DS9 Document EFTA01149240

From: To: Subject: Date: Attachments: lane-Images: "Weissend. Renee E" US "O JPM View 09.23.2011 Fri, 23 Sep 2011 21:18:57 +0000 The_WM_View_09.23.2011-pdtzip imagc003.png J.P.Morgan The J.P. Morgan View Who will win the race to recession? • Economies— Europe is falling into recession, by our new for ream %%take, PMI's suggest serious downside to Asian forecastss. US is tracking our already weak youth forecasts • Portfolio strategy — The market reversal signals of Value. Positions. Timing. Data and Policy IC1111111 in defensive mode. Stay underweight risky assets • Fixed Income —we think a more severe Greek restructuring than agreed in July is inevitable, and stay cautions on the Euto alea • Fgt.( t i * s — Worsening technical: and fundamentals and the lack of clear triggers Justify a defensive stance. • Credit — We stay defensive. • Foreign exchange — Yen and dollar are the worlds strongest currencies in the face of_ urging volatility • Commodities— The sharp fall in base metal prices implies a dose to SC% chance of a US recession • The global nsktiffnade moved into the phase of cross hedging and nulls- elinlillare selling Witness the 20% &op in the Mexican peso, and falls in EM local bonds and gold Unfortunately. by itself this does not signal that we as nee the end But it doe: help clear the deck and mates relative value oppar aunties that Lave *AO: S will move to once volatility becomes less threatening A squaring of acmes:we position: and budding of defensive postures ate both sequins:I condition: to define a market bottom and conung reversal what we need in addition that most of the 'sun news is peed in. data and events no longer surprise on the downside, and policy actions are taken to reverse the negative fundamentals_And hen the news remains broadly negative and keeps us in defensive mode On ialue u1 mat kets have cheapened significantly. but most :ennui well off woistnews levels. which we equate to a US secession here By our reckoning. we would need to see that St P s00 to have fallen by its avenge move of past recessions — to about 1.000 — to give condor that the almost-wont is priced m. Sumlaily. we would need to see HY widen another 2% and base metals fall another 20% to puce in a US recession Two mukets ate much closer to pricing in a recession. US HO and USTs. USHG spreads, now neat 240bp over UST:. ate already wide: than all US recession:, with the exceptions of the 2003.09 Criss. when they peaked over SOObp And 10-year USTs already saw mai lunatic lows However relevant the \blue signal will be to signal a bottom, it need: to eel support from T" g We know that nsk markets typically do not rebound until the loht at the end of the recession tunnel is in sight — on average s months before the end But any US and European fiscal tightening induced recession may not even have started yet In the Pogo area. we think this recession will Stall any moment (Q4) In the US, fiscal policy will only begin tightening seriously in January. and only if the minunistraticm's Jobs Act is The certifying analyst is indicated by an "c See page 7 for analyst certification and important legal and regulatory' disclosures. Global AssetAttocation J puapas Guth eaflk NA. J P Morgan rnsuritiez Lid Soo 23.2011 Jan Loe VI° irtzoglou Seamus Mac Gorain Matthew Lehmann YID returns through Sap 22 %. • 41 islet AA n I Woo 0uM US WOGS* US Feed Weer 0kbalgetlkede BSS EM Lceel Bads" US win Tog EPIC*" Ent Fred krone US cal% Eli Ft =TR $417500 WO AC Nat tom EGG Ea MSG Some Sc A Sex in sags Das Ras a 6.40 -a •n0;44 s tre0 Ca Nog Kam la eta ova tons wa ma. am no I, Oa. or iv iminw Po Ps ••tat- at www.morganmarkets.com EFTA01149240 This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities, accuracy and corn leteness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at EFTA01149241