J.P. Morgan

J.P. Morgan he J.P. Morgan View Is this it in Europe? Economics —US growth upside due to ISM and a likely extension of the payroll tax cut is offset by greater weakenss in Asia. We downgrade China and Japan growth. • Portfolio strategy — The runup to the Dec 9 Sumnmit will likely push risk assets up, and, as before, could then easily lead to some disappointment, as details will be lacking. • Fixed Income — The repeated pattern of high pm•summit hopes followed by disappointment argues for some caution on itra•EMU spreads. Equities — EPS growth outperformance has supported US equities this year. This theme of US equities outperforming is likely to continue into 2012. Credit —A spike in default rates suggests to maintain a low risk profile heading into YE. • Foreign exchange— Stay short EURLIPY and USD/JPY as hedges. • Commodities — Iran tensions creates the risk of an oil supply shock. Buy brent calls and be long brent vs. base metals. • After a week of bad economic and policy news, we got a big reversal this week, with better US activity data and signs of impending compromises on fiscal policy on both sides of the Atlantic. Equities, credit, commodities, EM FX, and euro area bonds all jumped back up, fully undoing the damage of the previous week. The dollar and major bond markets went down. • Notice how the German bond market has joined the risky assets family in recent weeks. Bunds now rally when stocks go up. US Treasuries and the US dollar, as the real safe assets left, sell off when stocks rally. This will remain the case as long as Euro policy makers insist that any government in the Euro area can default, and that quantitative easing by the ECB raises the risk of inflation, even in an economy that is in recession. • How good was this week's news, and will it last? Starting with the US, the failure of last week's Super Committee, despite strong signals that this was a low•probability risk, had made us quite pessimistic about the massive fiscal tightening coming in January. But now Congressional leadership is signalling they will likely extend the payroll tax cut for another year. If they do, then we will have to raise our 2012 US growth forecast from 1.7% to 2.5%, above current consensus. But given how fast the Super Committee blew up, we want to see the law signed before changing forecasts. And even then, postponing fiscal tightening does not eliminate the need for it. Under current tax law, and assuming the payroll tax cut is extended one year, total fiscal drag for the following year, 2013, would exceed 3% of GDP. It would thus likely push the economy into recession. This could in turn lead to more extensions of tax cuts, but this can surely not continue forever. • Stronger US data this week — especially ISM — create more confidence that 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.AAorgan Chase Bank NA, J.P. Morgan Securities Ltd. Dec 2, 2011 Jan Loe sAc John Normand Nikolaos Pani irtzo lou Seamus Mac Gorain Matthew Lehmann Leo Evans YTD returns through Dec 1 %. acuities are in lighter GOIOUl. Gold EMBIG US Feed Income US High Grade Gbbal Gov Bonds" EM Local Bonds" US High Yield EMS Cora SAP500 GSCI TR US cash Europe Fixed Income' EM FX MSCI AC Woad' MSCI EM' MSCI Europe' Tope O O O O O ■ O l=i O .20 .10 0 10 20 30 Scum: AP. Mown Ettriberst. Pans n USD. 'Las earercy. - 14,:ked MO USD ELM Fixed burns is lbw Cuerzil Index. US HG. NY. DASIG rd EM On are AV Sec, EM a is ELIA. in S. www.morganmarkets.com EFTA01172027 Global Asset Allocation The J.P. Morgan View J.P. Morgan imminent recession risks are fading. The same cannot be said, though, for the rest of the world. Upside surprises on ISM were more than offset by downside one in Europe and Asian, with our Global Manufacturing PMI falling (049.6, a new low for the recovery (if we can call it that). Both the US and Asian PMIs tend to lead the rest of the world, raising the question on which will be right. We are not sure, but need to recognise that Asia is weakening while the US is picking up. Some of the Asian weakness is due to the Thai flood, whose impact should be temporary. However, part is surely due to the sharp reversal in Chinese housing. We have lowered Chinese growth to 7.2% qoq for Q I. We raised H2 on an expectation of policy easing, but near-term risk remains clearly on the downside. Concerns about a Chinese hard landing are not going away and keep us from ovenveighting EM equities at the moment. • In Europe, all eyes are on the Dec 9 Summit of EU Heads of State. Hopes are rising that EU policy makers arc finally getting ahead of the market with the creation of a fiscal union that will allow the ECB to become the lender of last resort. But as with US policy makers, we have been burned before in expecting the final solution to emerge and want to see both words and actions, before joining the rally. At this point, our best guess is that policy makers will announce that the IMF will lend to Italy, using own funds, the ECB, EFSF, and possibly others. The total amount could be as big as €500bn. • A big number would impress investors, until they start asking how this solves the structural problem in EMU, which is that there is no fiscal solidarity, no fiscal discipline, and no lender of last resort to sovereigns. It is quite possible the Summit throws terms around like a fiscal union, or a fiscal compact (the Draghi term), but by now, the market will want to know what this means concretely before buying bonds on it. We do not think the Summit will promise a Eurobond. Call us more than twice bitten, and thus more than a bit shy. Fixed income • Hopes are again building ahead of next week's EU summit, and intra-EMU spreads have ratcheted tighter. A modest move towards fiscal union appears set to provide a sufficient quid pro quo for increased ECB liquidity assistance for sovereigns, most likely in tandem with the IMF. But the repeated pattern of high pre-summit hopes followed by disappointment argues for caution. • This week's coordinated reduction in the pricing of central bank dollar swap facilities brought down the cost of sourcing dollars from outside the US. Nonetheless, USD basis swaps are still sufficiently elevated to create opportu- nities: for example, 2-year Japanese government bonds, swapped into USD, yield a percentage point more than the equivalent US Treasuries. • Further liquidity support for Euro area banks is on the cards next week. With the ECB's policy rate likely to be cut Thursday to 1%, the crisis low, Presi- dent's Draghi's guidance on whether it can go lower will be keenly watched. Our call is for a rate of 50bp by mid-2012, supporting a bullish euro money market view. • Euro area breakevens rebounded this week, having fallen sharply both on an outright and a cross-market basis in recent months, partly reflecting the lower liquidity that can see linkers underperform in period of market stress. We think 2011 global GDP growth forecasts: JPMorgan and Consensus 4.0 3.6 3.2 2.8 2.4 Jan-10 May.10 Sep.10 Jand 1 May-11 Sep-11 Saute. J.P Mogan. Ccnse-ox Eccturncs. Gcnseroz Eccnancs laccats art br regicts and mutes did sie meerged uskg same Spar rcli-g USD GDP taut eel sie use Ice as can gkbd govell Iceccast 2012 global GDP growth forecasts: JPMorgan and Consensus 4.0 3.5 3.0 2.5 2.0 1.5 Apr-11 Jul-11 Oct-11 Jan-11 Sarce.J.P Mogan. Cancans Ecen:mcs. CCOSCIDJ3 &comics laccasts are ice rep= arid cealries the/ se metre, tail" Pe same Syms rcii-g UM GDP mops RA se use Iv as can gl:bal Tooth Incest More details in ... Global Data Watch. Bruce Kasman and David Hensley Global Markets Outlook and Strategy. Jan Loeys. 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 Hey trades and tisk: Emerging Market Equity Strategy. Adrian Mowat et al. Rows and Liquidity. Nikos PaNgidzoglou et al. Dec 2,2011 2 EFTA01172028 Global Asset Allocation The J.P. Morgan View J.P. Morgan EA breakevens offer value vs US TIPS breakevens, not least because inflation is set to fall sharply in the US in H I, and by more than in the Euro area. Equities • We moved to a neutral stance last week as we saw equity markets being caught up between opposing forces. On the positive side there is more opti- mism about policy makers' actions in both the US (extension of payroll tax) and Europe (a fiscal pact and more ECB buying). In addition, seasonals have been positive for December over the past few years. On the negative side, the macro drop has deteriorated, as signalled by the drop in our Global PMI to a new year low for November. In addition, we see a high risk of disappointment after the Dec 9 EU summit, as happened after each of the critical EU summits over the past two years. • US equities are the clear winner this year among regions, outperforming MSCI AC World by more than 7%. This was mostly built in July/August due to the slump in European equities and in September to the slump in EM. To a large extent this outperformance is a reflection of growth and earnings outperformance in the US. The global manufacturing PMI has dropped to below 50, but the US ISM is holding up well. Bottom analysts have raised their 2011 S&P500 EPS forecast by 2.5% YTD, but have lowered their forecast for other major indices (Chart p. 3). • US equities will likely continue to outperform in 2012.11e Euro debt crisis will likely linger creating more downside for European economies and equities. EM economies are also facing growth headwinds into 2012 and they have failed so far meaningfully to outperform their DM counterparts. EM growth has not been able to decouple with the gap in EM vs DM IP oya growth still below the 5% threshold, which we identified in our previous research as a useful signal for trading EM vs DM equities. The chart at the bottom of p. 3 shows that, while EM IP growth has meaningfully exceeded that 5% threshold for most of the past 10 years, this has not been the case since Oct 2010. Credit • The Fed's actions to support global financial markets helped US HG snap a sixteen-day decline on Wednesday, a run which saw spreads widen to our YE target of 250bp. Better US economic activity data should keep downward pressure on spreads near term. However, we remain cautious as sovereign stress and bank funding challenges in Europe continue to grow. The coordi- nated steps taken by central banks this week are far from a panacea. • According to our US HY strategists, six issuers and $9.6bn in bonds and loans defaulting last month was the eighth largest monthly volume on record and the highest since November 2009 (Acciavatti et al., High-Yield Market Monitor). The 12-month HY bond default rate now stands at 1.7%, still well below its long-term average of 4.2%, but a telling sign of the times. • In their 2012 outlook this week (Eric Beinstein et al., High Grade bond and CDS 2012 Outlook) our US HG strategists expect spreads to narrow next year to 175bp, down from 242bp today, on strong credit fundamentals, but remain underweight for now as the global outlook is more uncertain than at any lime since 2008. Their report also highlights impending changes to the structure of the CDS market over the next year under the Dodd-Frank requirements. .5% 0 •10% •15% .20% YTD change in 2011 IBES EPS forecasts in % 5% 0% M —r-r U) Co CO m 0 o •25% Scow Cabana. IP. Morgan Industrial production growth EM IP oya minus DM IP oya. 25 % 20 15 0 • 01 03 Seuxe: JA. Wigan a 0 EMIR vs DM IP oya 0 05 07 09 11 More details in ... EM Corporate Outlook and Strategy. Warren Mar et al. US Creotit Markets Outlook and Strategy. Eric Beinstein et al. MO Vitt, Credit Markets Weekly. Peter Acciavaili et al. European Credit Outlook & Strategy. Steven Dulake et al. Emerging Markets Cross Product Strategy Weekly. Eric Beinstein el al. Dec 2, 2011 3 EFTA01172029 Global Asset Allocation The J.P. Morgan View J.P. Morgan Foreign Exchange • The dollar is falling across the board this week on suspicion of a global, coordinated policy response to prevent a replay of 2008. Suspicion is the operative word, as developments over the past week have been halfhearted by the standards of post-Lehman policy initiatives: China cut its required reserve ratio by 50bp; G-7 central banks cut the cost of USD swaps; and France and Germany have floated proposals for European fiscal union. Still, given the defensive positioning in currencies — USD longs are near all-time highs — this week's move is unsurprising. Note that currencies have lost any link to country-specific events; systemic issues such as Europe drive all moves, as evidenced by the near all-time highs on correlations across pairs. • The next focus is the Dec 9 EU summit at which fiscal union will be the focus. Germany should be careful what it asks for. Full fiscal union would probably drive EURIUSD to 1.50, as it would eliminate fiscal imbalances in a currency zone which already lacks external imbalance. Reserve demand for such a currency, particularly if the US lacks a long-term deficit reduction plan, would be massive. But that is an issue for later this decade. At most, the Summit should announce agreement on the precursors to a eurobond, such as debt brakes, EU budget oversight and penalties, along with a timeline (perhaps mid- year for debt brakes and fall 2012 for the first budget surveillance). We continue to expect the reform and financing components to dovetail by the spring, which is why the forecasts show EURIUSD in a I.30s range and also modest broad USD weakness in 2012. But given the slow progress on reform, the Q1 refinancing calendar and the funding questions, almost all trade recommendation are defensive. Stay short EURIJPY and USD/JPY as hedges. Commodities • Commodities rallied 4% this week with all major commodity sectors posting strong gains. In our monthly GMOS published Wednesday, we opened a long Brent vs. Base metals position which we believe will perform well in the current environment. Oil markets appear much tighter than metals markets and we continue to expect OPEC to react to any material fall in oil prices, while metals have no such backstop. Any supply shock in oil markets due to political tensions in the Middle East, such as those discussed below, would also likely see oil rally while base metals sell oft • With all the focus on developments in the Euro area, little notice has been paid to the rise in tensions between Iran and the international community over the past week. Sanctions are being discussed which could seriously limit Iran's ability to export its oil. Given how tight the market has been this year, these kind of measures could have resulted in a significant rise in oil prices had they been enacted earlier. However, with oil demand growth expected to slow in HI 2012 and supply returning in Libya, the oil market should have enough spare capacity to offset most of Iran's supply if necessary. • There is a risk, though, that if Iran starts to see sanctions as inevitable, it could pre-emptively ban exports. If this were to take place before arrangements can be made to adjust supply elsewhere, we could see a considerable supply shock. For some time now, we have recommended investors buy Dec-13 Brent $125 calls to hedge this kind of risk, and these latest developments in the Middle East make us reaffirm this view (see Trade opportunities for long-term investors, Panigirtzoglou et al, Sep 27 for details). FX weekly change vs USD 5% 4% 3% 2% 1% 0% •2% USD EUR GBP JPY CHF CAD AUD TWI Setrat:J.P. Wpm I I More details in ... FX Markets Weekly. John Newland et al. Commodity Markets Outlook & Strategy. Cohn Fenton et al. Oil Markets Monthly. Lawrence Eagles et al. Metals Review and Outlook. Michael Jansen Global Metals Ouatteny. Michael Jansen Dec 2, 2011 4 EFTA01172030 Global Asset Allocation The J.P. Morgan View Interest rates Current Mar-12 Jun-12 Sep.12 Dec-12 J.1? Morgan YTD Return' tinned Slates Fed funds rate 0.125 0.125 0.125 0.125 0.125 10-year ykelds Euro area Ref rate 10-year ykelds Uniled Kingdom Repo rate 10-year yields 2.06 1.25 2.14 030 2.29 1.70 2.50 2.50 2.50 0.75 0.50 0.50 0.50 1.55 125 1.50 1.75 0.50 0.50 0.50 0.50 1.80 1.50 1.75 1.95 8.6% 7.2% 14.4% Japan Overnight call rate 0.05 0.05 0.05 0.05 0.05 10-year ykelds GBI-EM hedged n S Yield • Global Diversified Credit Markets 1.08 6.52 Current 0.90 0.95 1.10 1.15 6.70 Index 1.6% 4.6% YTD Return' US high grade ttp Over UST) 250 JPMorgan JULI Porfoko Spread to Treasury 5.9% Euro high grade (bp over Euro gov) 297 iBoxx Euro Corporate Index 0.9% USD high yield (bp vs. UST) 747 JPMorgan Global High Yield Index STW 4.4% Euro high yield (bp over Euro gov) 1081 iBoxx Euro HY Index .5.5% EMBIG (bp vs. UST) 405 EMBI Global 7.4% EM Corporates (bp vs. UST) 457 JPM EM Corporates (CEMBI) 2.6% Commodities Current Ouarterly Averages 1201 1202 1203 1204 GSCI Index YTD Return' Brent (Mt) 109.4 105.0 110.0 115.0 120.0 Energy 4.2% Gold 15oz) 1744 1925 1875 1850 1825 Precous Metals 18.9% Copper (Wet& ton) 7763 8250 8850 9250 9000 Industrial Metals .24.2% Com (5Bu) Foreign Exchange 6.01 Current 6.70 7.00 6.80 6.30 Mar-12 Jun.12 Sep-12 Dec-12 Agriculture .20.4% 3m cash YTD Return' Index In USD EURJUSD 124 1.30 124 1.36 1.38 EUR 1.9% USIXIPY 77.9 76 76 74 72 JPY 4.7% GBP/USD 1.56 1.54 1.56 1.57 1.58 GBP 1.3% USUBRL 1.80 1.80 1.80 1.80 1.80 BRL 12% USDCNY 6.36 6.20 6.10 6.00 6.05 CNY 2.3% USI:EKRW 1131 1120 1080 1060 1040 KRVI 2.8% USCUTRY 1.83 1.80 1.80 1.82 1.80 TRY -11.3% YTD Return US Europe Japan EM Equities Current (local ccy) Sector Allocation ' YTD YID YTD YTD (S) S&P 1251 44% Energy 4.9% 4.2% 4.5% 47.9% Nasdaq 2638 -6.2% Materials -15.8% -28.3% -27.0% -27.0% Topix 744 .192% Industrials .9.4% -24.6% -17.3% -31.3% FTSE 100 5552 -9.0% Discretionary 1.4% -17.7% -25.7% -10.2% MSCI Eurozone' 131 .22.3% Slaples 5.3% -1.7% 0.8% -5.1% MSCI Europe' 1012 -17.0% Healthcare 2.7% -0.6% -13.6% -25.2% MSCI EM 5' 959 -20.8% Financials -25.6% -32.2% -28.9% -27.4% Brazil Bovespa 58107 -20.3% Information Tech. -2.7% .12.7% -28.5% .20.0% Hang Sang 19040 -15.0% Telecommunications 4.5% .7.1% 4.1% 4.8% Shanghai SE 2361 -15.3% llolibes 9.6% -17.7% -47.9% -17.4% tevelskelums as of Dec 01.2011 Overall -5.4% 47.0% -192% 40.8% Local currency except MSCI EM Sorts. BI:orrixr; Dulastewn Wt STantrel a Pock Seniors. J.P 14tecpn Smiles Dec 2,2011 5 EFTA01172031 Global Asset Allocation The J.P. Morgan View .1.i? Morgan Global Economic Outlook Summary Real GDP `!curer attar ago Real GDP %ow pev}o.is peood. sae Consumer prices “: crier a year ago 2010 2011 2012 1011 2011 3011 4011 1012 2Q12 3012 2011 4011 2012 4Q12 The Americas Uniied States 3.0 1.8 1.8 0.4 1.3 2.0 a•D 0.5 1.5 2.5 3.3 3.3 1.5 12 Canada 3.2 2.3 2.2 1 3.5 1 25 1 3.5 1 1.7 2.1 2.6 2.3 3.4 2.6 1.6 1.7 Latin America 6.0 4.1 3.0 5.7 4.3 _321 2.0 1.6 4.8 4.9 6.7 1.2 6.4 62 Argentina 9.2 7.0 1.0 13.1 102 4.0 2.0 0.0 6.0 4.0 9.7 11.0 10.0 9.0 Brazil 1.5 3.0 3.1 5.0 3.1 OA 1.3 2.9 5.0 5.3 6.6 6.7 5.2 52 CInte 5.2 6.5 4.0 5.8 5.3 2.6 24 3.5 4.5 5.0 3.3 3.6 3.6 3.4 Colombia 4.3 5.3 3.7 2.9 85 3.5 1.5 3.0 4.0 5.0 3.0 3.9 3.0 2.9 Ecuador 3.6 6.5 3.0 7.1 9.1 3.0 1.0 2.0 3.0 3.0 4.1 5.5 5.3 4.6 Mexico 5.4 4.0 2.5 2.3 5.2 5.5 2.6 -1.7 4.1 4.8 3.3 3.2 3.5 3.5 Peru 8.8 6.7 4S 7.3 4.6 6.5 1 2.7 4.5 5.0 6.2 3.1 4.0 3.6 2.7 Venezuela -1.5 3.8 4.0 16.0 4.1 6.8 6.0 6.0 4.0 24.6 28.6 26.7 25.3 AskePacIlic Japan 4.1 -021 2.0 1 -21 -13 62 OS 1 221 15 13 -0.4 -0.1 -OS -0.5 Austraka 2.7 1.7 3.0 -3.4 4.8 52 0.9 2.5 2.7 3.8 3.6 3.8 3.2 32 New Zealand 1.7 2.3 2.8 3.5 0.4 2 2.4 -0.2 6.5 3.1 5.3 2.9 2.2 2.5 Asia ex Japan 9.1 7.1 6.4 8.8 58 5.9 1 5.0 1 6.1 1 7.1 T 7.4 T 5.7 4.9 3.9 1 3.9 1 Ch nor 10.4 9.0 821 9.0 7.9 1.9 7_41 7.21 2.7 1 931 5.7 4.8 3.6 3.4 Hong Kong 7.0 5.0 3.0 13.0 -1.6 0.4 15 3.5 4.0 5.5 5.2 5.7 4.4 42 kick 8.5 7.4 7.7 8.3 72 7.3 7.0 6.9 7.3 8.5 8.9 8.6 7.6 7.8 kidonesia 6.1 6.3 52 6.8 5.4 6.2 22 5.0 4.5 5.0 5.9 3.2 3.6 4.0 Korea 6.2 3.8 3.8 5.4 3.6 3.0 4.2 3.0 4.0 4.0 4.2 3.7 3.1 3.5 Malaysia 7.2 4.0 1.5 6.7 2.1 5.8 0.0 1.0 1.0 2.0 3.3 2.4 1.5 12 Philippines 1.6 3.7 1 3.8 1 8.01 2.0 1 1.31 4.5 t 2.8 t 491 5.71 5.0 4.9 3.9 4.0 Singapore 14.5 5.6 12 27.9 -6.4 1.9 41 -5.9 8.2 4.1 4.7 5.6 4.0 2.8 Taiwan 10.7 4.7 2.9 9.8 2.4 -0.6 22 3.5 4.3 4.6 1.6 0.9 0.4 1.8 Thailand Afdcallilddle East 7.8 1.0 1.5 7.5 02 2.1 :212 20.0 12.0 1 0.5 4.1 3.5 2.81 1.4 1 Israel 4.8 4.3 2.9 4.7 35 3.4 La 0.8 32 6.1 4.1 2.8 2.3 2.5 South Africa Europe 2.91 3.1 2.7 4.6 T 13 1.4 1 3.9 23 2.6 2.8 4.6 62 6.4 61 Euro area 1.8 1.6 -0.7 3.1 0.7 OS jQ -1.5 -1.5 -0.3 2.8 2.9 1.9 15 Germany 3.6 3.0 02 5.5 1.1 2.0 -0.5 -0.3 -0.3 0.5 2.5 2.8 7 1.7 12 France 1A 1.6 -0.2 3.8 -02 1.6 -1.0 -0.8 -0.8 0.5 2.2 2.5 1.7 12 halt' Norway Sweden 1.2 1.8 5.3 1 0.5 2.5 4.7 1 -1.6 1.1 1.1 1 0.5 1.5 2.71 12 5.4 42 T -05 3.4 6.6 1 -2.0 12 LO 1 -2.5 0.0 -0.5 -2.5 0.0 -03 -1.0 1.0 0.5 2.9 1.4 2.9 3.61 1.1 2.5 2.41 1.2 1.1 1S 1 12 1.1 United Kingdom 1.8 0.9 OS 1.6 0.4 2.0 0.0 -1.5 23 4.4 4.6 2.6 1.9 Emerging Europe Bulgaria Czech Republic 4.5 0.2 2.3 4.2 2.2 2.0 2.4 2.5 0.6 3.5 1 3.5 15 T 0.3 3.6 1 0.0 2.8 -0.3 2.0 0.0 1.6 0.8 2.6 2.0 7.1 1.8 6.2 1.8 5.6 2.5 5.7 2.8 Hungary 1.2 1.5 OS 2.0 0.8 2.0 Ala -0.3 0.3 1.0 4.0 3.7 4.4 5.1 Poland 3.9 1 4.0 2.7 4.1 1 4.9 T 4.1 I 24 2.0 2.5 3.0 4.6 3.9 2.5 2.7 Romania -1.3 2.7 0.8 2.8 0.8 1.8 2.2 -1.2 -1.5 0.8 8.2 3.5 3.3 4.4 Russia 4.0 3.8 3.0 3.5 0.7 3.5 4.2 3.0 2.0 3.0 9.6 7.1 6.3 72 Turkey 9.0 7.0 22 5.9 8.3 7.8 6.0 Global Developed markets Emerging markets 4.0 2.7 7.3 2.6 1A 5.7 2.0 0.9 4.7 2.61 1.0 1 7.01 1.8 02 41 3.01 23 4.8 1 1.8 1 1.0 1 3.8 1 1.3 0.2 7 4.2 1 1.7 0.3 5.5 T 2.6 1.4 5.9 T 3.7 2.7 6.1 3.6 2.8 5.7 2.4 1.5 4.9 22 12 42 1 Sparce. JP. 1.1:tgan Dec2.2011 6 EFTA01172032 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 indi- vidually 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. Other Disclosures J.P. Morgan (-112M") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. 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