MI-GTM 1Q17.pptx [Read-Only] - J.P. Morgan Asset …

1 MARKET INSIGHTSG uide to the Markets ||1Q 2017As of December 31, 2016|GTM Market Insights Strategy TeamAmericasEuropeAsiaDr. David P. Kelly, CFANew YorkStephanie H. FlandersLondonTai HuiHong KongAnastasia V. Amoroso, CFANew YorkManuel Arroyo Ozores, CFAM adridKerry Craig, CFAM elbourneJulio C. CallegariS o PauloTilmann Galler, CFAF rankfurtYoshinori ShigemiTokyoSamantha M. AzzarelloNew YorkLucia Gutierrez-MelladoMadridMarcella ChowHong KongDavid M. LebovitzNew YorkVincent JuvynsLuxembourgAkira KunikyoTokyoGabriela D. SantosNew YorkDr. David StubbsLondonDr. Jasslyn Yeo, CFAS ingaporeAbigail B.

2 Dwyer, CFANew YorkMaria Paola ToschiMilanIan HuiHong KongJohn C. ManleyNew YorkMichael J. Bell, CFAL ondonBen LukHong KongAinsley E. Woolridge, CFANew YorkAlexander W. Dryden, CFAL ondonHannah J. AndersonNew YorkNandini L. RamakrishnanLondon2|GTM fixed yield market income sector returns equity equity earnings and monetary and fiscal : Economy and : Economic and policy market currencies and current market currencies Other Asset and debt and alternatives: Domestic and commercial real investment and inflation Investing class expectancy and pension , diversification and the volatility of and the average and risk investor investing and global opportunities 500 Index at inflection 500 valuation ratios and equity and valuations by and valuations by performance and sector.

3 Dispersion and active and defensive returns and intra-year markets and subsequent bull rates and market since 1900 length and strength of growth and the composition of real drivers of economic and market and income by educational and the confidence and the stock market Fixed rates and Fed and interest of the yield income yields and returnsPage reference3|GTM 2000 Oct. 2007 Dec. 2016 Index level1,527 1,565 2,239P/E ratio (fwd.) 500 Index at inflection pointsSource: Compustat, FactSet, Standard & Poor s, Morgan Asset yield is calculated as consensus estimates of dividends for the next 12 months, divided by most recent price, as provided by Compustat.

4 Forward price to earnings ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future to the Markets are as of December 31, 9, 2002 P/E (fwd.) = 777 Mar. 24, 2000 P/E (fwd.) = 1,527 Dec. 31, 1996 P/E (fwd.) = 741 Dec. 30, 2016P/E (fwd.) = 2,239+101%Oct.

5 9, 2007 P/E (fwd.) = 1,565-57%Mar. 9, 2009 P/E (fwd.) = 677+231%+106%S&P 500 Price IndexEquities|GTM '90'92'94'96'98'00'02'04'06'08'10'12'14' 16S&P 500 valuation measuresSource: FactSet, FRB, Robert Shiller, Standard & Poor s, Morgan Asset management . Price to earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Shiller s P/E uses trailing 10-years of inflation-adjusted earnings as reported by companies. Dividend yield is calculated as the next 12-month consensus dividend divided by most recent price.

6 Price to book ratio is the price divided by book value per share. Price to cash flow is price divided by NTM cash flow. EY minus Baa yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) minus the Moody s Baa seasoned corporate bond yield. Std. dev. over-/under-valued is calculated using the average and standard deviation over 25 years for each measure. *P/CF is a 20-year average due to cash flow data to the Markets are as of December 31, 500 Index: Forward P/E ratio5 EquitiesCurrent: measureDescriptionLatest25-year avg.

7 *Std. dev. Over-/under-valuedP/EForward s YieldDividend to to cash SpreadEY minus Baa average: +1 Std. dev.: Std. dev.: |GTM = 10%-60%-40%-20%0%20%40%60% : FactSet, Reuters, Standard & Poor s, Morgan Asset management . Returns are 12-month and 60-month annualized total returns, measured monthly, beginning December 31, 1991. R represents the percent of total variation in total returns that can be explained by forward P/E to the Markets are as of December 31, ratios and equity returnsForward P/E and subsequent 1-yr. returnsS&P 500 Total Return IndexForward P/E and subsequent 5-yr.

8 Annualized returnsS&P 500 Total Return Index6 EquitiesCurrent: = 42%Current: |GTM '12'13'14'15'16'17-$1$3$7$11$15$19$23$27 $31$35'01'04'07'10'13'16 Source: Compustat, FactSet, Standard & Poor s, Morgan Asset management ; (Top right) Federal Reserve, S&P 500 individual company 10k filings,S&P Index Alert; (Bottom right) levels are based on operating earnings per share. Earnings estimates are Standard & Poor s consensus analyst expectations. Past performance is not indicative of future returns. Currencies in the Trade Weighted Dollar Major Currencies Index are: British pound, euro, Swedish krona, Australian dollar, Canadian dollar, Japanese yen and Swiss franc.

9 *3Q16 earnings are calculated using actual earnings for of S&P 500 market cap and earnings estimates for the remaining companies. **Year-over-year change is calculated using the quarterly average for each period. USD forecast assumes no change in the dollar from its December 31, 2016 level. **Corporate income tax rates include state and local to the Markets are as of December 31, profits7S&P 500 earnings per shareIndex quarterly operating earningsCorporate income tax ratesPercent** dollarYear-over-year % change**, quarterly, USD major currencies index4Q16: 500 revenues assumes no change in USD3Q16*: $ consensus analyst estimates2016200628%39%30%30%27%24%20%35 %39%39%40%34%28%30%0%10%20%30%40%50% |GTM.

10 FactSet, Russell Investment Group, Standard & Poor s, Morgan Asset calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Peak represents period 10/9/07 12/31/16, illustrating market returns since the S&P 500 Index high on 10/9/07. Since Market Low represents period 3/9/09 12/31/16, illustrating market returns since the S&P 500 Index low on 3/9/09. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with the exception of the large blend category, which is based on the S&P 500 Index.