1 “3 Years Later--How worried should I be?” “Dodging a Bullet?” “What actions should I take, if any?” Thoughts from a long-time, long-term investor Thomas D. McCandless, CFA

2 Economy Fixed Income Markets International Asset Class – Diversification Equities Housing Conclusions TONIGHT’S AGENDA

3 Economic Expansions and Recessions Guide to the Markets Page 15

4 Employment Guide to the Markets Page 22

5 Cyclical Sectors Guide to the Markets Page 17

6 Small Business Guide to the Markets Page 24

7 Federal Finances Guide to the Markets Page 19

8 Corporate Profits Guide to the Markets Page 25

9 Consumer Finances Guide to the Markets Page 18

10 The Fed and the Money Supply Guide to the Markets Page 33

11 Credit Conditions Guide to the Markets Page 34

12 High Yield Bonds Guide to the Markets Page 36

13 Municipal Finance Guide to the Markets Page 37

14 Global Economic Growth Guide to the Markets Page 40

15 European Crisis: Financial System Risks Guide to the Markets Page 44

16 Europe - Deleverage Problem: Too Much Gov’t Debt & Too Little Growth Credit concentration: 80% vs 25% Solvency vs Liquidity Resolution: ECB Intervention Reduced Standard of Living

17 Asset Class Returns Guide to the Markets Page 49

18 Global Equity Valuations – Developed Markets Guide to the Markets Page 45

19 Global Equity Valuations – Emerging Markets Guide to the Markets Page 46

20 Dividend Income: Domestic and Global Guide to the Markets Page 52

21 Global Commodities Guide to the Markets Page 53

22 Gold Guide to the Markets Page 54

23 Deploying Corporate Cash Guide to the Markets Page 13

24 Equity Correlations and Volatility Guide to the Markets Page 14

25 Earnings Estimates and Valuation Drivers Guide to the Markets Page 11

26 Consumer Confidence Guide to the Markets Page 29

27 S&P 500 Index at Inflection Points Guide to the Markets Page 7

28 The Aftermath of the Housing Bubble Guide to the Markets Page 21

29 Best Seats on a Train Wreck Long-Term Large Cap Buys Financials: BAC, NTRS, PNC Energy: BP, CVX, RIG Health Care: BMY, JNJ, MRK, PG, SYK Consumer Staples: ADM, COST, MO, SWY, WAG Industrials: BA, DOW, GE, UNP Technology: ADP, AAPL, CSCO, HPQ, RIMM Consumer Discretionary: COH, DLB, NKE, TIF

30 Summary ( ) Diversify your assets. When investing long-term in the stock market: a) know your pain threshold (use stop loss), b) Timing your entry is THE most important investment decision. At the earliest, the stock market may not be poised for a sustained upturn until 1Q09…above norm volatility will continue.

31 Performance vs S&P 500: +45% Tom’s Portfolio (equal wtd): +55% Tom’s Portfolio (incl 10% stop loss): +60% Tom’s Portfolio (incl 10% stop loss, Div): +70%

32 New Large Cap Recommendations Financials (13%): AXP, BAC, GS, PNC, BEN Energy (12%): BP, COG, CVX, EP, FTI, RIG Health Care (12%): BMY, JNJ, MRK, PG, SYK, WPI Consumer Staples (11%): COST, MO, PEP, WAG, SJM, STPL Industrials (11%): BA, GE, GWW, GR, MMM, UNP, PH, UPS, WM Technology (20%): ADBE, ADP, CSCO, IBM, GOOG, MSFT, MA, NTAP, QCOM, TXN Consumer Discretionary (11%): BWA, COH, DLB, DW, HD, NKE, TIF, TOL, WYNN Materials (4%): ABX, ADM, DOW, FCX, MON Telecom Service (3%): T Utilities (3%): ED, D

33 Summary: Bullish Long Term ( ) Diversify your assets. When investing long-term in the stock market: a) know your pain threshold (use stop losses), b) Timing your entry is THE most important investment decision. Overweight stocks (large cap/ div), underweight bonds. Combined strength of modestly accelerating US growth, soft landing in Emerging Markets should outweigh slowdown in Europe. Stock market will remain rangebound another 3—6 months, but should be poised for a sustained upturn by mid-2012…above norm volatility will continue.

34 Marginal and Average Tax Rates Guide to the Markets Page 55

35 Diversification and the Average Investor Guide to the Markets Page 57

36 Historical Returns by Holding Period Guide to the Markets Page 56

37 Returns by Sector Guide to the Markets Page 5

38 Mutual Fund Flows Guide to the Markets Page 51

39 International Economic and Demographic Data Guide to the Markets Page 47

40 J.P. Morgan Asset Management – Index Definitions

41 J.P. Morgan Asset Management – Index Definitions

42 J.P. Morgan Asset Management – Definitions, Risks & Disclosures