13.0x 12.6x 12.9x 14.2x 16.6x
P/B Price to Book 2.4 2.2 2.1 2.1 2.5 3.0
P/CF Price to Cash Flow 9.4 8.9 8.5 8.4 9.7 11.0P/S Price to Sales 1.4 1.2 1.2 1.1 1.3 1.5
PEG Price/Earnings to Growth 1.5 1.3 1.0 2.1 1.7 1.7
50x9%
10%
S&P 500 Shiller Cyclically Adjusted P/EAdjusted using trailing 10-yr. avg. inflation adjusted earnings
S&P 500 Earnings Yield vs. Baa Bond Yield
S&P 500 Earnings Yield:(Inverse of fwd. P/E) 7.3%
Div. Yield Dividend Yield 2.2% 2.2% 2.2% 2.3% 2.1% 1.9%
20x
30x
40x
5%
6%
7%
8%
1Q13:22.6x
Average: 19.0x
'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100x
10x
'94 '96 '98 '00 '02 '04 '06 '08 '10 '123%
4% Moodys Baa Yield: 4.8%
Source: (Top) Standard & Poors, FactSet, Robert Shiller Data, J.P. Morgan Asset Management.Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Price to Book is price divided by book value per share. Data
-
7
.
months. Price to Sales is calculated as price divided by consensus analyst estimates of sales per share for the next 12 months. PEG Ratio is calculated as NTM P/E divided byNTM earnings growth. Dividend Yield is calculated as consensus analyst estimates of dividends for the next 12 months divided by price. All consensus analyst estimates areprovided by FactSet. (Bottom left) Cyclically adjusted P/E uses as reported earnings throughout. *Latest reflects data as of 3/31/2013.(Bottom right) Standard & Poors, Moodys, FactSet, J.P. Morgan Asset Management.Data are as of 3/31/13.
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Earnings Estimates and Valuations by Style
28x
S&P 500 Index: Forward P/E Ratio Current P/E vs. 20-year avg. P/E
12.5 13.8 15.5
Value Blend Growth
ge
16x
20x
Average: 16.2xEqu
ities
13.9 16.2 20.9
14.1 15.5 17.6
14.0 16.3 21.8
Lar
Mid
'94 '96 '98 '00 '02 '04 '06 '08 '10 '128x
12x
S&P 500 Operating Earnings Estimates
Mar. 2013: 13.8x
Current P/E as % of 20-year avg. P/EE. .: Lar e Ca Blend stocks are 14.8%
14.2 15.6 17.4
14.2 17.1 21.3Small
Value Blend Growth
Large
89.7% 85.2% 74.0%$80
$100
$1201Q13: $114.15
Consensus estimates of the next twelve months rolling earnings cheaper than their historical average.
Mid 100.7% 95.2% 80.5%
Small
99.5% 91.4% 81.6%$0
$20
$40
$60
8
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Source: (Top and bottom left) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Right) Russell Investment Group, IBES, FactSet.Earnings estimates are for calendar years and taken at quarter end dates throughout the year. Forward Price to Earnings is price divided byconsensus analyst estimates of earnings per share for the next 12 months. P/E ratios are calculated and provided by Russell based on IBESconsensus estimates of earnings over the next 12 months except for large blend, which is the S&P 500.Data are as of 3/31/13.
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Corporate Profits
$26
S&P 500 Earnings Per ShareOperating basis, quarterly
Adjusted After-Tax Corporate Profits (% of GDP)Includes inventory and capital consumption adjustments
11% 4Q12:4Q12: $23.16
2Q07: $24.06
$20
$23
Equ
ities
9%
10%
.
$14
$17
7%
8%
$8
$11
5%
6%
50-yr. avg.: 6.2%
-$1
$2
3%
4%
9
'12'10'08'06'04'02 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10
Source: Standard & Poors, Compustat, BEA, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. Most recently available data is 3Q12 as 4Q12 are Standard & Poors estimates with 99.8% ofcompanies reported.Past performance is not indicative of future returns.
Data are as of 3/31/13.
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Sources of Earnings per Share Growth
50%
S&P 500 Year-Over-Year EPS GrowthGrowth broken into revenue growth and margin expansion, quarterly
30%
40%
Equ
ities
Revenue Share of EPS Growth
10%
20%
-20%
-10%
-40%
-30%
4Q124Q104Q084Q064Q044Q024Q004Q984Q964Q94
10
Source: Standard & Poors, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. Most recently available data is 3Q12 as 4Q12 are Standard & Poors estimates with 99.8%of companies reported. Past performance is not indicative of future returns. 4Q2008, 1Q2010 and 2Q2010 reflect -101%, 92% and 51% growth inoperating earnings, and are adjusted on the chart.
Data are as of 3/31/13.
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Confidence and the Capital Markets
120
24x
26x
Multiple Expansion and Contraction
Consumer SentimentForward P/E
S&P 500 forward P/E based on consensus EPS estimatesEst. impact of a 10pt. rise in sentiment: +2.0 multiple points*
80
90
100
16x
18x20x
22x
Equ
ities
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
50
60
10x
12x
14x
Sentiment & Real Yields*
Correlation Coefficient: 0.75
100
110
120
4%
5%
6% Consumer SentimentReal 10-year Yield
Real yield based on nominal 10-yr. yield minus year-over-year core CPI. .
60
70
80
0%
1%
2%
Correlation Coefficient: 0.68
11
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '1250-1%
Source: (Top) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Bottom) U.S. Treasury, BLS, University of Michigan, J.P. MorganAsset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next twelve months. Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core inflation for that month. *Estimated impact based oncoefficients from regression analysis. Data are as of 3/31/13.
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Interest Rates and Equities
0.8
Correlations Between Weekly Stock Returns and Interest Rate MovementsWeekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, 1963-2013
When ields are
0.4
0.6
Equ
ities
Positiverelationshipbetween yieldmovements and
below 5%, risingrates aregenerally
associated withrising stockprices
0
0.2
stock returns
relatio
nCoefficient
-0.4
-0.2 Negativerelationshipbetween yieldmovements andstock returns
Co
-0.8
-0.6
0% 2% 4% 6% 8% 10% 12% 14% 16%
10-Year Treasury Yield
12
Source: Standard & Poors, US Treasury, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends.
Data are as of 3/31/13.
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Deploying Corporate Cash
Corporate Cash as a % of Current AssetsS&P 500 companies cash and cash equivalents, quarterly
30%
Corporate Growth
Capital Expenditures M&A Activity
$bn, nonfarm nonfinancial capex, quarterly value of deals completed$1,600$1,300
Equ
ities
20%
22%
24%
26%
28%
$600
$800$1,000
$1,200
,
$900
$1,000
$1,100
,
Cash Returned to ShareholdersDividend Payout Ratio'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
14%
16%
18%
$0
$200
$400
$600
$700
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
$120
$140
$160
$27
$30
$33
50%
60%
S&P 500 companies, rolling 4-quarter averages, billions USDS&P 500 companies, LTM
Dividends per Share
$40
$60
$80
$18
$21
$24
30%
40%
Share Buybacks
13
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12Source: Standard & Poors, FRB, Bloomberg, FactSet, J.P. Morgan Securities, J.P. Morgan Asset Management.
(Top left) Standard & Poors, FactSet, J.P. Morgan Asset Management. (Top right) M&A activity is the quarterly value of deals completed andcapital expenditures are for nonfarm nonfinancial corporate business. (Bottom left) Standard & Poors, FactSet, J.P. Morgan AssetManagement. (Bottom right) Standard & Poors, Compustat, FactSet, J.P. Morgan Asset Management. Data are as of 3/31/13.
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Broad Market Lagged Price to Earnings Ratio
35x
Lagged P/E Ratio All U.S. CorporationsRatio of market value of all U.S. corporations to adjusted after-tax corporate profits for prior four quarters
25x
30x
Equ
ities
Avg. During Recessions 12.6x
Avg. During Expansions 13.9x
P/E Ratios
20x Mar. 31, 2013*:
14.4x
March 31, 2013 14.4x
10x
15x Average: 13.7x
0x
5x
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
14
Source: BEA, Federal Reserve Board, Wilshire Associates, J.P. Morgan Asset Management.
*The March 31, 2013 price is a J.P. Morgan Asset Management estimate based on the daily value of the Wilshire 5000 Total Market Index.
Data are as of 3/31/13.
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P/E Ratios and Equity Returns
60%60%
P/E and Total Return Over 5-yr. Annualized PeriodsP/E and Total Return Over 1-yr. PeriodsQuarterly, 1Q 1952 to 4Q 2007Quarterly, 1Q 1952 to 4Q 2011
Current P/E: 14.4 Current P/E: 14.4
40%40%
3/31/13
Implied Annual Return 11.9%Standard Error 5.7%
3/31/13
Implied Annual Return 12.9%Standard Error 17.2%
Equ
ities
20%20%
0%5x 10x 15x 20x 25x 30x
0%5x 10x 15x 20x 25x 30x
-40%
-
-40%
-20%
15
Source: BEA, FRB, J.P. Morgan Asset Management. Prices are based on the market value of all U.S. corporations and include quarterlydividends. Valuation based on long-term P/E ratio.
Note: Orange line denote results of linear regression with R-squared of 0.15 for 1-yr. returns (left) and 0.35 for 5-yr. returns (right).
Data are as of 3/31/13.
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Equity Correlations and Volatility
70%
Large Cap StocksCorrelations Among Stocks
Sovereign DebtCrisis
LehmanGreat Depression /
30%
40%
50%
Equ
ities
Tech Bust & 9/11
1987 Crash
OPEC Oil
Crisis
Cuban Missile Crisis
0%
10%
20%
'26 '32 '38 '44 '50 '56 '62 '68 '74 '80 '86 '92 '98 '04 '10
Average: 26.7% Mar. 2013: 34.5%
2.5%
3.0%
3.5%
60
75
90Volatility Measure 08 Peak Average LatestDJIA (Left) 3.30% 0.72% 0.45%VIX (Right) 80.9 20.4 12.7
DJIA vol. shownin 3-month
moving average
0.5%
1.0%
1.5%
.
15
30
45
16
'30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100.0% 0
Source: (Top) Empirical Research Partners LLC, Standard & Poors, J.P. Morgan Asset Management. Capitalization weighted correlation of top750 stocks by market capitalization, daily returns, 1926 Mar. 31, 2013. (Bottom) CBOE, Dow Jones, J.P. Morgan Asset Management. DJIAvolatility are represented as three-month moving averages of the daily absolute percentage change in the Dow Jones Industrial Average.
Charts shown for illustrative purposes only. Data are as of 3/31/13.
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Economic Growth and the Composition of GDP
$18,00010%
Real GDP% chg at annual rate
20-yr avg. 4Q12
Components of GDP4Q12 nominal GDP, billions USD
12 000
$14,000
$16,000
4%
6%
8%
y
Real GDP: 2.5% 0.4%
10.6% Investment ex-housing
19.2%Govt Spending
. ous ng
$625 bn ofout ut lost
$8,000
$10,000
0%
2%
Econo
$2,000
$4,000
$6,000
-6%
-4%
- .Consumption
n ooutput
recovered
-$2,000
$0
'04 '06 '08 '10 '12
-10%
-8%
Source: BEA, FactSet, J.P. Morgan Asset Management.
- 3.3% Net Exports
17
va ues s own n egen are c ange vs. pr or quar er annua ze an re ec .
Data are as of 3/31/13.
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Cyclical Sectors
24
Millions, seasonally adjusted annual rateLight Vehicle Sales
$150
Change in Private InventoriesBillions of 2005 dollars, seasonally adjusted annual rate
4Q12: 13.3
14
1618
20
y Average: 15.2
Feb. 2013:15.3
$-50
$0
$50
Average: 28.7
'94 '96 '98 '00 '02 '04 '06 '08 '10 '128
10
12
Econo
Real Capital Goods Orders
Housing Starts
'95 '00 '05 '10$-200
$-150
-
$6 0
$6 5
$7 0
$7 5
1,600
2,000
2,400
- . , ,ousan s, seasona y a us e annua rae
Average: 57.2
Feb. 2013:57.6
'00 '02 '04 '06 '08 '10 '12$4 0
$4 5
$5 0
$5 5
'95 '00 '05 '100
400
800
, .917
,
18
Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, FactSet, J.P. Morgan Asset Management. (Bottom left) Census Bureau,FactSet, J.P. Morgan Asset Management. (Bottom right) Census Bureau, FactSet, J.P. Morgan Asset Management.Capital goods orders deflated using the producer price index for capital goods.
Data are as of 3/31/13.
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The Aftermath of the Housing Bubble
$1,100160
Monthly Rent vs. Monthly Mortgage PaymentVacant propertiesIndexed to 100, seasonally adjusted
Home Prices
-
$500
$650
$800
$950
140
150
y
1Q13*:$726
on yMortgagePayment
FHFA Purchase Only
Average Existing Home
$200
$350
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12130
Econo
Home Inventories
1Q13*: $507Monthly Rent
3.5
4.0
4.5
110
120 ons, annua rae, seasona y a us e
'94 '96 '98 '00 '02 '04 '06 '08 '10 '121.5
2.0
2.5
.
'03 '04 '05 '06 '07 '08 '09 '10 '11 '1290
100
Feb. 2013: 2.2
19
Sources: (Left) National Association of Realtors, Standard & Poors, FHFA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, J.P. Morgan Asset Management.Monthly mortgage payment assumes a 20% down payment at prevailing 30-year fixed-rate mortgage rates; analysis based on median asking rent and median mortgage paymentbased on asking price. (Bottom right) Census Bureau, National Association of Realtors, J.P. Morgan Asset Management. *1Q13 rent and mortgagepayment values are J.P. Morgan Asset Management estimates.
Data are as of 3/31/13.
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Consumer Finances
$80
15%
Household Debt Service RatioDebt payments as % of disposable personal income, seasonally adjusted
3Q07:
Consumer Balance SheetTrillions of dollars outstanding, not seasonally adjusted
Total Assets: $79.5tn 2Q-07 Peak: $81.5tn
$60
$70
12%
13%
14%
y 1Q80:
.
Homes: 25%
- .
$40
$50'80 '85 '90 '95 '00 '05 '10
10%
11%
Econo
.
1Q13*:10.4%
Household Net WorthBillions USD, saar 1Q13*:
Deposits: 10%
Pension Funds: 18%
Other Tangible: 7%
$20
$30
$50,000
$60,000
$70,000
$80,000 $69,2103Q07:$67,413
Revolving (e.g.: credit cards): 6%Non-revolving: 14%Other Liabilities: 8%
$0
$10
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12$10,000
$20,000
$30,000
$40,000Total Liabilities: $13.5tn
Assets: 41%
Mortgages: 71%
20
Source: (Left) FRB, J.P. Morgan Asset Management. Data includes households and nonprofit organizations. (Right) BEA, FRB, J.P. Morgan Asset
Management. *1Q13 household debt service ratio and household net worth are J.P. Morgan Asset Management estimates. Values may not sum to100% due to rounding.
Data are as of 3/31/13.
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Corporate Finances
240%$1,600
Corporate Financing GapNonfarm nonfinancial corporate business, billions USD
Total Internal Funds
Total LeverageS&P 500, ratio of total debt to total equity, quarterly
200%
220%
$800
$1,000
$1,200
$1,400 Total Capital Expenditures
y
Companiesmustborrow
180%'94 '96 '98 '00 '02 '04 '06 '08 '10 '12
$400
$600
Econo Companies
can fundinternally
Interest Coverage Ratio (EBIT / Net Interest)
Average: 173%
140%
160%
5x
6x
7x
8x
9x
, quar ery3Q12:
7.2x
100%
120%
' ' ' ' ' ' ' ' ' '0x
1x
2x
3x
4x
4Q12 : 108%
21
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Source: Federal Reserve, Compustat, Standard & Poors, FactSet, J.P. Morgan Asset Management.
(Top Left): All data is from the Feds Flow of Funds tables report Z.1, F.102 lines 9 and 11. Total internal funds equals retained earnings plusdepreciation.
Data are as of 3/31/13.
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Federal Finances: Outlays and Revenues
$4.0 26%
The 2013 Federal BudgetCBO Baseline forecast, trillions USD
Federal Outlays and Receipts1960 2013, % of GDP
$3.0
$3.5
24%
y
Total Spending: $3.6tn
Other
$448bn (13%)
Net Int.: $224bn (6%)
Borrowing:$845bn (24%)
2013:23.3%
$2.0
$2.5
20%
22%
Econo
Defense:$751bn (21%)
on- e ense sc.:$461bn (13%)
Average: 20.6%Social Insurance:
$952bn (27%)
Other: $241bn (7%)
$1.0
$1.5
18%Social Security:$810bn (23%)
Average: 17.9%
2013:17.8%Corp.: $251bn (7%)
$0.0
$0.5
Total Government Spending Sources of Financing
14%
16%
1960 1970 1980 1990 2000 2010
Medicare & Medicaid:$858bn (24%)
Income:$1,264bn (36%)
RevenuesOutlays
22
Source: U.S. Treasury, BEA, OMB, CBO, J.P. Morgan Asset Management.
2013 Federal Budget is based on the CBOs February 2013 Baseline Scenario.Note: Years shown are fiscal years (Oct. 1 through Sep. 30).
Data are as of 3/31/13.
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Federal Finances: Deficits and Debt
-12% 100%
Federal Budget Surplus/Deficit Federal Net Debt (Accumulated Deficits)% of GDP, 1990 2022 % of GDP, 1990 2022
ForecastForecast
-10%
-8%
80%
y
ase ne
2012 actual: 72.5%
2013 CBO Baseline
2022: 76.0%
ase ne
2013 CBO Baseline
-6%
-4%
60%
Econo
2022: 58.3%
-2%
0%
20%
2%
4%1990 1994 1998 2002 2006 2010 2014 2018 2022
0%1990 1994 1998 2002 2006 2010 2014 2018 2022
Source: U.S. Treasury, BEA, CBO, J.P. Morgan Asset Management.
23
. . . . outlays). Federal net debt comprises all financial liabilities of the Federal government (gross debt) minus all intra-government holdings as assets. Deficitand debt scenarios are based on CBO budget forecasts from August 2012 and February 2013, which include the American Taxpayer Relief Acts costestimates.
Data are as of 3/31/13.
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Trade and the U.S. Dollar
115-8%
Current Account Balance, % of GDP U.S. Dollar IndexNominal trade-weighted exchange index: major currencies
105
110
-6%
:-6.5%
y
90
95
100
-4%Econo
80
85
-2%4Q12:-2.8%
.84.0
Mar. 2013:76.1
' ' ' ' ' ' ' ' ' '65
70
75
' ' ' ' ' ' ' ' ' '
0% Mar. 2008: 70.3
24
Source: BEA, FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
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Employment
60012%
Civilian Unemployment Rate Employment Total Private PayrollSeasonally adjusted Total job gain/loss (thousands)
200
400
10%
11%
y 8.8mmjobs lost
-200
0
8%
9%
Econo
Feb. 2013: 7.7%6.4mmjobs
-600
-400
6%
7%
-1 000
-800
3%
4%
5 50-yr. avg.: 6.1%
25
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12'70 '80 '90 '00 '10
Source: BLS, FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
Source: BLS, FactSet, J.P. Morgan Asset Management.
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Employment and Income by Educational Attainment
$87,981$90,00018%
Average Annual Earnings by Highest Degree EarnedFull-time workers aged 18 and older, 2011, USD
Unemployment Rate by Education Level
$70,000
$80,000
14%
16%
y
+29K
Feb. 2013:
Less than High School Degree
High School No College
Some CollegeCollege or Greater
$59,415
$50,000
$60,000
10%
12%
Econo
+24K
Feb. 2013:7.9%
.
$32,493
$30,000
$40,000
6%
8
Feb. 2013:6.7%
$0
$10,000
,
0%
2%
Feb. 2013:3.8%
26
High School Graduate Bachelor's Degree Advanced Degree'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Source: Census Bureau, J.P. Morgan Asset Management.Source: BLS, FactSet, J.P. Morgan Asset Management.
Unemployment rates shown are for civilians aged 25 and older.
Data are as of 3/31/13.
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Consumer Price Index
15%
CPI and Core CPI50-yr. Avg. Feb. 2013
Headline CPI: 4.2% 2.0%
% change vs. prior year, seasonally adjustedCPI
Components
Weight in
CPI
12-month
Change
Food & Bev. 15.3% 1.7%
12%
y
Core CPI: 4.1% 2.0%Housing 41.0% 2.0%
Apparel 3.6% 2.0%
Transportation 16.8% 3.7%
6%
9%
Econo Medical Care 7.2% 3.3%
Recreation 6.0% 0.8%
Educ. & Comm. 6.8% 2.0%
Other 3 4% 1 7%
0%
3%
. .
Headline CPI 100.0% 2.0%
Less:
Energy 9.6% 4.4%
'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-3%
Source: BLS, FactSet, J.P. Morgan Asset Management.
Food 14.3% 1.7%
Core CPI 76.1% 2.0%
27
CPI used is CPI-U and values shown are % change vs. 1 year ago and reflect February 2013 CPI data. CPI component weights are as of December 2012 and 12-monthchange reflects non-seasonally adjusted data through February 2013. Core CPI is defined as CPI excluding food and energy prices.
Data are as of 3/31/13.
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Oil and the Economy
$160 $4.50
4%
WTI Crude Oil & Retail Gasoline Prices
Oil Gas12/31/00 3/31/13Oil $26.72 $97.23
Economic Drag From Oil PricesU.S. petroleum imports as a % of GDP
3Q08: 3.8%
$120
$140
$3.50
$4.00
2%
3%
y
. .
$80
$100
$2.50
$3.00
'70 '75 '80 '85 '90 '95 '00 '05 '10
0%
1%
Econo 1Q13*: 2.7%
Total U.S. Ener Net Im orts
$40
$60
$1.50
$2.00Energy Spending by Income Level% of after-tax income
25%
30%
35%
% of total energy consumption
EIAforecast
0
$20
0.50
$1.00
5%
10%
15%
28
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12.
Source: U.S. Department of Energy, FactSet, J.P. Morgan Asset Management. Price ofgas based on U.S. retail national average of all formulations and WTI for crude.Imports are mostly crude oil, petroleum and natural gas while consumption includes oil,gas, coal, nuclear, hydropower and bio-fuels.
Data are as of 3/31/13.
Source: (Top) BEA, FactSet, J.P. Morgan Asset Management.(Bottom) EIA, J.P. Morgan Asset Management.*1Q12 drag on growth is a J.P. Morgan
Asset Management estimate.
'90 '95 '00 '05 '10 '15 '20
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Global Energy Supply
30
U.S. Natural Gas ProductionTrillions of cubic meters, USD EIA
forecast
Kuwait
Middle East Energy Production & Chokepoints
Percent of global liquid fuel production, 2011
10
15
20
25
yOther
Shale Gas
Iran4.9%
Iraq3.0%
3.1%yr a
0.5%Suez Canal
2.2%
0
5
1990 1995 2000 2005 2010 2015 2020 2025Econo Libya
0.6%Egypt0.8% Saudi Arabia
12.8%
Strait ofHormuz Natural Gas Prices b Countr
u an0.5%
UAE3.6%
.
Bab el-Mandeb
USD per mmBTU*
$13.70 $14.10
$10
$12
$14
$16
3.4%
Major Producers Major Consumers
Percent of global total, 2011 Percent of global total, 2011
Saudi Arabia 13% China 5% United States 22% India 4%
Russia 12% Iran 5% China 10% Saudi Arabia 3%
$4.03
$10.11
$2
$4
$6
$8
29
Source: EIA, J.P. Morgan Asset Management.Forecasts are from the EIA Annual Energy Outlook 2013. *mmBTU represents 10,000 million British thermal units. Natural gas prices are as of June2012.
Data are as of 3/31/13.
United States 12% Canada 4% Japan 5% Brazil 3% $0
United States United Kingdom China Japan
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Consumer Confidence and the Stock Market
130
Consumer Sentiment Index University of Michigan
Average 12-month S&P 500 index return
110
120
y
Jan. 2000
-2.0%
Jan. 2004+4.4%
. . .
90
100
Average: 85.3
Econo
.+13.5%
May 1977+1.2%
.-6.2%
Jan. 2007-4.2%
60
70
Oct. 1990
Mar. 2003+32.8% Oct. 2005
+14.2%
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '40
50
Feb. 1975+22.2%
May 1980+19.2%
+29.1%
Nov. 2008+22.3%
Aug. 2011+15.4%
30
Source: University of Michigan, FactSet, J.P. Morgan Asset Management.
Peak is defined as the highest index value before a series of lower lows, while a trough is defined as the lowest index value before a seriesof higher highs. Subsequent 12-month S&P 500 returns are price returns only, which excludes dividends.
Data are as of 3/31/2013.
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Fixed Income Sector Returns
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13 Cum. Ann.
High Yield EMD EMD High Yield TIPS Treas. High Yield High Yield TIPS EMD High Yield EMD EMD
29.0% 11.9% 12.3% 11.8% 11.6% 13.7% 58.2% 15.1% 13.6% 17.9% 2.9% 200.3% 11.6%
10-yrs '03 - '12
EMD High YieldAsset
Alloc.EMD Treas. MBS EMD EMD Muni High Yield Muni High Yield High Yield
26.9% 11.1% 3.6% 10.0% 9.0% 8.3% 34.2% 12.8% 10.7% 15.8% 0.3% 174.3% 10.6%
Asset
Alloc.TIPS Muni MBS
Barclays
Agg
Barclays
AggCorp. Corp. Treas. Corp.
Asset
Alloc.
Asset
Alloc.
Asset
Alloc.
9.7% 8.5% 3.5% 5.2% 7.0% 5.2% 18.7% 9.0% 9.8% 9.8% 0.1% 94.3% 6.9%
TIPSAsset
Alloc.TIPS
Asset
Alloc.MBS
Asset
Alloc.
Asset
Alloc.
Asset
Alloc.
Asset
Alloc.
Asset
Alloc.MBS TIPS TIPS
8.4% 6.3% 2.8% 5.1% 6.9% -1.4% 15.8% 7.6% 8.9% 7.8% 0.0% 90.4% 6.7%
Corp. Corp. Treas. MuniAsset
Alloc.
TIPS MuniBarclays
Agg
Corp. TIPS Corp. Corp. Corp.
8.2% 5.4% 2.8% 4.8% 6.2% -2.4% 12.9% 6.5% 8.1% 7.0% -0.1% 84.7% 6.3%com
e
Muni MBS High Yieldarc ays
AggEMD Muni TIPS TIPS
arc ays
AggMuni
arc ays
Agg
arc ays
Agg
arc ays
Agg
5.3% 4.7% 2.7% 4.3% 5.2% -2.5% 11.4% 6.3% 7.8% 6.8% -0.1% 65.7% 5.2%
Barclays
AggMuni MBS Corp. Corp. Corp.
Barclays
AggTreas. EMD
Barclays
AggTreas. Muni Muni
4.1% 4.5% 2.6% 4.3% 4.6% -4.9% 5.9% 5.9% 7.0% 4.2% -0.2% 64.5% 5.1%
FixedI
MBS Agg
Agg
Treas. Muni EMD MBS MBS MBS MBS TIPS MBS MBS
3.1% 4.3% 2.4% 3.1% 3.4% -14.7% 5.9% 5.4% 6.2% 2.6% -0.4% 64.1% 5.1%
Treas. Treas. Corp. TIPS High Yield High Yield Treas. Muni High Yield Treas. EMD Treas. Treas.
2.2% 3.5% 1.7% 0.4% 1.9% -26.2% -3.6% 2.4% 5.0% 2.0% -1.5% 59.0% 4.7%
Source: Barclays Capital, FactSet, J.P. Morgan Asset Management.
31
Past performance is not indicative of future returns. Fixed income sectors shown above are provided by Barclays Capital and are represented by: Barclays Capital U.S. Aggregate
Index; MBS: Fixed Rate MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond Index; Emerging Debt: Emerging Markets USD Index; High Yield: Corporate High YieldIndex; Treasuries: Barclays Capital U.S. Treasury; TIPS: Barclays Capital TIPS. The Asset Allocation portfolio assumes the following weights:10% in MBS, 20% in Corporate, 15% in Municipals, 10% in Emerging Debt, 10% in High Yield, 25% in Treasuries, 10% in TIPS.
Asset allocation portfolio assumes annual rebalancing.
Data are as of 3/31/13.
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Interest Rates and Inflation
20%
Nominal and Real 10-year Treasury Yields
15%
ep. , :15.84%
Average 3/31/13
Nominal Yields 6.42% 1.87%Real Yields 2.55% 0.09%
10%
com
eNominal 10-yearTreasury Yield
5%
FixedI Mar. 31, 2013: 1.87%
Real 10-year
-
0%
Mar. 31, 2013: 0.09%
Rising Rate Corp. Bonds S&P 5001958-1981 3.0% 8.6%Ann. Inflation 5.0% 5.0%Ann. Real Return -2.0% 3.5%
Falling Rate Corp. Bonds S&P 5001982-2012 10.1% 11.0%Ann. Inflation 3.1% 3.1%Ann. Real Return 6.8% 7.7%
32
'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10
-
Source: Federal Reserve, BLS, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core inflation for that month except for March 2013, wherereal yields are calculated by subtracting out February 2013 year-over-year core inflation. All returns above reflect annualized total returns, which includereinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance.Data are as of 3/31/13.
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The Fed and the Money Supply
Money MultiplierM2 / Monetary Base
Feds Balance Sheet: Assets$ trillions
10.0x$3.5tn
5.0x
6.0x
7.0x
8.0x
.er
U.S. Treasuries
Agency MBS
Mar. 2013:$1.5tn
$2.0tn
$2.5tn
. n
Feds Balance Sheet: Liabilities
com
e
Federal Funds Rate & FOMC Interest Rate Projections
'03 '04 '05 '06 '07 '08 '09 '10 '11 '122.0x
3.0x
4.0x.
$0.0tn
$0.5tn
.
'03 '04 '05 '07 '08 '09 '10 '12
6%
8%
10%
12%
$2.0tn
$2.5tn
$3.0tn
r ons
FixedI
Minimum Reserves
Long-term Fedprojection
0%
2%
4%
'84 '88 '92 '96 '00 '04 '09 '12 '14'03 '04 '05 '06 '07 '08 '09 '10 '11 '12$0.0tn
$0.5tn
$1.0tn
. Mar. 31, 2013:
0.0%-0.25%
34
Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.
Monetary base is defined as the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits heldin the central bank's reserves. Money multiplier defined as M2 divided by the monetary base. Long-term Fed projection is based on averageexpectations of FOMC members.
Data are as of 3/31/13.
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Credit Conditions
760 60%
Commercial & Industrial Loan DemandNet percent of banks reporting stronger demand
Lending Standards for Approved Mortgage LoansAverage FICO score based on origination date
Feb. 2013: 747
700
720
740
-
-20%
0%
20%
40% 19%
15%
660
680
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Delinquency Rates
com
e
Common Equity as a % of Total Assets
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12-80%
-60%
-
Large & Medium Firms
Small Firms
10%
12%
14%
8%
10%
12%
Consumer Loans
Residential Mortgages
an s, seasona y a use
FixedI
Commercial and Industrial Loans 10.1%
,
2011:
11.1%
4%
6%
8%
' ' ' ' ' ' ' ' ' ' ' ''92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
2%
4%
6%
1.2%
2.6%
Average: 7.6%
35
Source: (Top left) McDash, J.P. Morgan Securitized Product Research, J.P. Morgan Asset Management. (Top right) Federal Reserve, FactSet, J.P. Morgan Asset
Management. (Bottom left): Federal Reserve, FactSet, J.P. Morgan Asset Management. (Bottom right) FDIC, J.P. Morgan Asset Management.
All data reflect most recently available releases.
Data are as of 3/31/13.
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High Yield Bonds
20%Average Latest
HY Spreads 5.9% 5.0%Lev. Loan Spreads 5.1% 4.5%
High Yield Spreads and Defaults
HY Spreads
5%
10%
. .ev. oan prea s
HY Default Rates
0%'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
com
e
Historical High Yield Recovery RatesHi h ield bonds cents on the dollar
Annual Flows into High Yield and Leveraged Loan FundsMutual funds & ETFs, billions USD
$20
$30
$40
$50
50
60
70
80
90
FixedI
Average: 42.1
.
High Yield
Leveraged Loans
-$20
-$10
$0
$10
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '130
10
20
30
40
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
36
Source (Top chart): U.S. Treasury, J.P. Morgan, Strategic Insight, J.P. Morgan Asset Management. 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, Fitch, J.P. Morgan AssetManagement. (Bottom right): Strategic Insight, J.P. Morgan Asset Management. Spreads indicated are benchmark yield to worst less comparable maturity Treasury yields.
2013 recovery rate is a weighted average number as of February 28, 2013. Yield to worst is defined as the lowest potential yield that can be received
on a bond without the issuer actually defaulting and reflects the possibility of the bond being called at an unfavorable time for the holder.
Flows include ETFs and are as of February 28, 2013. Past performance is not indicative of comparable future results.
Data are as of 3/31/13.
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Municipal Finance
8%
State & Local Government Debt Service% of current expenditures
Muni/Treasury RatioRatio of Barclays 10-year Municipal Bond yield to 10-year Treasury240%
6%
7%
200%
220%
4Q12: 5.2%
4%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
com
e
Municipal Bond Issuance*Billions USD revenue and GO issues
160%
180%
FixedI
100%
120%
$300bn
$400bn
$500bn
'00 '02 '04 '06 '08 '10 '1260%
80% Mar. 31, 2013:110%
$0bn
$100bn
$200bn
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
37
Source (Left chart): Barclays Capital, U.S. Treasury, FactSet, J.P. Morgan Asset Management. (Top right) BEA, J.P. Morgan Asset Management. (Bottom right) SIFMA,J.P. Morgan Asset Management.
*Excludes maturities of 13 months or less and private placements. 2013 issuance data is as of February 2013.
Data are as of 3/31/13.
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Emerging Market Debt
12%
Emerging Markets Debt SpreadsSpread to Treasuries of USD-denominated debt, percent
Index Breakdown USD Denominated EMDMiddle East &
Africa 7%
Middle East &Africa 13%
100%
Index Average Spread
4%
6%
8%
Asia 41%
Europe 33%
Europe 16%
Latin America43%
Latin America29%
20%
40%
60%Sov. 3.8% 3.1%
Corp. 3.3% 3.4%
0%
2%
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
com
e
Annual Flows into EMD Mutual Funds & ETFsBillions USD
Emerging Market Debt Credit RatingEMBIG average monthly credit rating, inverse scale
Asia 17%0%
Sovereigns(EMBIG)
Corporates(CEMBI)
$15
$20
$25
$30
FixedI e . : -
BB+
BBB-
BB
BB-
: .
'93 '95 '97 '99 '01 '03 '05 '07 '09 '11
-$5
$0
$5
10
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
B-
B
B+
38
Source: J.P. Morgan, MorganMarkets, FactSet, Strategic Insight, J.P. Morgan Asset Management.
Spreads measure the credit risk premium over comparable maturity U.S. Treasury bonds. The J.P. Morgan EMBI Global (EMBIG) Index is a USD-denominated external debt index tracking bonds issued by sovereigns and quasi-sovereigns in developing nations. The J.P. Morgan Corporate EmergingBond Index (CEMBI) is a USD-denominated external debt index tracking bonds issued by corporations in developing nations. Flow data is as of February2013. Past performance is not indicative of comparable future results.Data are as of 3/31/13.
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Global Equity Markets: Returns
MSCI EAFE Index: Return Needed to Reach 2007 Peak
Analysis as of Mar. 31, 2013, implied average annualized total return
46.9%1 YrCountry / Region
1Q13 2012
Local USD Local USD
23.2%
16.1%
2 Yrs
3 Yrs
Regions / Broad Indexes
USA (S&P 500) - 10.6 - 16.0EAFE 9.8 5.3 17.9 17.9
MSCI EME Index: Return Needed to Reach 2007 Peak
12.8%
10.8%
4 Yrs
5 Yrs
- . . . . . .
Pacif ic ex-Japan 7.0 7.0 22.6 24.7
Emerging Markets -0.4 -1.6 17.4 18.6
MSCI: Selected Countries
o
nal
Analysis as of Mar. 31, 2013, implied average annualized total return
21.1%
11.5%
1 Yr
2 Yrs
United Kingdom 9.7 2.5 10.2 15.3
France 3.3 0.6 20.9 22.8
Germany 2.9 0.3 30.1 32.1
Internati
8.5%
7.0%
3 Yrs
4 Yrs
. . . .
China -4.4 -4.5 22.9 23.1
India -3.3 -2.6 30.0 26.0
Brazil -2.3 -0.8 10.1 0.3
39
Source: Standard & Poors, MSCI, IMF, FactSet, J.P. Morgan Asset Management.
All return values are MSCI Gross Index (official) data. Definition of emerging markets is based on MSCI data. Data assume dividend yields as of
3/31/13 (MSCI EAFE: 3.3% and MSCI EM: 2.7%). Chart is for illustrative purposes only. Past performance is not indicative of future results. Please
see disclosure page for index definitions.
Data as of 3/31/13.
.Russia -1.8 -3.2 9.7 14.4
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Global Equity Markets: Composition
14%
16%
Weights in MSCI All Country World Index% global market capitalization, float adjusted
-
Share of Global Market Capitalization% global market capitalization, float adjusted
6%
8%
10%
12%
UnitedStates47%
U.K.15%
U.K. 8%
EmergingMarkets
EM Market
0%
2%
4%
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Share of Global GDP
Japan8%
Emerging Market Share of MSCI ACWI Earnings
o
nal
Emer in
OtherDeveloped
5%
Europe ex-U.K.16%
U.K. 3%
,
10%
12%
14%
16%
Canada 2%Internati Markets
51%
UnitedStates19%
Japan 6%
2%
4%
6%
8%
40
Source: MSCI, IMF, FactSet, J.P. Morgan Asset Management.
Share of global market capitalization is based on float adjusted MSCI data. Share of global GDP based on purchasing power parity (PPP) ascalculated by the IMF for 2013. Definition of emerging markets is based on MSCI and IMF data sources.Percentages may not sum to 100% due to rounding.Data as of 3/31/13.
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
-
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Global Economic Growth
Year-over-year % chg. forecasts from JPMSIEmerging Market Country Real GDP Growth
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
Historical
4Q13
JPMSI Forecast
10%
0%
2%4%
6%
Developed Market Country Real GDP Growth
-4%
-2%
Emerging Markets China India Mexico Russia South Africa Korea Brazil
4%
6%
8%
10%
Year-over-year % chg. forecasts from JPMSI
o
nal
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
4Q13
-4%
-2%
0%
2%
DevelopedCountries
U.S. Canada Germany Japan U.K. France Italy
Internati
41
Source: J.P. Morgan Global Economic Research, J.P. Morgan Asset Management.
Forecast and aggregate data come from J.P. Morgan Global Economic Research.
Data are as of 3/31/13.
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The Importance of Exports
Goods exports onlyExports as a % of GDP 2011
4.5%
2.0%
1.0%
4.4%
3.1%
2.1%
1.7%
2.3%
2.2%
15.5%
10.2%
4.9%
26.1%
17.6%
10.3%
China
India
Brazil . . urozone t er
2.2%
.
1.7%
1.5%
.
4.0%
1.4%
.
6.2%
6.9%
.
14.0%
9.8%
.
Japan
U.S.
o
nal
1.4%
1.1%
1.9%
12.4%
12.7%
10.0%
2.0%
1.5%
1.3%
7.6%
5.8%
4.8%
23.4%
21.1%
18.0%
Italy
France
U.K.
Internati
2.2%
19.2%
21.8%
2.5%
4.2%
1.6%
10.7%
2.8%
38.9%
26.0%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Germany
Canada
42
ource: , . . organ sse anagemen .
Numbers represent exports of goods only and would be higher if services were included. Values may not sum to total exports due to rounding.Data are as of 3/31/13.
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The Impact of Global Consumers
40% 40%
Share of Global Nominal Consumption Foreign Sales, % of Total Sales
35%
30%
35%
Mega Cap (Russell Top 200)
25%
30%
25%
Lar e Ca Russell 1000
20%15%
20%
o
nal U.S. Consumption % of Global
EM Consumption % of Global
15%1990 1995 2000 2005 2010
10%'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10
Source: FactSet, Compustat, Russell, J.P. Morgan Global Economics Research, J.P. Morgan Asset Management.Foreign sales as a percentage of total sales is calculated as an unweighted average of individual index constituent companies reported sales figuresand does not ca ture all index members due to differences in re ortin ractices.
Internati
43
Data are as of 3/31/13.
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Sovereign Debt Stresses
Bubble size = 10-yeargovernment bond yield
GDP Growth, Gross Debt to GDP and Borrowing Costs
China
10%
013F)
Turkey
India
Indonesia
Malaysia
10%
5%
6%
8%
row
th(20112
Brazil
South Africa
Mexico
U.S.
Korea
France
Germany
Japan
Russia Singapore
EU
Aust ralia
U.K.0%
2%
RealGDP
o
nal
Italy
Spain
Portugal
-4%
-2%
Developed Markets
Emerging Markets
240%
Internati
Greece
-8%
-6%
0% 20% 40% 60% 80% 100% 120% 140% 160% 180%
44
ross e - o- a os
Source: IMF, FactSet, Bloomberg, J.P. Morgan Economics, Barclays, J.P. Morgan Asset Management.
Growth and debt data are based on the October 2012 World Economic Outlook.Borrowing costs based on local currency debt. EU overall borrowing cost based on Barclays Capital Euro-Aggregate 7-10 year treasury. South Africasborrowing cost is based on 7-year government bond yield due to data availability.
Data as of 3/31/13.
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Global Manufacturing Wages
Manufacturing WagesNominal, average USD per month
Developed Countries Emerging Countries
$3,885
$3,716
$1,500
$1,750
,
$3,000
$3,500
,
Latest2001*
$2,942
$2,089 $2,077
2,958
$1,000
$1,250
$2,000
$2,500
$866
$455
$500
$750
$1,000
$1,500
o
nal
$309
$74$139 $112 $52
$323
$193$148
$0
$250
$0
$500
Source: ILO (International Labor Organization), U.S. Bureau of Labor Statistics, Ministry of Labor-Mexico, EM Advisors Group, Thailand National Statistical Office, General
Internati
Brazil Mexico China Thailand Vietnam IndonesiaU.S. Germany Japan
45
, , , , . . .Chinese wages are those of rural migrant workers as a proxy. *Data begins in 2005 for Vietnam due to availability of data.Data is from 2012 for Mexico, China, and Thailand; 2011 for United States, Vietnam (preliminary), and Indonesia (preliminary);and 2010 for Brazil, Germany, and Japan.
Data as of 3/31/13.
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Global Monetary Policy
Central Bank Assets Percent of Nominal GDP Real Policy Rates Monthly
30%
35%
3%
4%
European Central Bank
Bank of Japan
10%
15%
20%
25%
-1%
0%
1%
2%
Developed Markets
Country Level Monetary Policy and Inflation
Emerging Markets
Inflation Rate Real Polic RateTar et Polic Rate
U.S. Federal Reserve
0%
5%
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
-3%
-2%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
o
nal
0.0%
2.5%
5.0%
7.5%
10.0%
Internati
-5.0%
-2.5%
HongKong
U.K.
Euroarea
U.S.
Canada
Japan
Australia
Turkey
India
Taiwan
Russia
Thailand
SouthAfrica
Mexico
Poland
Korea
Colombia
Indonesia
Brazil
China
46
Source: J.P. Morgan Global Economics Research, J.P. Morgan Asset Management.(Top charts) Emerging and Developed Economy GDP growth and real policy rates represent GDP weighted aggregates estimated by J.P. MorganGlobal Economics Research. (Bottom chart) Target policy rates are the short-term target interest rates set by central banks. Inflation rates shownrepresent year-over-year quarterly rates for 4Q12. Real policy rates are short-term target interest rates set by central banks minus year-over-yearinflation.Data are as of 3/31/13.
Developed Markets Emerging Markets
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Europe: Economic Growth
6%
Europe Real GDPYear-over-year % change
Avg. Since1999
4Q12
Latest GDP Growth Rates for European Countries4Q12, year-over-year % change
2.1%Norway
4%
Real GDP 1.5% -0.5%
0.5%
0.7%
1.4%
1.4%
Germany
Austria
Switzerland
Sweden
0%
2%Average:
1.5%
-0.4%
-0.3%
0.0%
0.2%
Belgium
France
Ireland
U.K.
-2%
o
nal
-1.9%
-1.4%
-1.0%
-0.9%
- .
Spain
Finland
Denmark
Netherlands
-6%
-4%
'99 '01 '03 '05 '07 '09 '11
Internati
-5.7%
-3.8%
-2.8%
-8% -6% -4% -2% 0% 2% 4%
Greece
Portugal
Italy
47
Source: Eurostat, Bloomberg, FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
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Europe: Inflation and Unemployment
27%
Europe InflationYear-over-year % change
Unemployment RateAvg. Since
1999Feb. 2013
Greece and Spain5%
21%
24%Headline CPI 2.1% 1.8%
Core CPI 1.7% 1.4%
U.S.Italy
German
Euro area
4%
15%
18%
2%
3%
9%
12%
1%
o
nal
3%
6%
'99 '01 '03 '05 '07 '09 '11'99 '01 '03 '05 '07 '09 '11
0%
Internati
48
Source: (Left) ECB, FactSet, J.P. Morgan Asset Management. (Right) Note: Greece,and Spain unemployment rate is weighted average of each countrys harmonisedunemployment rate based on population size. Latest data January 2013 except US which is February 2013. Source: Eurostat, FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
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China: Growth and Economic Policy
16% 12%
InflationYear-over-year % change
Avg. sinceJan. 2000 Feb. 2013
Headline CPI: 2.3% 3.2%
-
China GDP ContributionYear-over-year % change
Investment
Consumption
12%4%
8%
. .
9.1%
10.4%
4.5%
8.1%
5.5% 4.5%
3.9%
8%-4%
0%
'00 '02 '04 '06 '08 '10 '12
Monetary Policy Rates
9.6% 9.3%
7.8%
4.2%4.6%
4.5% 5.2%4.1%
4%
15%
20%
25%
7%
8%
Working Capital Rate
Mar. 2013:20%
o
nal
0.9%
-3.5%
0.4%
-0.4% -0.2%
0%
5%
10%6%
Mar.2013:
6%Internati
50
-
2008 2009 2010 2011 2012 '00 '02 '04 '06 '08 '10 '12
Source: National Bureau of Statistics of China, The Peoples Bank of China, FactSet, CEIC, J.P. Morgan Asset Management.
Values may not sum to 100% due to rounding. RRR represents the reserve requirement ratio.
Data are as of 3/31/13.
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China: Cyclical Indicators
690%
Merchandise Trade GrowthYear-over-year % change
Chinese CurrencyRenminbi per US Dollar (inverted scale)
Mar. 2013: 6.22
7
30%
60% Imports
Feb. 2013:
21.8%
Jun. 2005 Jul. 2008:
+17.4% May 2010 Mar. 2013:+9.0%
8
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
RMB per USD (Spot)
-30%'10 '11 '12 '13
Residential Floor Space Started and Sold Manufacturing PMIs
Exports
Feb. 2013: -15.0%
55
60
60%
90%
Year-over-year % change, seasonally adjusted
Residential FloorSpace Started
Feb. 2013:56.0%
Index level
Mar. 2013: 51.7 (Flash)
o
nal
50
-
0%
30%Residential Floor
Space Sold
Feb. 2013:17.7%
g.
Markit Mfg. PMI Feb. 2013: 50.1Internati
51
'10 '11 '12 '13'10 '11 '12 '13
Source: National Bureau of Statistics of China, Markit, FactSet, J.P. Morgan Asset Management.
Note: NBS manufacturing PMI covers approximately 800 companies with a bias toward state-owned and large enterprises, while the Markitmanufacturing PMI includes 400 companies with a bias toward small and medium-sized companies.
Data are as of 3/31/13.
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Japan: Economic Snapshot
6%
20-yr Avg. 4Q12
Real GDP: 0.9% 0.4%
Japanese Yen and the Stock MarketReal GDPYear-over-year % change 130 20,000
Japanese Yen per U.S. Dollar Nikkei 225
-3%
0%
3%
120
16,000
18,000
-9%
-6%
'02 '04 '06 '08 '10 '12
CPI Inflation
100
110
14,000
1%
3%ear-over-year c ange, sa
Jan. 2013: -0.4%Headline CPI
90
10,000
12,000
o
nal
-3%
-1%
'02 '04 '06 '08 '10 '12
Jan. 2013: -0.6%Core CPI
'03 '04 '05 '06 '07 '08 '09 '10 '11 '1270
80
6,000
8,000
Internati
52
Source: (Left) Japanese Statistics Bureau & Statistics Centre, Bank of Japan, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management.
Core CPI is defined as CPI excluding food and energy prices.
Data are as of 3/31/13.
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Global Equity Valuations Developed Markets
Developed Market Countries
verage Expensive
relative toworld
Example
+5 Std Dev
+4 Std Dev
+6 Std Dev
dDevfromG
lobal
Expensiverelative to own
history
Cheap relative toown history
Average
Current
+3 Std Dev
+2 Std Dev
+1 Std Dev
Average
-1 Std Dev
-2 Std Dev
-3 Std Dev
St
relative toworld
-4 Std Dev
-5 Std Dev
World(ACWI)
EAFEIndex
France Germany U.K. Japan Australia Canada UnitedStates
Switzerland
CurrentComposite Current 10-year avg.
o
nal
. . . . . .
World (ACWI) -0.29 13.0 1.8 7.5 2.6% 12.7 1.9 6.8 2.7%EAFE Index -1.11 12.8 1.5 6.5 3.3% 12.3 1.7 5.9 3.4%
France -1.83 11.5 1.3 5.7 3.8% 11.0 1.5 5.5 3.8%
Germany -1.51 11.3 1.5 6.0 3.4% 11.3 1.5 5.0 3.4%
U.K. -0.93 11.5 1.8 8.2 3.7% 10.8 1.9 6.7 3.9%
Source: MSCI, FactSet, J.P. Morgan Asset Management.
Internati apan - . . . . . . . . .
Australia -0.45 14.2 1.9 8.6 4.4% 13.1 2.2 7.9 4.5%
Canada -0.32 13.3 1.8 8.0 2.9% 13.5 2.1 7.1 2.5%
United States 1.08 13.9 2.4 9.3 2.0% 13.4 2.3 8.0 2.1%Switzerland 0.82 14.6 2.5 10.7 3.1% 13.0 2.4 9.9 3.0%
53
. , ,cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over the last 10 years. The grey bars represent
valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page at the end for metric definitions.Data are as of 3/31/13.
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Global Equity Valuations Emerging Markets
Emerging Market Countries
erage
+5 Std Dev
+4 Std Dev
+6 Std Dev Expensiverelative to
world
Example
Devfrom
GlobalA +3 Std Dev
+2 Std Dev
+1 Std Dev
Average-1 Std Dev
-2 Std Dev
-3 Std Dev
Expensiverelative to own
history
Cheap relative toown history
Average
Current
Std
-4 Std Dev
-5 Std Dev
relative to
world
World(ACWI)
EMIndex
Russia Brazil China TaiwanThailand
SouthAfrica
KoreaIndonesia
Mexico India
CurrentComposite
Current 10-year avg.
o
nal
Fwd. P/E P/B P/CF Div. Yld. Fwd. P/E P/B P/CF Div. Yld.
World(ACWI) -0.29 13.0 1.8 7.5 2.6% 12.7 1.9 6.8 2.7%EM Index -1.31 10.6 1.6 5.9 2.7% 11.4 2.0 6.1 2.7%
Russia -3.80 5.3 0.7 3.0 3.8% 7.7 1.4 4.2 2.3%
Brazil -1.76 11.2 1.4 5.5 3.7% 10.5 2.0 6.0 3.2%
China -2.14 9.2 1.5 4.4 3.2% 12.6 2.3 5.1 2.6%
Index
Internati Taiwan -0.58 14.2 1.8 6.4 3.0% 14.9 1.9 6.2 3.9%
Thailand -0.05 12.4 2.4 8.4 3.1% 10.7 2.0 6.9 3.8%
South Africa 0.16 12.4 2.3 10.4 3.4% 11.3 2.5 8.0 3.3%Korea 0.12 8.5 1.2 4.9 1.1% 10.0 1.5 5.5 1.6%
Indonesia 3.09 15.1 3.8 14.0 2.2% 13.0 3.7 10.2 2.8%Mexico 2.41 18.0 3.0 7.7 1.6% 14.2 2.8 6.3 2.0%
54
Source: MSCI, FactSet, J.P. Morgan Asset Management.Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), priceto last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over thelast 10 years. The grey bars represent valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page atthe end for metric definitions.Data are as of 3/31/13.
India 2.52 13.6 2.4 13.2 1.6% 16.0 3.3 12.9 1.3%
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Emerging Market Equity Composition
MSCI EM Index by Region MSCI EM Index by Sector
Africa/Mideast7%
Latin America exBrazil
9%
Brazil13%
OtherConsumer
Asia ex China &Korea28%Korea
Europe
10%
19%
Commodities23%
Tech14%
17%
MSCI EM Country Index by Sector
China18%
Financials27%
o
nal
13%33%18%
21%22%
12%
16% 12% 16%22% 26%
15%
60%
80%
100%
Other
Commodities
Internati
20% 17%
39%
22%
2%18%
6%
37%29%
19%
30%
40%
13%
20%
40%
Financials
Tech
Consumer
55
Source: MSCI, FactSet, J.P. Morgan Asset Management. Other is comprised of Healthcare, Industrials, Telecom, and Utilities sectors.*Mexican Telecom sector accounts for 19% of the countrys market capitalization. Values may not sum to 100% due to rounding.
Data are as of 3/31/13.
5%0%
Brazil Russia India China Mexico* Korea
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Correlations: 10-Years
Large
Cap
Small
Cap EAFE EME
Core
Bonds
Corp.
HY EMD Cmdty. REITs
Hedge
Funds
Eq.
Market
Neutral*
Large Cap 1.00 0.95 0.91 0.81 -0.22 0.79 0.65 0.51 0.80 0.82 0.58
Small Cap 1.00 0.87 0.77 -0.28 0.75 0.61 0.45 0.84 0.76 0.55
EAFE 1.00 0.92 -0.16 0.78 0.71 0.59 0.73 0.89 0.73
EME 1.00 -0.08 0.82 0.80 0.64 0.63 0.91 0.62
Core Bonds 1.00 -0.04 0.30 -0.25 0.00 -0.22 -0.08
Corp. HY 1.00 0.86 0.54 0.72 0.78 0.44
EMD 1.00 0.44 0.66 0.68 0.43
Commodities 1.00 0.39 0.72 0.52
REITs 1.00 0.59 0.50
Source: Standard & Poors, Russell, Barclays Capital Inc., MSCI Inc., Credit Suisse/Tremont, NCREIF, DJ UBS, J.P. Morgan Asset Management.
Indexes used Large Cap: S&P 500 Index; Small Cap: Russell 2000; EAFE: MSCI EAFE; EME: MSCI Emerging Markets; Bonds: BarclayssetClass
Hedge Funds 1.00 0.59
Eq. Market Neutral* 1.00
57
Capital Aggregate; Corp HY: Barclays Capital Corporate High Yield; EMD: Barclays Capital Emerging Market; Cmdty.: DJ UBS Commodity Index;Real Estate: NAREIT Equity REIT Index; Hedge Funds: CS/Tremont Multi-Strategy Index; Equity Market Neutral: CS/Tremont Equity MarketNeutral Index. *Market Neutral returns include estimates found in disclosures.
All correlation coefficients calculated based on quarterly total return data for period 3/31/03 to 3/31/13.
This chart is for illustrative purposes only.
Data as of 3/31/13.
As
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Mutual Fund Flows
Billions, USD AUM YTD 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Domestic E uit 4 608 17 156 132 81 29 149 65 0 18 101 120 26 55 261 176 149
Fund Flows
World Equity 1,689 35 3 4 58 28 (80) 139 149 106 71 24 (3) (22) 53 11 8
Taxable Bond 2,899 43 254 137 224 310 21 98 45 27 5 40 125 76 (36) 8 59
Tax-exempt Bond 593 10 50 (12) 11 69 8 11 15 5 (15) (7) 17 11 (14) (12) 15
Hybrid 1,042 18 46 29 29 12 (25) 41 18 37 48 38 8 9 (36) (14) 10
$1,400
$1,600 $40
Difference Between Flows Into Stock and Bond FundsBillions, USD, U.S. and international funds, monthly
Bond flows exceeded equity flowsby $6 billion in February 2013
Cumulative Flows into Stock & Bond FundsIncludes both mutual funds and ETFs, $ billions
Feb. 13: $1,447 billion into bond funds
,
$800
$1,000
$1,200
-$20
$0
$20an xe ncome s s nce
Feb. 13: $278 billion
$0
$200
$400
'07 '08 '09 '10 '11 '12 '13-$60
-$40
Sep '08 Jul '09 May '10 Mar '11 Jan '12 Nov '12setClass Bonds
Stocks
into stock funds andequity ETFs since 07
58
Source: Investment Company Institute, J.P. Morgan Asset Management.Data include flows through February 2013 and exclude ETFs except for the bottom left chart. ICI data are subject to periodic revisions. Worldequity flows are inclusive of emerging market, global equity and regional equity flows. Hybrid flows include asset allocation, balanced fund,flexible portfolio and mixed income flows.Data are as of 3/31/13.
As
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Yield Alternatives: Domestic and Global
S&P 500 Total Return: Dividends vs. Capital AppreciationAverage annualized returns Capital Appreciation
Dividends20%
4.7% 5.4% 6.0% 5.1% 3.3% 4.2% 4.4% 2.5%1.8%
4.1%
13.9%
3.0%
13.6%
4.4%
1.6%
12.6% 15.3%
-2.7%
5.6%
0%
5%
10%
Equity Dividend Yields Yield Alternatives
- .
-10%
-5%
1926 - 1929 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's 1926 to 2012
4.2%
3.8%3.6%
2.9% 2.9%2.7%3%
4%
5%
10-year governmentbond yield
4.9% 4.7%
3.5%3.3%
4%
5%
6%
2.2%2.0%
1%
2%
setClass
10-year governmentbond yield
1.0%0.7%1%
2%
3%
59
0%U. S. Aus tralia F rance U. K. Sw it zerland C anada ACWI Japan
Source: (Top chart) Standard & Poors, Ibbotson, J.P. Morgan Asset Management. Dividend vs. capital appreciation returns are through 12/31/12.(Bottom left) FactSet, NAREIT, J.P. Morgan Asset Management. Yields shown are that of the appropriate MSCI index. (Bottom right) FactSet, MSCI,J.P. Morgan Asset Management. Yields shown are that of the appropriate FTSE NAREIT REIT index, which excludes property developmentcompanies. Preferreds, U.S. REITs, Inter. REITs, EMD Loc., Converts, and Floating Rate yields reflect current yield.
Data are as of 3/31/13.
As EMD Loc. Preferreds U.S. REITs Inter. REIT's Converts Float ing Rate
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Global Commodities
600
Commodity PricesWeekly index prices rebased to 100
Oil Demand: Emerging Markets ShareEmerging markets as % of total global oil consumption40%
500
Precious Metals
Industrial Metals 34%
36%
38%
300
400
Commodit Prices and Inflation
30%
32%
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
4%
6%
8%
40%
60%
80%
200
Energy
Grains
Year-over-year % chg.
DJ-UBS Commodity Index (Y/Y % chg.)
-4%
-2%
0%
2%
-40%
-20%
0%
20%
100
setClass
Livestock
Headline CPI (Y/Y % chg.)
60
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12
-6% -60%'03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Source: Dow Jones/UBS, FactSet, J.P. Morgan Asset Management.
Commodity prices represented by the appropriate DJ/UBS Commodity sub-index.
Data are as of 3/31/13.
Source: (Top) BP Statistical Review of World Energy, J.P.Morgan Asset Management. (Bottom) BLS, DJ/UBS,FactSet, J.P. Morgan Asset Management.
Data are as of 3/31/13.
As
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Gold
Gold Prices$ / oz
+338% -11%$3,000
Jan. 1980:$2,480.36
+1,209% - 67% + 75% - 49% + 609% - 16%
$2,500
Mar. 2013:
$1,598.25$1,500
$2,000
Jan. 1980:$850.00
Gold, Inflation Adjusted
Gold$1,000
setClass
$0
$500
61
Source: EcoWin, BLS, U.S. Department of Energy, FactSet, J.P. Morgan Asset Management. CPI adjusted gold values are calculated using monthlyaverages of gold spot prices divided by the CPI value for that month. CPI is rebased to 100 at the end of the chart. Returns based on nominal prices.
Data are as of 3/31/13.
As '75 '80 '85 '90 '95 '00 '05 '10
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Historical Returns by Holding Period
Annual total returns, 1950 2012Range of Stock, Bond and Blended Total Returns
Annual Avg. Growth of $100,00060%
50/50 Portfolio 8.9% $554,754
Bonds 6.2% $335,627
Stocks 10.8% $782,751
o a e urn over 20 years
51%
43%
30%
40%
50%
28%
23% 21% 19%16% 17% 18%
12% 14%10%
20%
Stocks
-8%
-15%
-2% -2% 1%-1% 1%
2%
6%
1%
5%
-
-10%
0%
setClass 50/50 Portfolio
Bonds
-37%
-40%
-30%
1- r. 5- r. 10- r. 20- r.
62
As
Sources: Barclays Capital, FactSet, Robert Shiller, Strategas/Ibbotson, Federal Reserve, J.P. Morgan Asset Management.
Returns shown are based on calendar year returns from 1950 to 2012. Growth of $100,000 is based on annual average total returns from1950-2012.
Data are as of 3/31/13.
rolling rolling rolling
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Annual Returns and Intra-year Declines
S&P 500 Intra-year Declines vs. Calendar Year ReturnsDespite average intra-year drops of 14.7%, annual returns positive in 25 of 33 years
3440%
26
15 17
26
1512
27 26
7
20
27
20
26
9
14
23
13 13
10%
20%
30%
-10 1 2
-7
4
-2 -10 -13 -233 4
-38 0
-7 -8 -9 -8 -8 -6
-6
-5
-9
-3
-8-11 -
-8 -7 -8-10 -10
-10%
%
-17 -18 -17
-
-34
-20 -19-17
-30
-34
-14
-28
-16
-19
-40%
-30%
-20%
setClass
-49
-60%
-50%
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
64
Source: Standard & Poors, FactSet, J.P. Morgan Asset Management.
Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough duringthe year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2012.
Data are as of 3/31/13.
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Cash Accounts
$ Billions
Weight in
Money
Supply
Money Supply
Component
$8,000
$10,000
Annual Income Generated by $100,000 Investment in a 6-month CD
M2-M1 7,941 76.6%
Retail MMMFs 628 6.1%$2,000
$4,000
$6,000
2012:$450
,
Savings deposits 6,701 64.6%
Small time deposits 612 5.9%
$01986 1990 1994 1998 2002 2006 2010
6-month CD rate vs. Core CPICash AccountsCash as a % of Total Household Financial Assets28%
Institutional MMMFs 1,768 17.0%
663 6.4%Cash in IRA & Keogh
accounts
16%
20%
24% Oct. 02 S&P 500 low
.
Total 10,371 100.0%
setClass
Source: Federal Reserve, St. Louis Fed, Bankrate.com, J.P. Morgan Asset Management.All cash measures obtained from the Federal Reserve are seasonally adjusted monthly numbers. All numbers are in billions of U.S. dollars.
'98 '00 '02 '04 '06 '08 '10 '12
12%
65
As ma - enom na on me epos s are ose ssue n amoun s o ess an , . an eog accoun a ances a commerc a an s an r ns u ons are su rac e
from small time deposits. Annual income is for illustrative purposes and is calculated based on the 6-month CD yield on average during each year and $100,000 invested. 2012
average income is through December 2012. IRA and Keogh account balances at money market mutual funds are subtracted from retail money funds.Past performance is not indicative of comparable future results.
Data are as of 3/31/13.
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Corporate DB Plans and Endowments
Underfunded
Defined Benefit Plans Funded Status: S&P 500 Companies
Overfunded
Asset Allocation: Corporate DB Plans vs. Endowments
Endowments
45.3%
13.0%
32.0%
Fixed Income
Equities
94%78
22%
2.7%
35.5%
21.9%Hedge Funds
Pension Return Assumptions: S&P 500 companies
20111999
27%29%
20%
28%
21%
35%
20%
30%
40%
3.1%
4.7%
6.1%
.
Real Estate
Private Equity
anies
2012: Average 7.3%
1999: Average 9.2%
2% 1%
5%
9%7%
13%
3%0% 0% 0%
0%
10%
< 7% 7 to 7.5 to 8 to 8.5 to 9 to 9.5 to > 10%4.7%
4.1%
4.0%
12.2%
Cash
Other
%o
fCom
setClass
% of total
66
7.5% 8% 8.5% 9% 9.5% 10%0% 10% 20% 30% 40% 50%
Return AssumptionSource: NACUBO (National Association of College and University Business Officers), Towers Watson, Compustat/FactSet, J.P. Morgan AssetManagement. Asset allocation as of 2010. Funded status as of 2011. Endowments represents dollar-weighted average data of 842 colleges anduniversities. Pension Return Assumptions based on all available and reported data from S&P 500 Index companies. Funded Status based on 347companies reporting pension funding status. Return assumption bands are inclusive of upper range. All information is shown for illustrative purposesonly. Data are as of 3/31/13.
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Stock Market Since 1900
S&P Composite Index, Price Return (Since 1900)
Log Scale
2000 P/E:28.6x
1,000
300
1966 P/E:
Current P/E:16.3x
100
1966 19741929 P/E:
17.8x
18.0x
1937 P/E:
10
1937 19481974 P/E:
9.5x
.
1900 P/E:15.1x
'00 '10 '20 '30 '40 '50 '60 '70 '80 '90 '00 '10setClass
1900 1924
1924 P/E:10.0x 1932 P/E:
14.5x
10.0x
67
Source: IDC, FactSet, J.P. Morgan Asset Management.
Data shown in log scale to best illustrate long-term index patterns. P/E ratios shown at price peaks and troughs use trailingfour quarters of reported earnings and are shown as a one year average.
Past performance is not indicative of future returns. Chart is for illustrative purposes only.
Data are as of 3/31/13.
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