J.P. Morgan

J.P. Morgan he J.P. Morgan View Who will win the race to recession? • Economics — Europe is falling into recession, by our new forecast. Weaker PMI's suggest serious downside to Asian forecasts. US is tracking our already weak growth forecasts. • Portfolio strategy —The market reversal signals of Value, Positions, Timing, Data and Policy remain in defensive mode. Stay underweight risky assets. • Fixed Income — We think a more severe Greek restructuring than agreed in July is inevitable, and stay cautious on the Euro area. • Equities — Worsening technicals and fundamentals and the lack of clear triggers justify a defensive stance. • Credit — We stay defensive. • Foreign exchange — Yen and dollar are the world's strongest currencies in the face of surging volatility. • Commodities — The sharp fall in base metal prices implies a close to 50% chance of a US recession. The global risk-off trade moved into the phase of cross hedging and indis- criminate selling. Witness the 20% drop in the Mexican peso, and falls in EM local bonds and gold. Unfortunately, by itself this does not signal that we are near the end. But it does help clear the deck and creates relative value oppor- tunities that investors will move to once volatility becomes less threatening. A squaring of aggressive positions and building of defensive postures are both required conditions to define a market bottom and coming reversal. What we need in addition is that most of the worst news is priced in, data and events no longer surprise on the downside, and policy actions are taken to reverse the negative fundamentals. And here the news remains broadly negative and keeps us in defensive mode. On value, risk markets have cheapened significantly, but most remain well off worst-news levels, which we equate to a US recession here. By our reckoning, we would need to see that S&P500 to have fallen by its average move of past recessions — to about 1,000 — to give comfort that the almost-worst is priced in. Similarly, we would need to see HY widen another 2% and base metals fall another 20% to price in a US recession. Two markets are much closer to pricing in a recession: US HG, and USTs. USHG spreads, now near 240bp over USTs, arc already wider than all US recessions, with the exceptions of the 2008.09 crisis, when they peaked over 500bp. And 10-year USTs already saw near historic lows. • However relevant the Value signal will be to signal a bottom, it needs to get support from Timing. We know that risk markets typically do not rebound until the light at the end of the recession tunnel is in sight — on average 3 months before the end. But any US and European fiscal tightening induced recession may not even have started yet. In the Euro area, we think this rrrrccion will start any moment (Q4). In the US, fiscal policy will only begin tightening seriously in January, and only if the Administration's Jobs Act is The certifying analyst is indicated by an AC. See page 7 for analyst certification and important legal and regulatory disclosures. Global Asset Allocation J.P.Morgan Chase Bank NA, J.P. Morgan Securities Ltd. Sep 23, 2011 Jan Loe SAC John Normand Nikolaos Pani irtzoglou Matthew Lehmann YTD returns through Sep 22 %. equities are in lighter colour. Gold US High Grade US Axed Income 0 Global Gov Bonds" EMBIG K EM Local Bonds- K US High Yield EMS Corp. Europe Fixed Income' US cash EM FX ■ GSCI TR S&P500 MSCI AC Workr Tops II MSCI EM' MSCI Europe . I .20 40 0 10 20 30 Some: ■ Mown IStriberst. Flans n UW. 'Lea/ wilency. —Naked Ala USG. LOD Fixed Income is Isom Omni We.. US HG. HY. DABIG rd EM stop are JPII Sim. Eli Ris ELL% Ent www.morganmarkets.com EFTA01149242 Global Asset Allocation The J.P. Morgan View J.P. Morgan not passed. So the US is probably not yet in recession. Investors that con- sider buying equities should do so on a no-recession view rather than on a view that it is in the price. • An end to negative economic surprises is also needed to reverse the sell off. The good news is that our US Economic Activity Surprise Index is no longer in the red. And Q3 US data are tracking a bit better than our I% call for quarter. But elsewhere, we continue to see worse data. In the Euro area, the combina- tion of weak PMIs, accelerated fiscal austerity and likely hard restructuring of Greece has induced our economists to project a 0.9% economic contraction starting next quarter (Q4). And in Asia, weaker trade and PMIs are all creating significant downside risks to our forecasts. • Finally, decisive policy action is the last, but not least element of a market reversal. Here, we have raised the concern that US policy makers may be out of bullets, and that the Europeans ones are extremely reluctant to make the TALF-like move to fiscal federalism that markets demand. The negative reaction to this week's FOMC announcement to add duration to its SOMA portfolio underlines this fear. Our economists currently assume that very little of the Administration's fiscal plans will get through Congress. In the Euro area, we see little reason to change our view that conditions need to get a lot worse before EMU members accept and commit to the need for fiscal solidarity and discipline — an EFSF with both a bigger carrot and bigger stick. EM policy makers have a lot more ammunition, but the dramatic drop in their currencies will already prevent many from easing now. • The quartet of our value, positions, date and policy signals remains bearish and keeps us defensively positioned on the risky asset world of equities, credit, commodities, and EM. Within each asset class, this implies overweighting lower-beta subclasses and securities. Fixed income • New yield lows in DM have become commonplace, as concerns over the EMU crisis and the global economy mount. EM local yields are backing up sharply though, caught in the downdraft of a violent derisking in currencies. • Investors are spooked in part because of worries about whether unconven- tional monetary policy, like the Fed's Operation Twist, can affect the wider economy much. It has certainly not lost its ability to impact the markets directly targeted, as evidenced by the near 50bp rally in 30yr Treasuries this week. The Fed's unexpected decision to reinvest MBS and Agency bullet maturities back into the mortgage market (instead of into Treasuries), has decisively shifted the supply-demand landscape in that market, and prompts us to go long US MBS (see Matt Jozoff, MBS Market Commentary, Sep 21). • Euro area funding conditions continue to worsen, and surely demand a decisive policy response. Weak growth and slippage in fiscal targets mean we now think a more severe Greek debt restructuring than that agreed in July is inevitable. That means a deeper recession in Greece. and (via asset price contagion) recession in the Euro area as a whole. And that forecast assumes a very active policy response, with ECB support for sovereign bond markets possibly reaching fltr. See David Mackie et al., Directing the Greek tragedy: default, a regional recession and spillover risks, for details. We stay defen- 2012 JPMorgan global GDP growth forecast vs. Global equities 4.0 3.5 3.0 2012 JP/il global GDP growth forecast 2.5 2.0 Ja 4I Mar.11 Marl I Jul.11 360 340 320 300 280 260 Sawce JP. Wagrek Cmsensus Emelt Ceramsus Emeteries fecemsts ore let regions mid count Pal we averaged userg the same low ming USD GDP weigIns thin voe arse be Jr c men VeDal growth breast. 2011 global GDP growth forecasts: JPMorgan and Consensus 4.0 3.8 3.6 3A 3.0 2.8 2.6 2.4 Jan•I0 May.10 Sep.I0 Jan.11 May11 Sep.11 Scum/. JP. thargrk Cossensus Ecceorrim. Consensus Emearim forecasts zre let mats and =elms tor .e weraged usng the same 5-i ming USD GOP %mire that .e use be cue an ow groat!, beams!. JPN More details in ... Global Data Watch. Bruce Kasman and David Hensley Global Markets Outlook and Strategy. Jan theys. Bruce Kasman. el al. US Fixed Income Markets. Terry Belton and Srini Ramaswamy Global Fixed Income Markets. Pavan Wadhwa and Fabio Bassi Emerging Markets Outlook and Strategy. Joyce Chang Key trades and risk: Emerging Market Equity Strategy. Adrian Mowal et al. Rows and Liquithiy. Nikos Paniginzoglou el al. Sep 23,2011 2 EFTA01149243 Global Asset Allocation The J.P. Morgan View J.P, Morgan sive in the Euro area, with peripheral underweights and duration longs. Equities • Investors' derisking intensified this week, resulting in sharp underperforrnance by high beta sectors, i.e. cyclicals, small caps and EM equities. While equities are now pricing more than 50% chance of recession, worsening technicals and fundamentals and the lack of clear triggersjustify a defensive stance. Earnings expectations are being cut and uncertainty, proxied by the standard deviation of 12-month ahead analysts EPS forecasts, is on the rise (top chart). • We favour large-cap defensive stocks in the US. We are reluctant to recom- mend an overweight in EM vs. DM equities despite better overall fundamen- tals in EM economies. EM equities are perceived as high beta during crises. In addition, our EM vs. DM equity signals based on relative IP growth and 2- month return momentum is currently neutral in EM (The EM vs Developed Markets equity allocation, Apr 2009). Relative IP growth favours EM but 2- month return momentum favours DM. And the IP signal, although positive for EM, is rather weak. As the chart at the top shows, it is only marginally above its 5% threshold. • We favour less directional cross-country trading themes. We remain over- weight DAX vs. Eurostoxx50. The main motivation is German growth outperformance vs. the rest of the Euro area. Healthier balance sheets (both private and public) in Germany allow the country to escape the painful adjustments that other Euro area countries have to make. In contrast, auster- ity is pushing peripheral economies deeper into contraction. • Within EM, we continue to underweight BRICs and focus ow exposure on ASEAN countries. Investors remain sceptical about BRICs, concerned about overheating and corporate governance. • Our model for allocating between the US and Euro area equities currently suggests a long in S&P500 vs. MSCI EMU currency hedged (Panigirtzoglou et al., Trading the US vs Europe, June 24). Of the three signals, the perform- ance of global equities over the past 3 months and the change in the US-Euro PM1 difference point to an UW of Euro area equities. They dominate the third signal, the change in the EURUSD over the past three months, which favours Euro area equities. Credit • Spreads lurched wider this week. German and French CDS hit new records (108bp and 203bp) and yet again headlines were focused on the EMU crisis. The downgrade of Italy comes amongst a larger wave of rating cuts. US and Italian banks saw downgrades on Wednesday, following French banks last week. In fact, this quarter, downgrades outnumber upgrades by all three major rating agencies for the first time since Q12010. • Our European credit strategists believe the likelihood of banks holding, raising or taking more capital is gaining traction among policymakers. They neutralise their underweight Financials vs. Corporates position (see Stephen Dulake et al., The Preferred Route: ECOS, Sep 22). • In the US, the JULI widened 16bp to 246bp and the US HY Cash Index widened Industrial production growth EM IP op minus DM IP oya. 25 % 20 15 10 5 0 05 07 09 11 01 03 Soiree: AP. lbw EMI? vs DM IP oya% Dispersion of analysts' EPS forecasts Sid Dev. of twelve month ahead S&P 500 forecasts by bottom up analysts. $ 13 12 I II • 10 9 8 7 6 • 5 08 Sane: JP. Magni 09 10 11 CDX IG vs. iTraxx Main Weeldy speed levels stce June 2010. Bp 200 150 100 50 Ju -10 Nov-10 Scum: Spank's; iTraxx Main April CDX IG Sep-11 More details in ... EM Corporate Outlook and Strategy, Warren Mar et al. US Credit Markets Outlook and Strategy. Eric 8einstein el al. High Yield Credt Markets Weekly. Peter Acciavalli el al. European Credit Outlook 8 Strategy, Steven Dulake el al. Sep 23,2011 3 EFTA01149244 Global Asset Allocation The J.P. Morgan View J.P. Morgan 36bp to 775bp. Likewise, CDS indices were wider although some of this likely related to the index rolls to series 17. The CDX.IG stands at 141bp and the CDX.HY at 728. Our US strategists remain UW HG corporate credit. • Our EM strategists are looking towards less developed "next generation" sovereigns given the declining yield trends of core EM external debt as well as increased correlation with more traditional asset classes (see Joyce Chang et al., "Next Generation" Emerging Markets: Opportunities for Diversification and Higher Welds, Sep 20). They are overweight Nigerian external debt given a relatively low debt burden and recent fiscal improvement On the week, EMBIG spreads were 72bp wider at 457bp and CEMBI spreads were 61bp wider at 496bp. Foreign Exchange • As the US Congress and European parliaments dither around decisions required to avoid joint recessions, references to a Lehman moment are becom- ing increasingly appropriate. Currencies reflect these exceptional times, with over 25 pairs posting moves in excess of two sigmas over the past week , mostly through deleveraging in emerging markets. As with Lehman, the yen and dollar are the world's strongest currencies in the face of surging volatility, highlighting what determines safe-haven status. It is the low rates which tempt investors to fund in that currency during expansions, thus obliging them to repurchase the same unit during deleveraging. To a lesser degree the same phenomenon has driven the euro's September rally versus the emerging markets and commodity currencies, since it has been used exten- sively to fund or hedge longs in those currencies. Hence the argument for avoiding the euro as a hedge for the sovereign crisis despite its European epicenter. The yen's behavior remains more predictable. • As precarious as the current environment appears, there are few opportunities outside of the yen. Currency managers are already very long dollars, and the underlying position risk is more in EM assets than G-10 ones. Thus we hedge further deleveraging selectively by keeping a USD/JPY put spread and buying USD/NOK today in cash. There is decent risk of Bank of Japan intervention before the fiscal half-year end on Sep 30, at which time we would probably re- enter the short EUR/JPY and GBP/JPY positions we took profits on last week. Commodities • Commodities sold off heavily across the board this week, down around 8% with the worst losses coming from base metals which fell almost 11%. Given base metals are the commodity most leveraged to global growth, this suggests investors are pricing in a much higher risk of recession than before. In our "How much of a US recession is priced in Y', Aug 11, we concluded that over the past five US recessions, base metals had fallen an average of 43% from peak to trough. Based on this, and given base metals have fallen around 21% since the recent peak at the end of July, this very simple analysis suggests current prices imply around a 50% chance of a US recession. • Expanding the above analysis to other commodities we find that over the past five recessions precious metals have fallen on average -5%, agriculture - 8% and oil -19%. We only use the past three recessions for oil because the contractions in the early 80s involved an oil supply shock which is not the case currently. Based on this, if a serious recession were to materialise, we would expect energy and base metals to underperform other commodities. Sep 23, 2011 4 FX weekly change vs USD 4% 2% 0% -2% -4% -6% -8% USD EUR GBP JPY CHF CAD AUD Sosce:J.P. Mcegan More details in ... FX Markets Weekly. John Normand et af. Commodity Markets Outlook & Strategy. Cohn Fenton et al. 04 Markets Monthly. Lawrence Eagles et al. Meats Rowew and Outlook Michael Jansen Global Metals Ouarterly. Michael Jansen EFTA01149245 Global Asset Allocation The J.P. Morgan View .J.P.Morgan Interest rates Current Sep-11 Dec.11 Mar-12 Jun.12 YTD Return' United States Fed funds rate 0.125 0.125 0.125 0.125 0.125 10-year yields 1.79 2.05 2.60 2.80 3.00 10.0% Euro area &di rate 1.50 1.50 1.50 1.50 1.50 10-year yields 1.75 2.10 2.05 2.00 2.00 8.9% United Kingdom Repo rate 0.50 0.50 0.50 0.50 0.50 10-year yields 2.37 2.45 2.55 2.55 2.55 11.1% Japan Overnight cad rate 0.10 0.05 0.05 0.05 0.05 10-year yields 0.98 0.90 0.95 1.05 1.10 2.1% GBI-EM hedged in $ Yield • Global Diversified 6.78 6.90 2.8% Credit Markets Current Index YTD Return' US high grade (bp over UST) 236 JP/Aorgan US Index (JULI) ispread 7.5% Euro high grade (bp over Euro gov) 314 Aka Euro Corporate Index 3.5% USD high yield (1:9 vs. UST) 791 JPMorgan Global High Yield Index 1.7% Euro high yield llop over Euto goy) 936 Abe Euro HY Max -62% EMBIG (bp vs. UST) 455 EMBI Global 4.3% EM Corporates (bp vs. UST) 499 JPM EM Corporates (CEMBI) 0.6% Commodities Current Quarterly Averages 1103 1104 1201 1202 GSCI Index YTD Return' Brent (SIM; 104.5 110.0 115.0 115.0 110.0 Energy -5.5% Gold (See 1640 1650 1800 1800 1750 Precious Metals 22.0% Copper (5/metric ton) 7653 9750 10000 10250 9500 Industrial Metals -18.4% Corn 130u) Foreign Exchange 6.44 Current 7.20 6.90 7.10 Sep-11 Dec.11 Mar-12 7.40 Jun.12 Agncullure -12.1% 3m cash TTD Return' Index In USD EUFULISD 1.35 1.38 1.38 1.40 1.42 EUR 1.5% USC,JPY 76.5 75 74 73 72 JPY 6.5% GBAUSD 1.54 1.59 1.58 1.58 1.60 GBP -1.2% USO:BFIL 1.85 1.70 1.70 1.70 1.70 BRL -6.7% USDICNY 6.39 6.30 6.20 6.10 6.00 CNY 1.9% USO:KRW 1167 1070 1050 1020 1010 KRW -2.3% USD/TRY 1.85 1.65 1.65 1.65 1.65 TRY .12.8% YTD Return Equities Current (local eey) US Sector Allocation • YTD Europe YTD Japan YTD EM YTD (S) S&P 1135 -8.5% Energy 11.2% -13.1% -7.8% -23.2% Nasdaq 2475 -6.4% Materials -19.0% -29.5% -17.1% -24.4% Topix 745 -16.1% Industrials •I5.3% -24.5% 43.9% -29.7% FTSE 100 5067 -11.7% Discretionary .4.9% -17.2% -21.1% -12.8% MSCI Eurozone 117 -24.1% Staples 2.8% 4.8% 2.2% 4.0% MSCI Europe' 918 -18.8% Healthcare 1.6% .2.3% .5.1% -22.4% MSCI EMS' 881 -21.7% Financials .26.8% 31.9% -25.7% -26.5% Brad Bovespa 53166 .23.3% Information Tech. 4.6% -14.8% -27.7% -21.9% Hang Sting 17669 -21.1% Telecommunications 40% •1OA% 4.6% -7.2% Shanghai SE 2433 -13.4% 'Levels 'retums as of Sep 22.2011 Local currency except MSCI EM $ UtilAies 8.9% -17.6% 43.2% Overall 43% .188% 46.1% -21.7% Sane: &airbag. Cabana,. IBM Sandra a Pozes Smite,. JP Mo.e.in et, mete: Sep 23, 2011 EFTA01149246 Global Asset Allocation The J.P. Morgan View J. P Morgan Global Economic Outlook Summary Real GDP % ever a year ago Real GDP % over [menus perti. saat Consumer prices % over a year ago 2010 2011 2012 1011 2011 3011 4011 1012 2012 3012 4010 2011 4011 2012 The Americas United States 3.0 1.4 1.2 0.4 1.0 A 1.0 0.5 1.5 2.5 12 3.3 3.21 1.4 Canada 3.2 2.2 2.2 3.6 -0.4 1.8 2.4 2.6 2.6 2.4 2.3 3.4 2.6 1.6 Lath America 6.0 4.3 3.5 5.61 LI 3.4 3.1 2.6 4.3 4.4 6.7 6.71 7.2 1.2 Argentina 9.2 7.0 4.8 13.1 1 102 1 6.0 3.0 4.0 6.0 4.0 11.0 9.71 11.0 13.0 Brazil 7.5 3.4 3.8 5.0 3.1 2,3 3.9 4.3 4.1 3.5 5.6 6.6 6.7 5.3 Chile 5.2 6.5 4.5 6.4 5.7 3.5 2.5 5.0 4.5 4.3 2.5 3.3 4.0 3.6 Colombia 4.3 5.3 4.0 291 8.5 1 3.5 1.5 4.2 4.7 5.2 2.7 3.0 3.5 3.1 Ecuador Mexico Peru 3.6 5.4 8.8 6.0 4.0 6.3 3.0 2.5 5.0 7.3 2.4 6.9 3.0 4.5 4.5 2.0 5.7 ,Z5 1.0 2.6 3.0 2.0 -1.5 7.0 3.5 3.7 5.3 4.0 4.9 5.3 3.4 42 2.1 4.1 3.3 3.1 3.9 3.4 3.6 3.6 3.6 3.0 Venezuela -1.5 3.5 3.0 14.7 -32 -1.5 3.0 3.0 5.0 6.5 27.3 24.6 29.0 33.6 AsiaiPacific Japan 4.0 -0.3 2.5 -3.7 -2.1 LB 3.5 2.0 1.7 1.5 -0.3 -0.4 -0.2 -0.7 Australia 2.7 1.4 3.5 -3.4 4.8 2.1 2.2 4.1 3.4 4.8 2.7 3.6 3.8 3.2 New ZeaLand 1.7 2.01 3.81 3.5 1 0.4 1 2.81 4.1 1 3.9 1 391 5.61 4.0 5.3 3.2 2.4 Asia ex Japan 9.1 7.2 7.0 8.9 5.3 6.1 6.7 7.2 7.5 7.6 4.9 5.7 4.9 4.5 China 10.3 8.9 8.5 8.9 7.0 7.5 8.5 8.7 8.9 9.0 4.7 5.7 4.6 4.3 Hong Kong 7.0 5.2 4.0 13.0 -2.0 A 3.5 5.5 5.6 4.5 2.7 5.2 5.1 4.3 India 8.5 7.6 8.5 8.3 7.6 7.5 7.1 8.6 9.0 9.5 92 9.1 8.7 7.8 Indonesia 6.1 6.4 6.2 6.8 5.4 5.5 6.2 6.2 6.2 6.2 6.3 5.9 4.5 5.6 Korea 6.2 4.0 4.2 5.4 3.6 4.8 4.0 4.0 4.5 4.5 3.6 4.2 3.7 3.1 Malaysia 7.2 4.2 3.3 5.5 32 Lfg 3.2 3.6 3.6 3.6 2.0 3.3 2.8 2.4 PhipiLines 7.6 4.3 1 4.8 1 7.8 2.4 4,1 1 5.3 1 4.9 4.9 5.3 3.5 5.0 4.6 3.3 Singapore 14.5 5.1 3.8 27.2 -6.5 SO 3.2 4.5 6.1 7.0 4.0 4.7 4.6 3.0 Taiwan 10.9 5.0 3.8 14.6 0.9 135 3.8 4.2 4.7 4.8 1.1 1.6 2.2 2.0 Thailand Afrkalliddle East 7.8 3.1 3.3 8.1 -0.8 20 3.5 4.0 3.8 3.8 2.9 4.1 3.7 3.6 Israel 4.8 4.3 2.9 4.7 3.5 1 2,4 1.2 0.8 3.2 6.1 2.5 4.1 2.8 2.3 South Africa Europe 2.8 3.1 1 2.7 4.5 1.3 1.01 4.81 2.3 2.6 2.9 3.5 4.6 5.8 5.1 Euro area 1.7 1.6 -031 3.1 0.6 (LB -0.51 -1.01 -1S 1 0.01 2.0 2.8 2.7 1.6 Germany 3.6 2.8 0.21 5.5 0.5 1.51 0.01 •05 1 0.51 1.6 2.5 2.41 1.4 1 France 1.4 1.6 4.1 1 3.6 0.0 1.0 7 0.01 -0.51 -1.0 1 OS 1 1.9 2.2 2.3 1.4 Italy 1.2 0.51 -1.21 OS 12 -141 -13 -1.51 -2.5 1 -0.51 2.0 2.9 3.41 2.5 1 Noway 2.1 2.21 0.71 1.9 4.1 1S 1 OS: 0.01 0.0 1 1.01 22 1.4 1.31 1.2 1 Sweden 5.4 4.1 1 0.41 3.1 1 3.61 2,0 t 0.0 -0.51 -0.5 1 0.51 1.9 2.9 2.61 131 United Kingdom 1.4 1.0 0.81 1.9 0.7 1.5 1.0 0.51 -1.0 1 2.5 1 3.4 4.4 4.91 2.8 Emerging Europe 4.5 3.8 2.9 3.6 12 1,4 2.2 4.0 3.8 3.8 6.6 7.1 6.0 5.2 Bulgaria 0.2 2.8 2.7 Czech Repubac 2.3 2.0 1.6 15 0.3 0.3 0.8 1.3 1.8 2.0 2.1 1.8 2.1 2.8 Hungary 1.2 1.5 1.3 1.2 -02 Q.B 1.0 1.0 1S 1.8 4.4 4.0 3.8 3.1 Poland 3.8 3.8 3.0 4.5 4.5 2.0 2.5 2.8 2.8 3.0 2.9 4.6 4.0 2.5 Romania -1.3 1.2 1.0 7.9 8.2 4.0 3.5 Russia 4.0 3.4 3.5 3.7 0.4 1.1 2.0 5.0 4.7 4.5 8.2 9.6 7.4 6.5 Turkey 9.0 6.3 2.7 7.4 5.9 6.7 6.0 Global 3.9 2.5 2.1 1 2.6 1,5 2.ST 2.01 1.71 1.9 1 2.81 2.7 3.7 3.5 2.4 Developed markets 2.6 1.3 0.9 1 0.9 0.4 1 1.71 0.91 0.41 0.41 1.6 1 1.5 2.7 2.7 1.3 Emerging markets Space JP. Mxgan 7.3 5.7 5.2 7.1 1 431 4.5 1 5.0 5.3 5.9 6.1 5.6 6.2 5.7 5.3 Sep 23.2011 6 EFTA01149247 Global Asset Allocation The J.P. Morgan View J.P.Morgan Analyst Certification: The research analyst(s) denoted by an "AC" on the cover of this report certifies (or. where multiple research analysts are primarily responsible for this report. the research analyst denoted by an "AC" on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (I) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers: and (2) no part of any of the research analyst's compensation was, is. or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Disclosures: J.P. Morgan ("JPM") is the global brand name for J.P. 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