From: "Pil, Anton C"

From: "Pil, Anton C" To: Undisclosed recipients:; Subject: GIO Market Update Date: Thu, 16 Oct 2014 20:07:32 +0000 Inline-Images: image001.png Dear GIO clients, Over the past several days, markets have experienced a large amount of volatility across all traded financial assets globally. Although, it is hard to pinpoint one specific trigger, concerns around non-US growth, particularly in Europe and Asia and a correction in oil prices seem to be most responsible. Interestingly, the notional volume of trading across asset classes has been led by options, futures and derivatives trading. This seems to be a sign to us that much of recent price action is driven by fast money looking to square positions or reduce market risk in a year where active money management has been challenged. We look at this volatility as an opportunity to discuss some of our highest conviction ideas that we don't believe are going to be derailed by recent price actions. We remain confident in the strength of the US recovery- employment indicators, earnings reports, industrial activity are signs that the recovery is fundamental. Our view on gradually divergent global central bank policies is unchanged: BOE and Fed will lead the world in a path of gradual monetary policy normalization while BOJ continues its asset buying program and the ECB and BOC look to expand/begin their easy money policies. As a result, for clients that share our view, we recommend adding to US equity positions now. For pure trading opportunities, we would recommend adding S&P exposure. For a medium term view, we recommend adding to US bank positions focusing on those with traditional banking activities that can be expected to benefit from an anticipated change in Fed rate policy in the second half of next year. We believe the rebound in euro strength will be short lived as the ECB continues to struggle with growing deflation concerns and a domestic market that is struggling to recover. Therefore, we are looking to add to weaker euro positioning and to converting borrowings into euros. We continue to use the Fed's own guidance on short rates, agreeing that short term rates will rise by the end of next year. Longer term US rates might trend back to levels over the last several months but will remain depressed as the downturn in Europe and subsequent ECB actions result in term European rates falling further. US bank preferreds and European subordinated debt continue to be our preferred fixed income assets. One asset which has fallen over the last week that is expected to struggle to recover is oil. Policy shifts among major international producers to increase production to maximize revenue over per barrel oil price may contribute to global supply pressure while European/China weakness will weigh on global marginal demand. This may be good news for consumers and industrial energy users but may leave energy producers out of a future market recovery. Flying back from the Dallas/Permian basin today, the fear factor of a potential spread of Ebola is palpable. Historical financial experience with SARS showed that fear can trump valuation during the time frames while there is a perceived threat. We are monitoring CDC statements closely and believe that although the risk exists, it should be viewed as a remote tail event and not the primary driver of future term market movements. Finally, as the Fed highlighted in its own minutes from the last meeting, it will continue to be there to backstop US economic progress. We appreciate the business you do with us and look forward to help you navigate the price action from the last several weeks. Anton EFTA00998951 Anton C. Pill Managing Director Head of Global Investment Opportunities Group I JPMorgan Private Bank 320 Park Ave., 14th Floor. New York, NY 10022 J.P. Morgan Securities LLC I J.P. Morgan Chase Bank N.A. 21PMsignature_ drkbrwn pmf This information is for the sole use of the person to whom it is addressed, and may be privileged and confidential. Any use, distribution, or duplication by anyone other than the addressee is prohibited. If you receive this in error, please notify the sender immediately and return it by mail. The following is being provided for informational purposes only. 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This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities, accuracy and completeness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://www.lpmorgan.com/pages/disclosures/email. This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities, accuracy and completeness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://wwwjpmorgan.com/pages/disclosures/email. EFTA00998952