Introduction to the Market Insights programme

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Introduction to the Market Insights programme

Andrew D. GoldbergExecutive Director, Global Market Strategist

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Why Market Insights?

Political uncertainty

Government indebtedness

Extreme uncertainty

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Market Insights: a programme designed to cut through the noise

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Market Insights: programme summary

Market Insights is a program designed to provide timely market and economic insight to clients of J.P. Morgan Asset Management.

The programme was launched in 2004 with the first Guide to the Markets book

Today we distribute 85,000 books each quarter to our US clients, and many more globally

Last year over 60,000 clients dialled-in to hear Market Insights conference calls

Market Insights is distributed in 25 countries and 12 languages, including Italian, French, German, Spanish, Portuguese, Chinese, Japanese, and Korean

The program is used by IFA’s, institutional investors and many banks, private banks, fund selectors and gatekeepers

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A compilation of many market data sources

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Access to a global capability: GTM available in US, UK, Europe, Brazil, Asia

New York

Sao Paolo

Hong Kong

LondonMilan Tokyo

Los Angeles

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Dr. David Kelly, CFAChief Global Market StrategistHead of Global Team

Supported by a global team of strategists

Experienced market strategists provide insights on a variety of market and economic topics

The Europe team:

Tom ElliottGlobal Market StrategistLondon

Dan Morris, CFAGlobal Market StrategistLondon

Paola ToschiGlobal Market StrategistMilan

Andrew GoldbergGlobal Market StrategistHead of European Team

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Five things our clients need to know

1) Don’t confuse the economy with investing

2) Emotions are great for movies, but terrible for investing

3) Don’t bet against central bankers

4) Everyone needs income – and there are ways to get it

5) This is not the year to be out of the markets

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YOU ARE HERE

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How long will it take to reach 6.5% unemployment?

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '121

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-1,000

-800

-600

-400

-200

0

200

400

600

800

1,000

US 10-year Treasury Yield vs. Monthly Payrolls

10-year Treasury Yields Payroll jobsUS jobs & the Fed’s target: The Fed is targeting 6.5% unemployment, 2.5% inflation. Payroll data revised by +647,000 jobs (oops!) from Mar-2011 through Dec-2012. The 3- mo avg. is now exactly at 200k, the best pace since early 2012

Pace matters. If…

…the participation rate holds steady, and job growth averages +200K/mo, unemployment would hit 6.5% in January 2015…the participation rate holds steady, and job growth averages +175K/mo, un-employment won't hit 6.5% until early 2017Courtesy of Phil Camporeale, GMAG

+157,000 in January

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The Fed’s focus on employment is supportive of equities

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2013: Not the year to be out of the markets

Q4 200

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Q1 200

8

Q2 200

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Q3 200

8

Q4 200

8

Q1 200

9

Q2 200

9

Q3 200

9

Q4 200

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Q1 201

0

Q2 201

0

Q3 201

0

Q4 201

0

Q1 201

1

Q2 201

1

Q3 201

1

Q4 201

1

Q1 201

2

Q2 201

2

Q3 201

2

Q4 201

2-2%

0%

2%

4%

6%

8%

10%

12%

Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-110

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400

800

1,200

1,600

2,000

2,400

NAHB Housing Market Index (6m lead) (LHS)

U.S. Housing Starts (Residential) (RHS)

Inde

x

Thous. U

nits

Correlation = 0.97

Intrade: Probability of European Nation leaving the Eurozone in 2013

Italian and Spanish 10yr government yields

China GDP Growth Year on Year (YoY)Percent change (%)

Housing improvement is for real

Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-120%

10%

20%

30%

40%

50%

60%

70%

Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-124%

5%

6%

7%

8%Span Italy

Source: (top-left) Intrade, J.P. Morgan, Bloomberg. As of January 18, 2013. (bottom-left) J.P. Morgan and Bloomberg. As of January 18, 2013. (top-right) J.P. Morgan and Bloomberg. As of January 18, 2013. (bottom-right) Source: Bloomberg and China Customs, Korea Customs, Taiwan Ministry of Finance. As of January 18, 2013.

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Where this leaves us...

The economy is not the same as the marketWhile economic data have been stabilizing in China, less bad in Europe, and trending up in the US, the markets have dramatically outperformed economic growth

Emotions have hurt investorsAnxiety and uncertainty have kept investors from staying balanced, causing many to miss tremendous opportunities (and creating new ones for savvy investors)

Don’t be against central bankersCentral banks seem committed to printing money, with implications for our clients, including a need for income and the importance of not betting against them.

This is not the year to be out of the marketsGlobal indicators suggest it would be unwise to be waiting on the sidelines in 2013; stay invested, but maintain balance

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J.P. Morgan Asset Management

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Documents

Introduction to the Market Insights programme