From: US CIO *C

From: US CIO *C > To: Undisclosed recipients:; Subject: IPM View 0930.2011 Date: Fri, 30 Sep 2011 20:38:02 +0000 Attachments: JPMorgan_View_09-3O-2011-pdf-zip Inlinrlmages: imageOO3-png J.P. Morgan The J.P- Morgan View Still too many banana peels • Economies — Further cuts to growth forecasts. this time in Japan and EM Europe. US Q3 is tracking a 13% pace. We retain the view that Europe is sliding into recession. • Portfolio strategy —Riskier markets are trying to rebound as many active managers are short. We find it too early to go long risk. as there remain too many banana peels in front of us. on which risk assets can slip. • Fixed Income —Falling growth projections rtmain bullish for bonds • Equities — 2012 EurostorafRdisidends provide an attractive return to risk • Credit — EU recession forecasts Aunty staying defensive. • Foreign exchange— Be long JPYvsEUR and GBP. On the USD. we prefer to buy it against NOE. • Commodities — Ab close our outright longs in copper. can and wheat but we remain long gold and a basket of EM driven against a basket of US driven cceurnodities. • Risk markets rallied early this week, and bond yields rebounded strongly. as some of the teased event risks in Europe did not materialise. But they then lost ground again later in the week as investors have no confidence that undeilying conditions in the world have improved. We retain a defensive posture, imelerweightuig n•Jq• assets. as l I ) the Euro area is fat from creating the fiscal solidarity and discipline needed to resolve its sovereign funding crisis — even as it is now at least talking about these more openly— and likely requires a renewed crisis before its takes these actions: (2) whatever the outcome of the EMU debt crisis. Western Europe is likely now already sliding into recession: (3) the US is probably not in reces- sion yet. but Congress seems too divided to present the main risk of recession coming from me massive fiscal tightening. that is on the books for 2011 and Id) Japan and Asia are now also weakening and will thus not be able to turn around the US and European economic: Investors are heavily underweight European assets as they see a significant risk that EMC members ate unable to combine resources to battle then self- Inflicted debt mius The required degree of fiscal integration implies surrender- ing much of their cherished national sovereignty and will not be taken in a single yea-or-nay vote. It can only come about through a long set of decisions and actions over the coming year by all the EMU member states Each such decision constitutes a banana peel on which Europe could slip in its journey' for a full resolution to the tuna crisis. The best that can be said about the last few days is that nobody slipped on this week's bag of bananas. But there remains quite a few in front of us. • Over the next few weeks. we expect few major actions_ although still half a dozen EU connotes have to ratify the EFSF enlargement The decision on the next Greek package has been pushed out to later in October to give Greece The certifying analyst is indicated by an '4. See page 7 for analyst certification nd important legal and regulatory disclosures. Global Asset Allocalices J.P hicegan Chase Bank NA, J.P. Liman Seas Lld See 30.2011 Jan Leona° John Normand Nlkolaos PanIghMoglou Seamus Mae Goraln Matthew Lehmann VTR trims through Sop 3 % "Wan at IS Weer NW. Gobi US Feed Income US Not On& CAMS Gael:MC ElABK3 BA Iscal Bra" Eimer Fool lm o' US each US Huh Yield DA E Corn EM DC SIUISOO tISO TR M IX Won? Toe MSCI FRCP. MSG EM• "045004 0 0 V IS bra ID Wain Maca" ton a t "ma ameba mama OD Lea ea Maw scam a Om Omni mm wow ma DOG lit4 MIS On a a esker. tit a a ea-ea wvnv.morganmerkets.com EFTA01169184 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://wvnvjpmorgan.com/pages/disclosures/email. EFTA01169185