J.P. Morgan CIO Market Outlook Memo Post‑2012 Election

Richard Madigan, Chief Investment Officer, J.P. Morgan Private Bank A brief introduction (and a promise) For those of you who don’t know me from my former position as Chief Investment Officer of the Global Access Portfolios, where | oversaw $16 billion in private and institutional client assets, | want to briefly introduce myself in my new role as Chief Investment Officer of the J.P. Morgan Private Bank. I've been part of the investment and strategy team at the Private Bank since 2004, when | returned to the firm to work with Michael Cembalest as he assembled a global strategy team to work on behalf of private clients. | was responsible for global multi-asset investment strategy and asset allocation for our international clients before taking on the role as ClO for Global Access. During my time with Global Access, | wrote a regular investment strategy note, Market Thoughts, which we sent to clients globally. In my new role, | want to re-establish the discipline of putting pen to paper around our market views: what we are thinking, what we are seeing as core investment themes, and how we are investing across global markets. There is nothing more humbling than writing down and clearly explaining what you think, and why, about the world and markets. | have a well-established practice with our family physician: | promise not to confuse him with investment nonsense if he promises not to do the same with medical gibberish. | promise the same clarity with this note. Same as it ever was “Once in a Lifetime” is a song by the band Talking Heads. It has come to mind repeatedly as I've listened to the media talk about the recent U.S. elections. There is a line in the song that keeps repeating the phrase “same as it ever was,” which seems to be, post-election, where we’ve landed. The United States just ran a national election where an estimated $6 billion was spent campaigning. The result across Congress, state governorships and the presidential popular vote was effectively a 50/50 split. Ironically, an election this important is supposed to help bring direction and clarity, and instead we have continued short-term uncertainty. We believe that will translate into a market that trends higher over the next 12 months, but with air pockets. Right now, the most important policy debate and air pocket is around the fiscal cliff. The good and bad news is we have to see movement in the next few months. There isn’t a choice. The one thing that did ring clearly from the J.PMorgan market thoughts November 2012 U.S. election is the degree of frustration around partisan bickering and policy inaction. This was Obama’s last campaign, so he is playing for posterity. Congress recognizes it is already playing to mid-term elections in 2014, and while | never count on pragmatism from politicians, it’s actually in everyone’s interest for the first time in three years to work together. Everyone wins, and if not, has the other side to blame come 2014. Looking ahead From a macro perspective, we believe the global economy is bottoming, though we are likely to sit along the bottom of a U-shaped recovery into early next year: growing, but not yet inspiring. The immediate effects on growth from Hurricane Sandy are going to need to be better understood, along with how protracted a recession Europe is facing. Markets reflect expectations, and already, data that is less bad shows improved leading indicators, consumer confidence and surprise indices. So less bad will eventually be good; we simply need to see a trough in activity to lessen market uncertainty. Economic data has been surprising to the upside Economic surprises; Index level 100 Developed Markets 50 0 -50 -100 Emerging Markets 2010 -150 2009 2011 2012 Source: Citigroup, Bloomberg. Data as of November 2012. Global manufacturing and services survey J.P. Morgan Global Composite PMI 2009 2010 2011 2012 Source: J.P. Morgan Securities LLC, Bloomberg. Data as of October 2012. HOUSE_OVERSIGHT_030840