1. 3Q | 2013 As of June 30, 2013 Guide to the Markets ® Easing Up on Easy Money Anastasia Amoroso, CFA Vice President – Global Market Strategist

2. Topics  US: With the Fed winding down its bond purchase program, are there more peaks left to climb?  International: How long can emerging markets continue to be casualties of the Fed and what might be the saving grace?  International: Europe and Japan are still marching up the mountain in hopes of reaching prior peaks - what could help them get there?  A Better Question: not when there will be a market pullback, but what to do amidst a market pullback?

3. Topic 1  US Economic and Market Outlook With the Fed winding down its bond purchase program, are there more peaks left to climb?

4. S&P 500 Index at Inflection Points 6 GTM – U.S.

5. Corporate Profits and Leverage 10 GTM – U.S.

6. To Taper, or Not to Taper, That Is the Question 34 GTM – U.S.

7. Reasons to Taper - Cumulative Improvement in Employment 24 GTM – U.S.

8. The Uncomfortable Truth about US Unemployment 25 GTM – U.S.

9. Housing Market Is Key to Self-Sustaining Recovery 20 GTM – U.S.

10. Reasons to Taper - Who Says You Can’t Go Home? 19 GTM – U.S.

11. Banks – Able to Lend but Willing? 35 GTM – U.S.

12. 12 Reasons Not to Taper - Credit Propelled Momentum Slowing … Economy Sources: Mortgage Bankers Association, Census Bureau, Bankrate, Bloomberg, FactSet, J.P. Morgan Asset Management. Data are as of 9/23/13. Housing Starts Annual rate, seasonally adjusted, reported versus consensus expectations LHS MBA mortgage applications purchase index, RHS 30-year mortgage rate Mortgage Applications and Rates Consensus Expectation (RHS) Mortgage Rates (LHS) Mortgage Applications to Purchase Index

13. Consumer Confidence Held Hostage No More Source: University of Michigan, FactSet, J.P. Morgan Asset Management. Peak is defined as the highest index value before a series of lower lows, while a trough is defined as the lowest index value before a series of higher highs. Subsequent 12-month S&P 500 returns are price returns only, which excludes dividends. Data are as of 6/30/2013. Consumer Sentiment Index – University of Michigan Average: 85.3 Economy Feb. 1975 +22.2% May 1980 +19.2% Oct. 1990 +29.1% Mar. 2003 +32.8% Nov. 2008 +22.3% Aug. 2011 +15.4% Mar. 1984 +13.5% Jan. 2000 -2.0% Jan. 2004 +4.4% May 1977 +1.2% Aug. 1972 -6.2% Oct. 2005 +14.2% Jan. 2007 -4.2% 29 GTM – U.S. Sentiment Cycle Low and subsequent 12-month S&P 500 Index return

14. Cyclical Indicators Have Room to Run 18 GTM – U.S.

15. Confidence, Stocks, Yields and the Fed 12 GTM – U.S.

16. Stocks Can Rise Alongside Rising Yields 13 GTM – U.S.

17. Earnings Estimates and Multiples 8 GTM – U.S.

18. Topic 2  International How long can emerging markets continue to be casualties of the Fed and what might be the saving grace?

19. A Tale of Two Returns – Developed versus Emerging 39 GTM – U.S.

20. Global Equity Valuations – Emerging Markets 55 GTM – U.S.

21. GEM Slows, G3 Grows … 41 GTM – U.S.

22. The Case for Stronger Dollar … 47 GTM – U.S.

23. Relative to the U.S. Dollar … and the Carry Trade Unwind Source: FactSet, Federal Reserve, IMF, J.P. Morgan Global Economic Research, J.P. Morgan Asset Management. *U.S. Dollar Index is the nominal trade-weighted exchange rate index: broad definition. Past performance is not indicative of future results. Data are as of 8/28/13. Currency Performance Depreciated Appreciated International Year-to-date % change

24. Investors Flee the Weakest Links Source: MRB Partners, U.N. Commodity Trade Statistics Database, IMF, J.P. Morgan Asset Management. *Commodities defined by SITC codes 0-4. Data are as of 8/22/13. EM Sensitivity to Capital Flows and Currency Exposure Current Account (% of GDP) Commodity Exports (% of GDP) Commodity Imports (% of GDP) Net Commodity Exporters Net Commodity Importers

25. Know Your Time Horizon – Growth of Emerging Market Consumer 43 GTM – U.S.

26. Know Your Time Horizon - A Five Stage Global Cycle  Early Cycle Recovery  Mid Cycle Pause  Late Cycle Expansion - US  Tightening - China  Recession  Early part  Late part – Europe, Japan Source: IMF

27. Know Your Time Horizon - Short-Term Market Drivers  Valuation  Positioning –Fund flows –Cash levels  BUT valuation + positioning ≠ outcome.. UNLESS … there is a catalyst  Catalysts –Central bank action –Liquidity –Credit –Fiscal policy –Cyclical forces –Data surprises

28. The Importance of Exports – the Saving Grace for EM 43 GTM – U.S.

29. What’s Your EM Trade - Currency, Duration or Credit Spread? 38 GTM – U.S.

30. Time to Break Apart the BRICs 55 GTM – U.S.

31. China : Shifting Gears  New government increasingly comfortable with slower growth Source: The Economist

32. China: Economic Growth – Slower but Steady China GDP Contribution Year-over-year % change Source: National Bureau of Statistics of China, The People’s Bank of China, FactSet, CEIC, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding. RRR represents the reserve requirement ratio. *As defined by Total Social Financing. **Other: bankers acceptance bills (13%), trust loans (11%), entrusted loans (11%), corporate bond financing (11%), foreign currency loans (5%), and non- financial equity financing (2%). Data are as of 6/21/13. Investment Consumption Net Exports 50 GTM – U.S. International RMB billions, new for the month Credit Growth* RMB Bank Loans Other** Inflation Year-over-year % change Avg. since Jan. 2000 May 2013 Headline CPI: 2.3% 2.1% Non-Food CPI: 1.0% 1.6% RRR Working Capital Rate Monetary Policy Rates May 2013: 6% May 2013: 20% 9.6% 9.1% 10.4% 9.3% 7.8%

33. Fixed Asset Investment Year-over-year % change, 3-month moving average China: Cyclical Indicators – a Second Half Rebound Source: National Bureau of Statistics of China, China Association of Automobile Manufacturers, China Ministry of Construction, FactSet, J.P. Morgan Asset Management. Data are as of 9/18/13. International Auto and Retail Sales Year-over-year % change 52 GTM – U.S. Index, rebased 2007=100, national average Residential Real Estate Price Aug. 2013: 20.4% Property Tightening Measures Announced Auto Sales Aug. 2013: 10.3% Retail Sales Aug. 2013: 13.4% Residential Floor Space Started Year-over-year % change, 3-month moving average, seasonally adjusted

34. China and Europe – a Symbiotic Relationship 11

35. Europe : Rome Wasn’t Built in a Day  Out of the woods at last? Source: The Economist

36. Europe: Economic Growth – Where Art Thou Growth? 48 GTM – U.S.

37. Manufacturing Momentum – a Glimpse of a Better Tomorrow 42 GTM – U.S.

38. Eurozone: Sovereign Bond Yields – Room to Maneuver 50 GTM – U.S.

39. Europe: Austerity – When Less Is More 49 GTM – U.S.

40. Japan: Uncharted Waters ( 大航海時代, Dai-kōkai jidai)  A lot of hope for a sustained recovery needs to be supported by progress overtime to prove this time is different: Bond purchase programs before were small relative to the size of the issue Balance sheet problems for banks and firms were not fixed Source: The Economist

41. Japan: Economic Snapshot 53 GTM – U.S.

42. Japan: Economic Snapshot 17

43. Sovereign Debt Stresses 45 GTM – U.S.

44. Japan: Public Finance 19

45. Global Equity Valuations – Developed Markets 54 GTM – U.S.

46. Topic 3  A Better Question What to do amidst a market pullback?

47. 47 A Better Question: What to Do Amidst a Market Pullback?  Evaluate sector positioning in both fixed income and equities  Add to core investment themes  Approach emerging markets selectively

48. Investment Themes  Equities US late cycle sectors Regional opportunities Secular growth themes  Info Tech  Energy  Emerging Market Consumer  Fixed Income Converts Floating rate Credit sensitive non-agency MBS High yield corporates – US, developed ex-US, emerging

49. Time to Re-Define ‘Safety’ in Fixed Income 32 GTM – U.S.

50. The World Is Not a One Peak Wonder  More peaks left to climb –US housing, Europe, Japan  Higher peaks require extra skills –Sector tilts in equities and fixed income –Security selection matters  New horizons warrant extra tools –Currency, commodity and emerging market performance is greatly differentiated  The world is a rich opportunity set –Active management is key to identifying pockets of opportunity in any set of market conditions

51. 3Q | 2013 As of June 30, 2013 Guide to the Markets ®

52. Table of Contents EQUITIES ECONOMY FIXED INCOME INTERNATIONAL ASSET CLASS 4 17 30 39 57 U.S. Market Strategy Team Dr. David P. Kelly, CFA david.p.kelly@jpmorgan.com Joseph S. Tanious, CFAjoseph.s.tanious@jpmorgan.com Andrés D. Garcia-Amayaandres.d.garcia@jpmorgan.com Anastasia V. Amoroso, CFAanastasia.v.amoroso@jpmorgan.com Brandon D. Odenathbrandon.d.odenath@jpmorgan.com Gabriela D. Santosgabriela.d.santos@jpmorgan.com Anthony M. Wileanthony.m.wile@jpmorgan.com Past performance is not indicative of future returns.

53. Page Reference

54. Returns by Style 4 GTM – U.S.

55. Returns by Sector 5 GTM – U.S.

56. S&P 500 Index at Inflection Points 6 GTM – U.S.

57. Stock Valuation Measures: S&P 500 Index 7 GTM – U.S.

58. Earnings Estimates and Multiples 8 GTM – U.S.

59. Valuations by Sector and Style 9 GTM – U.S.

60. Corporate Profits and Leverage 10 GTM – U.S.

61. Sources of Earnings per Share Growth 11 GTM – U.S.

62. Confidence and the Capital Markets 12 GTM – U.S.

63. Interest Rates and Equities 13 GTM – U.S.

64. Deploying Corporate Cash 14 GTM – U.S.

65. P/E Ratios and Equity Returns 15 GTM – U.S.

66. Equity Correlations and Volatility 16 GTM – U.S.

67. Economic Growth and the Composition of GDP 17 GTM – U.S.

68. Cyclical Sectors 18 GTM – U.S.

69. The Aftermath of the Housing Bubble 19 GTM – U.S.

70. Consumer Finances 20 GTM – U.S.

71. Federal Finances: Outlays and Revenues 21 GTM – U.S.

72. Federal Finances: Deficits and Debt 22 GTM – U.S.

73. Trade and the U.S. Dollar 23 GTM – U.S.

74. Employment 24 GTM – U.S.

75. Employment and Income by Educational Attainment 25 GTM – U.S.

76. Consumer Price Index 26 GTM – U.S.

77. Oil and the Economy 27 GTM – U.S.

78. Global Energy Supply 28 GTM – U.S.

79. Consumer Confidence and the Stock Market 29 GTM – U.S.

80. Fixed Income Sector Returns 30 GTM – U.S.

81. Interest Rates and Inflation 31 GTM – U.S.

82. Fixed Income Yields and Returns 32 GTM – U.S.

83. Correlation to 10-Year Treasury Returns 33 GTM – U.S.

84. The Fed and the Money Supply 34 GTM – U.S.

85. Credit Conditions 35 GTM – U.S.

86. High Yield Bonds 36 GTM – U.S.

87. Municipal Finance 37 GTM – U.S.

88. Emerging Market Debt 38 GTM – U.S.

89. Global Equity Markets: Returns 39 GTM – U.S.

90. Global Equity Markets: Composition 40 GTM – U.S.

91. Global Economic Growth 41 GTM – U.S.

92. Manufacturing Momentum 42 GTM – U.S.

93. The Importance of Exports 43 GTM – U.S.

94. The Impact of Global Consumers 44 GTM – U.S.

95. Sovereign Debt Stresses 45 GTM – U.S.

96. Global Manufacturing Wages 46 GTM – U.S.

97. Global Monetary Policy 47 GTM – U.S.

98. Europe: Economic Growth 48 GTM – U.S.

99. Europe: Austerity 49 GTM – U.S.

100. Eurozone: Sovereign Bond Yields 50 GTM – U.S.

101. China: Growth and Economic Policy 51 GTM – U.S.

102. China: Cyclical Indicators 52 GTM – U.S.

103. Japan: Economic Snapshot 53 GTM – U.S.

104. Global Equity Valuations – Developed Markets 54 GTM – U.S.

105. Global Equity Valuations – Emerging Markets 55 GTM – U.S.

106. Emerging Market Equity Composition 56 GTM – U.S.

107. Asset Class Returns 57 GTM – U.S.

108. Correlations: 10-Years 58 GTM – U.S.

109. Mutual Fund Flows 59 GTM – U.S.

110. Yield Alternatives: Domestic and Global 60 GTM – U.S.

111. Global Commodities 61 GTM – U.S.

112. Historical Returns by Holding Period 62 GTM – U.S.

113. Diversification and the Average Investor 63 GTM – U.S.

114. Annual Returns and Intra-year Declines 64 GTM – U.S.

115. Cash Accounts 65 GTM – U.S.

116. Corporate DB Plans and Endowments 66 GTM – U.S.

117. Stock Market Since 1900 67 GTM – U.S.

118. J.P. Morgan Asset Management – Index Definitions

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