market quarterly perspectives insights uk q · are pursuing expansionary monetary policies. •...

MARKETINSIGHTS

J.P. Morgan Asset Management is pleased to present the latest edition of Quarterly Perspectives. This piece highlights key themes from our Guide to the Markets book and offers critical insights for engaging in portfolio discussions.

Both Quarterly Perspectives and Guide to the Markets are elements of our Market Insights programme, which is designed to provide investors with a way to address the markets and the economy based on logic rather than emotion, ultimately helping investors to make rational investment decisions.

Please visit us atam.jpmorgan.co.uk to learn more about the Market Insights programme.

Quarterly Perspectives UK | 1Q | 2015

STRATEGISTS

Stephanie FlandersManaging DirectorChief Market Strategist for the UK & Europe

David StubbsExecutive DirectorGlobal Market Strategist

Maria Paola ToschiExecutive DirectorGlobal Market Strategist

Vincent JuvynsExecutive DirectorGlobal Market Strategist

Kerry Craig, CFAVice PresidentGlobal Market Strategist

Alex DrydenMarket Analyst

Nandini RamakrishnanMarket Analyst

THIS QUARTER’S THEMES

1 How to play the stronger dollar

2 Eurozone: Five reasons to change the tune

3 New Year: Same dilemmas – Fixed income investing in 2015

4 The tragedy of emotional investing

2 | Quarterly Perspectives | 1Q 2015

MARKETINSIGHTS Quarterly Perspectives

OVERVIEWSome recent developments in global markets could be temporary, but there is widespread consensus that a stronger US dollar is here to stay. Traditionally, emerging markets (EM) have not responded well to a rising greenback. However, these are not normal times for global markets or for US monetary policy. It is worth considering whether the lessons of the past will hold true today, and what a stronger dollar will mean for investments.

1 How to play the stronger dollar

Why is the dollar rising?

There are three key reasons for the dollar rise:

• Divergent economic performance: the US economy looks to have grown at a healthy rate of 3% in the second half of 2014 and is particularly strong when compared to the loss in economic momentum in the eurozone, Japan and China in 2014.

• Expected monetary policy divergence in 2015: the US Federal Reserve is expected to raise interest rates, unlike either the European Central Bank or the Bank of Japan who are pursuing expansionary monetary policies.

• Reduced US borrowing from the rest of the world: America’s current account deficit has fallen sharply in recent years, largely as a result of its growing energy independence. Barely a third of the energy that the US consumed last year was imported, down from 60% in 2005.

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Canadian Dollar

Swiss Franc

Mexican Peso

Euro Japanese Yen

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US Dollar Index Real broad effective exchange rate (REER)

1978-85: +52.6%

1985-88: -30.0%

2002-11: -28.6%

1995-02: +34.2%

1973-78: -21.8%

Current account deficit % of GDP

Source: (Top) US Federal Reserve, J.P. Morgan Asset Management. (Bottom left) BEA, FactSet, J.P. Morgan Asset Management. (Bottom right) FactSet, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as at 31 December 2014.

1985: Plaza Accord

1987: Louvre Accord

2011-14: +10.5%

US dollar performance vs. selected currencies 2014

%

US current account deficit

US net oil imports % %

Avg since 1973 Nov 2014

US Dollar Index 95.7 89.0

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Source: Guide to the Markets - UK, page 15

• The growing economic divergence between the US and the rest of the world has driven up the US dollar against many of the major global currencies during the course of 2014.

J.P. Morgan Asset Management | 3

What does it mean for investors?

Historically, EM equity prices have had a strong negative correlation with the dollar. This is because a rising dollar has tended to go along with lower commodity prices and capital outflows from emerging economies. There is also the currency translation effect that lowers the dollar value of EM earnings.

This time around things may be different. The last period of strengthening of the US dollar ended in 2002. Since then, some emerging economies have reduced their exposure to commodities and increased their exposure to manufacturing industries. Economies with strong links to the US consumer could stand to benefit from stronger US growth.

In developed markets, a rising US dollar has often been a boon as it puts downward pressure on interest rates and inflation in the US, helping to prolong the upside of the economic cycle. The potential for further weakening in the euro should be a major tailwind for European earnings, particularly when coupled with the falling oil price.

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Real policy rates: Emerging and developed markets

Source: (Left) Bloomberg, J.P. Morgan Asset Management. (Top right) J.P. Morgan Economic Research, J.P. Morgan Asset Management. (Bottom right) MSCI, FactSet, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as at 31 December 2014.

% %

Consensus growth forecasts Estimates for next 12 months

Developed markets

Emerging markets

%

Indonesia (rhs) Thailand China (rhs)

Russia Turkey

Brazil India (rhs)

Relative EM / DM equity performance and USD REER Rebased to 1993 = 100

USD REER (inverted)

MSCI EM / MSCI DM

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INVESTMENT IMPLICATIONS• The dollar will likely continue to

strengthen in 2015, benefiting European and US investors.

• A strong dollar, weak commodity prices and higher US rates pose risks to EM assets.

• However, many developing economies have stronger fundamentals than in past periods of dollar strength.

• In the past when the US dollar has strengthened it has hampered EM equities. However, it may not be the same this time around as EM economies have diversified away from commodities and towards more manufacturing sectors.



2 Eurozone: Five reasons to change the tune

Less austerity

The eurozone was subject to three years of government belt tightening between 2010 and 2013 as politicians at the national and supranational level imposed a regime of spending cuts to tackle rising deficits and debt levels. Fiscal policy is not going to be very stimulative in the next few years, but the International Monetary Fund estimates that in the 2013 to 2016 period, the level of fiscal tightening in the eurozone will be a fraction of what it was in the past.

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Government fiscal tightening Decline in structural deficit* as % of GDP

2010-2013

2013-2016F

Government debt levels Gross debt as % of GDP

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Portugal

Ireland US Spain

UK France

Germany

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%

Source: (Both charts) IMF World Economic Outlook October 2014, FactSet, J.P. Morgan Asset Management. *Structural deficit is the cyclically adjusted budget deficit or the deficit that would prevail if the economy were running at full capacity. **Eurozone data is change between 2013 and 2015 due to data availability. Guide to the Markets – UK. Data as at 31 December 2014.

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Slow, but steady, reform

A pro-growth stance requires significant policy reform at the national level to tackle longstanding rigidities and barriers to growth. The reform process in the eurozone has been hampered by the political environment, but countries such as Spain are now starting to see the benefits of several years’ difficult structural reforms, with private investment on the rise and levels of employment improving. There are also encouraging signs in Italy, where prime minister Matteo Renzi is attempting to remove some of the most restrictive labour market laws and make the electoral process more conducive to further reforms. Meanwhile, reforms in Spain are beginning to translate into higher growth rates. In short, progress is slow, but it is in the right direction.

OVERVIEWThe level of market and media pessimism toward the eurozone increased over the latter half of 2014, as economic momentum stuttered and fears grew of another recession. Meanwhile the dramatic fall in the global price for crude oil further weighed on inflation expectations and heightened fears of outright deflation. These factors all pose important risks to the eurozone economy in 2015, but we see five reasons to believe that the tune for investors in European markets in 2015 might be more upbeat than the one that has been playing in the latter part of 2014.

• The fiscal drag from austerity will be much lower in the future allowing for more room for economic growth.


A potential turn in the credit cycle

So far, the eurozone recovery has been devoid of credit growth, as banks have shrunk their balance sheets and deleveraged. A tighter regulatory environment forced banks to improve capital ratios while the Asset Quality Review (AQR) and associated stress tests caused banks to jettison anything that could be perceived as risky and restrict lending practices. However, now that the AQR is complete, that burden has been lifted from banks, and while lending may not skyrocket, we would expect to see a modest uptick in corporate lending. We see early signs of this in the European Central Bank’s (ECB’s) latest bank lending survey, which shows that not only are banks making it easier to access bank lending, but that demand for loans from both households and businesses is on the rise.

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Credit demand and eurozone GDP growth Net % of banks reporting positive loan demand, GDP growth

%

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Housing loans (lhs)

Consumer credit (lhs)

Eurozone GDP growth (y/y) (rhs)

Stronger loan demand

Weaker loan demand

Eurozone bank lending Change year on year

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Source: (Left) ECB, Eurostat, FactSet, J.P. Morgan Asset Management. (Top and bottom right) ECB, FactSet, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as at 31 December 2014.

Non-periphery banks Eurozone aggregate Periphery banks

Eurozone bank loans outstanding Rebased to 100 as at December 2010, households and non-financial companies

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• Demand for bank loans is slowing starting to return, suggesting a turn in the credit cycle and better economic growth in the future.



INVESTMENT IMPLICATIONS• 2015 could be a rewarding year for

investors in European assets, thanks to less austerity, steady economic reforms, a turn in the credit cycle, a more pro-active central bank and a falling euro.

• European equities are not cheap, but nor are they especially expensive.

• The eurozone economy is unlikely to see a rapid upturn in growth in 2015, but sentiment has turned so far against European equities that they should be well positioned to deliver for investors.

A central bank willing to act

From “whatever it takes” to “all that we must”, ECB president Mario Draghi has been resolute in his commitment to restore both inflation and growth in the eurozone. Though the ECB’s governing council does not always line up behind Draghi, it has been willing publicly to endorse the goal of expanding its balance sheet by €1 trillion. Draghi has confirmed that the ECB is already making preparations for further easing measures to achieve that goal, such as the purchase of non-financial corporate or even sovereign bonds, should it be needed. This is now widely expected to happen in the first part of 2015.

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ECB balance sheet and the euro € trillions, real broad effective exchange rate (REER)

€

ECB balance sheet: Assets € trillions

Jan 2005 – Jun 2012: 248%

Jun 2012 – Dec 2014: -31%

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ECB balance sheet (rhs, inverted)

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Eurozone ABS* and covered bonds outstanding € trillions

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Source: (Left) ECB, FactSet, J.P. Morgan Asset Management. (Top right) ECB, European Covered Bond Council (ECBC), Security Industry and Financial Markets Association (SIFMA), J.P. Morgan Asset Management. (Bottom right) ECB, J.P. Morgan Economic Research, J.P. Morgan Asset Management. *ABS is asset-backed securities. Yearly covered bond amounts are from ECBC and 2Q14 amount is from ECB. Guide to the Markets - UK. Data as at 31 December 2014.

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A weaker euro

In effect, the ECB’s drive to increase the size of its balance sheet is an attempt to force the value of the euro lower. During 2014, the euro depreciated by 12% against the dollar and is expected to decline further as the ECB chases the €3 trillion target for its balance sheet. A weaker euro increases the costs of imports, offsetting some of the dis-inflationary pressures from weaker internal demand, and a falling oil price. However, a falling euro benefits companies because half of European company revenues come from outside of Europe and the currency effect should start to appear as higher profits.

• As the ECB continues to expand its balance sheet towards €3 trillion, the value of the euro should fall, reducing disinflationary pressures and helping companies who generate revenues outside of Europe.


3 New Year: Same dilemmas - Fixed income investing in 2015

Great expectations

• As the US and UK economic recoveries gathered pace, a normalisation of monetary policy by the US Federal Reserve (the Fed) and the Bank of England was anticipated and investors began discounting higher interest rates.

• In fact, long-dated government bonds proved to be one of 2014’s best-performing asset classes. The 30-year US Treasury returned 27.9% as yields declined.

• Demand outstripped supply by almost $500 billion, driving a surprise rally in fixed income markets.

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Yield curve steepness Ten-year government bond yield less two-year government bond yield

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Germany UK

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Source: (Left and bottom right) Tullett Prebon, FactSet, J.P. Morgan Asset Management. (Top right) Barclays, FactSet, J.P. Morgan Asset Management. Investment grade bond yields shown are provided by Barclays Capital and are represented by US: Barclays US Aggregate Corporate Investment Grade, UK: Barclays Sterling Aggregate Non-Gilts Corporate, Eurozone: Barclays Euro-Aggregate Corporate. Guide to the Markets - UK. Data as at 31 December 2014.


Persistent demand

There were three sets of buyers for longer-dated government bonds in 2014 who all helped to push down yields:

• Retail investors were willing to take advantage of the relatively higher yields reached at the end of 2013 to rebalance their portfolios. In 2014, they invested $360 billion1 annually in fixed income funds.

• Against consensus expectations, core government bond yields have fallen over the year as inflation expectations have declined.

OVERVIEW2013 was the worst year for US Treasuries since 1994 and most investors went into 2014 expecting more of the same. Instead, core government bond yields declined nearly everywhere and in many markets fell to historic lows. We believe that tighter US monetary policy will put downward pressure on US bond prices in 2015. But continued loosening of monetary policy in the eurozone and Japan and strong demand from institutional investors is likely to cap yields on longer-maturity bonds. Regardless of whether these forecasts come true, fixed income investors should prepare themselves for a challenging and potentially bumpy year.

1 As at end of December 2014, flows include global mutual fund and ETF flows. MF flows are from ICI (global flows up to 2Q 2014 is from ICI and data since then up to now is combination of EFAMA and ICI). 2014 YTD flows are estimated. ETF flows are from Bloomberg.



• Global bond demand is estimated to outstrip supply in 2015 and may constrain long dated government bond yields.

• Major central banks continued to invest in government-related bonds and G4 central banks’ bond-buying is expected to reach $1.2 trillion in 2014. The Bank of Japan and the European Central Bank (ECB) are pursuing expansionist policies to increase the size of their balance sheets. Meanwhile, despite the end of quantitative easing in the US, maintaining a balance sheet of $4.5 trillion will require the Fed to reinvest bonds, and other securities, as they mature, maintaining a certain level of artificial demand.

• Regulatory requirements oblige long-term institutional investors to maintain elevated exposure to high-quality assets like US Treasuries. Ongoing pension fund de-risking has also boosted demand.

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Estimated global bond demand $ billions per annum

Estimated global bond supply $ billions per annum

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Foreign official

G4 central banks

Other bonds

Government bonds $ $

Estimated $2,600 bn

Estimated $2,000 bn

Source: (Both charts) Central bank sources, ICI, Bloomberg, IMF, J.P. Morgan Economic Research, J.P. Morgan Asset Management.Guide to the Markets - UK. Data as at 31 December 2014.

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Sliding supply

Reduced supply has been the other key factor:

• Rising government borrowing during the great financial crisis led to a record $3 trillion issuance of government bonds in 2010. Since then, budget deficits have been reduced by higher levels of economic growth and the IMF forecasts that the government deficit in advanced countries will decline to 3.1% of GDP in 2015 from 3.9% of GDP in 2014.

• The supply of government bonds is expected to shrink by $90 billion in 2015 to $1.26 trillion—less than half the 2010 level.

• After several years of record issuance of spreads products, market volatility has seen issuers take a pause in 2014.


Most of these demand and supply factors are likely to persist in 2015, though we expect an expansion of ECB bond purchases to help stimulate greater issuance of spreads products in Europe.

Prospects for 2015: duration and liquidity risk

We expect that interest rates will rise in the coming years, albeit at a much slower pace than usual. However, we also expect a greater divergence in monetary policy to lead to greater volatility in fixed income markets than in 2014.

This poses difficult challenges for investors:

• The prospect of rates rising from a very low level means they must be flexible in their approach to income and protective of their capital. Spreads products still appear to offer good value.

• However, higher volatility could hamper liquidity in the higher-yield segments of the market. For investors, the best protection against this is to keep diversified, and to only buy assets from high-quality issuers you are willing to hold on to.

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US corporate debt market liquidity $ billions

Mark to market: Interest rate risks Estimated amount of yield increase to wipe out next year’s income

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bps $ $

A 102 bps increase in yield wipes out

income earned through the end of

2015

Dealer inventories (lhs)

IG corporate debt outstanding (rhs)

Current yield

Source: (Left) Federal Reserve Bank of New York, Barclays, J.P. Morgan Asset Management. (Right) Barclays, FactSet, J.P. Morgan Asset Management. Interest rate risks chart assumes that all investments are issued at par and are made on 31 December 2014, with no re-investment of income and with no consideration to convexity characteristics. Fixed income sectors shown are provided by Barclays Capital and are represented by – Barclays Global High Yield, Barclays Emerging Market Local Currency Government, Barclays Emerging Markets USD Aggregate, Barclays Global Credit – Corporate, Barclays US Aggregate Credit - Corporate - Investment Grade, Barclays US Aggregate Government - Treasury (7-10 Y), Barclays UK Gilt (7-10 Y), Barclays Euro Aggregate Government - Treasury (7-10 Y). Guide to the Markets - UK. Data as at 31 December 2014.

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INVESTMENT IMPLICATIONS• Higher interest rates are likely in the

US and the UK in 2015.

• Investors need to have a flexible, diversified approach to fixed income.

• High-yield credit products can play an important role and still represent relatively good value.

• However, these investments will not protect against broader volatility in equity markets. Concerns about market liquidity also mean that investors in this part of the credit market need to be highly selective.

• There are risks to holding fixed income: duration risk from possible monetary policy tightening in the US and UK, and liquidity risk from declining dealer inventories.



4 The tragedy of emotional investing

Invest with your head, not your heart

Retail investors often allow the way they feel about the world around them to influence their investment decision-making. But seldom in history has the damaging result been on such raw display:

• The technology bubble of the late 1990s is a striking example. From 1997 to 1999, cumulative flows into equity funds were 13 times higher than flows into bond funds. The tech bubble burst on 24 March 2000, and in the next two years, the S&P fell by roughly 50% and Nasdaq by 80%, wiping out trillions of dollars in wealth.

• If the technology bubble was about greed, the period since the 2007—2009 financial crisis has been about the opposite emotion: fear. Despite a meteoric rise in stock prices, retail investment flows have been net negative in equities, and overwhelmingly positive into bond funds. Again, investors made the wrong call at the wrong time—all because of how they feel.

What retail investors can learn from the ‘smart money’

Individuals have pulled money out of equities during the current bull market while the ‘smart money’ institutions have continued to add risk assets.

Institutions typically have a robust investment discipline with set targets, helping them avoid the emotional pitfalls faced by retail investors, such as ill-timed investments or heavy imbalances in a portfolio.

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$837bn

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Monthly mutual fund flows Net new cash flow to US mutual funds, $ billions

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Source: (Left) Strategic Insight, FactSet, J.P. Morgan Asset Management. (Top and bottom right) Investment Company Institute, FactSet, J.P. Morgan Asset Management. Latest data November 2014. Guide to the Markets - UK. Data as at 31 December 2014.

Cumulative mutual fund flows US-domiciled funds, $ billions

Equity funds

Bond funds

Tech bubble Post crisis

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Cumulative flows into US equity funds Includes both mutual funds and ETFs, $ billions,

Retail -$643 billion

Institutional +$626 billion

$


OVERVIEW“I can calculate the motions of the heavenly bodies, but not the madness of people.” - Isaac Newton

Since 2009, the S&P 500 Index has surged 250%, providing a generational opportunity for investors to boost their retirement accounts. Tragically, fund flows statistics show that many retail investors have failed to capitalise on this opportunity, piling into bond funds instead.

• While institutions have poured money into equity funds, retail investors have fled the scene.


Time and diversification

Investing for the long term and in a balanced, well-diversified portfolio can help investors achieve their retirement goals.

• The chart below shows a series of returns for bonds, stocks and a 50/50 blend of the two.

• Over short time periods, almost anything can happen. As the chart shows, the best one-year return for stocks since 1950 was a gain of 61%, while the worst was -43%. That is a range of returns spanning 100%.

• The worst five-year rolling return for a 50/50 blend of stocks and bonds would have produced an annual loss of only 1%. This includes the 2008 declines of the financial crisis in several of the rolling periods. It also includes the recovery—and thus better results for the investor.

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Large cap equity Bonds 50/50 portfolio

Range of equity and bond total returns Annualised total returns, 1950 - 2014

1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling

%

81

48% 49%

30% 24% 24% 21%

17% 17% 18% 13% 15%

-18% -24%

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Source: Strategas/Ibbotson, J.P. Morgan Asset Management. Returns shown are per annum and are calculated based on monthly returns from 1950 to November 2014 and includes dividends. Guide to the Markets - UK. Data as at 31 December 2014.


• A balanced, diversified portfolio has historically offered the best returns with the lowest downside over the long-term.

INVESTMENT IMPLICATIONS• Investors who can shake off the

behavioural biases that distort their decisions may be able to improve portfolio performance by taking advantage of long-run expected equity returns.

• Investors’ fear of short-term declines in equities losing is causing them to miss out on income opportunities and potential long-term returns.

MARKETINSIGHTSMARKETINSIGHTS Quarterly Perspectives

The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.

The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment in any jurisdiction, nor is it commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, and accounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. Exchange rate variations may cause the value of investments to increase or decrease. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitive to market movements. Investments in emerging markets may be more volatile and therefore the risk to your capital could be greater. Further, the economic and political situations in emerging markets may be more volatile than in established economies and these may adversely influence the value of investments made. The information presented herein is for the strict use of the recipient who has requested such information and it is not for dissemination to any other third parties without the explicit consent of J.P. Morgan Asset Management.

It shall be the recipient’s sole responsibility to verify his / her eligibility and to comply with all requirements under applicable legal and regulatory regimes in receiving this communication and in making any investment. All case studies shown are for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation. Results shown are not meant to be representative of actual investment results.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in Brazil by Banco J.P. Morgan S.A. (Brazil) which is regulated by The Brazilian Securities and Exchange Commission (CVM) and Brazilian Central Bank (Bacen ); in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority (FCA); in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Switzerland by J.P. Morgan (Suisse) SA, which is regulated by the Swiss Financial Market Supervisory Authority FINMA; in Hong Kong by JF Asset Management Limited, JPMorgan Funds (Asia) Limited or JPMorgan Asset Management Real Assets (Asia) Limited, all of which are regulated by the Securities and Futures Commission; in India by JPMorgan Asset Management India Private Limited which is regulated by the Securities & Exchange Board of India; in Singapore by JPMorgan Asset Management (Singapore) Limited or JPMorgan Asset Management Real Assets (Singapore) Pte. Ltd., both are regulated by the Monetary Authority of Singapore; in Taiwan by JPMorgan Asset Management (Taiwan) Limited or JPMorgan Funds (Taiwan) Limited, both are regulated by the Financial Supervisory Commission; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association and the Japan Securities Dealers Association, and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited which is regulated by the Financial Services Commission (without insurance by Korea Deposit Insurance Corporation) and in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919) which is regulated by the Australian Securities and Investments Commission; in Canada by JPMorgan Asset Management (Canada) Inc.; and in the United States by J.P. Morgan Investment Management Inc., or J.P. Morgan Distribution Services , Inc., member FINRA SIPC.

EMEA Recipients: You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy.

Past performance is no guarantee of comparable future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

© 2014 JPMorgan Chase & Co.

Brazilian recipients:

LV–JPM22753 | 01/15

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