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%

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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

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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

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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

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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

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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.

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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

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cono

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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

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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

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cono

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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

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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

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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

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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

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'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

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cono

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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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