Global Asset Allocation

Dec 18, 2009

The J.P. Morgan View

2010 Outlook Jan LoeysAC

(44-20) 7325-5473
• Asset allocation –– An aggressive overweight of equities, high-yield, EM FX jan.loeys@jpmorgan.com

and hedge funds versus gov’t and HG bonds and commodities. Overweight John Normand
EM in each asset class. Flat overall on commodities and inflation linkers. (44-20) 7325-5222
john.normand@jpmorgan.com
• Economics –– World economy grows at a 3.5% pace: 3% in DM and 5.5% in
EM. Inflation falls, keeping G3 central banks on hold until 2011. Nikolaos Panigirtzoglou
(44-20) 7777-0386
• Fixed Income –– Range and carry trading in the next few months, but the full nikolaos.panigirtzoglou@jpmorgan.com
year will likely bring negative returns to the fixed income asset class.
• Equities ––Rally continues in 2010, but at a slower pace. We favour small caps, Ruy Ribeiro
(44-20) 7777-1390
cyclical sectors, Financials, and EM. ruy.m.ribeiro@jpmorgan.com
• Credit –– Spread compression to continue in 2010. Overweight corporate
credit in both EM and DM, Financials vs Industrials, EMBIG, consumer ABS, Grace Koo
(44-20) 7325-1362
senior CMBS/RMBS and CLOs. grace.x.koo@jpmorgan.com
• FX –– Weak dollar in H1 and recovery in H2. EM FX to gain 7%-9% vs G3.
YTD returns through Dec 17
• Alternatives –– Hedge funds to earn 12% in 2010. Commodity performance flat
% in local currency
as projected rises in spot prices are priced in. Precious metals to do best.
MSCI EM
• This is our last issue of the year. We wish all our readers joyful holidays and a
prosperous new year. US High Yield

EMBIG

• In our last JPMorgan View of the year, we present our 2010 outlook, focusing Comm. ex energy
on the economic outlook and surprises, market drivers, asset returns and MSCI Europe
allocation, top trades and risks. A collection of our 2010 outlooks can be found
S&P500
on www.morganmarkets.com/market strategy/2010 outlooks.
Gold
• The world economy exited recession in Q3 and is set to grow at a 3.5% pace in US High Grade
2010 –– 3% in DM and 5.5% in EM. This growth gap is less than the historic
EM FX
average of 3%, creating upside risks in EM. Global growth should be led by
corporate spending on inventories and capital, as both are very low now while Europe Bonds
profits and cash flows are very strong. Government and consumer spending Topix
should lag GDP growth, but should still grow. Fiscal deficits will remain at 8%
Energy
in DM, but fall from 4% to 3% in EM.
US Bonds
• At a 3% growth pace, developed economies will take years to recover the lost EM Local Gov Bonds
ground and will operate well below capacity through 2011. As a result, core
Global Gov Bonds
inflation should fall to near zero in Europe and the US, and remain negative in
Japan. Central banks will thus stay on hold, with only 150bp in rate hikes JGBs
expected in 2011 for the ECB and the Fed. US cash

• Relative to where we gauge the majority view to be in markets, the main -5 5 15 25 35 45

Source: J.P. Morgan, Bloomberg. Global Bonds is JPM GBI
55

surprises to market participants should come from lower inflation, no rate
hikes, better growth (0.5% above consensus), a resilient consumer, and the
general lack of shocks. Each of these is a positive surprise and forms, to-
gether with value, the basis of our bullish view on risky markets.
hedged into $, EM Local Bonds is GBI-EM hedged in $, US
Bonds is the Barclays aggregate, Europe Bonds is JPM Maggie,
JGBs is JPM GBI - Japan local currency, EM FX is JPM ELMI+ in $,
US HG is JPM JULI index. Energy is JPMCCI Energy TR index,
Comm. ex Energy is JPMCCI ex Energy TR index, Gold is
JPMCCI Gold TR index, MSCI EM is in local currency.

The certifying analyst is indicated by an AC. See page 7 for analyst certification www.morganmarkets.com
and important legal and regulatory disclosures.
Global Asset Allocation
The J.P. Morgan View

• We thus anticipate a benign market environment in 2010, with low volatility, a

steady flight out of zero-return cash, a search for yield in bonds, and greater JPMorgan’s global GDP forecasts for 2009 and 2010
%oya, by date of forecast
attention to value which should induce investors to graduate from low-
0.0 4.0
yielding fixed income into equities. Structural optimism on EM should support
further capital flows into the various EM asset classes. The years that come -0.5 2010 3.5
closest to matching this environment are 1992-93 which were also early, job- -1.0
3.0
poor recoveries characterised by a Fed-on-hold, falling inflation, and a search-
-1.5
for-yield. But unlike then, government deficits are now wider, bond yields are 2.5
much lower and profit margins much higher, supporting our view that this time -2.0
around equities should outperform bonds. 2.0
-2.5
-3.0 2009 1.5
• Returns on asset classes should be quite diverse:
+ 20% on DM equities and + 30% in EM equities, on strong earnings and a -3.5 1.0
falling equity risk premium; Jan-09 Apr-09 Jul-09 Oct-09
- 2% on government bonds, given record low yields and a worsening supply Source: J.P. Morgan

demand imbalance;
+ 3% on HG corporates as tighter spreads from falling supply are offset by
rising government yields;
+ 10% on high-yield bonds due to falling default rates and tighter spreads;
+ 12% on hedge funds;
+ 9% on EM currencies (GBI-EM index; or 7% ELMI index) in dollar terms; and
0% on commodities as forecasted spot price rises are on average already
priced into futures curves.

• Asset allocation is accordingly simple. An aggressive overweight of equities,

high-yield, EM currencies and hedge funds versus government and HG bonds
and commodities. Overweight EM within each asset class. Flat overall on
commodities and inflation linkers.

• Our top ten trades are (1) long EM equities; (2) short USD vs EMFX; (3) short
USD vs EUR and JPY in H1; (4) short outright US agencies and MBS; (5) long
US HY outright; (6) overweight US HG and EM external debt vs USTs; (7)
long EM corporate credit; (8) overweight cyclicals within equities; (9) long
lower-tier II bank bonds outright and vs government debt; (10) long AAA
CMBS/RMBS and A-rated CLOs.
More details in ...
• Where are the major risks and vulnerabilities? We see an upward risk bias on Global Data Watch, Bruce Kasman and David Hensley
US and EM growth and downward on DM inflation. In terms of shocks, we are
Global Markets Outlook and Strategy, Jan Loeys, Bruce
focused most on potential policy errors from premature fiscal tightening from
Kasman, et al.
smaller countries or local authorities that face funding problems and from
sudden monetary tightening in EM due to rapid overheating. US Fixed Income Markets, Terry Belton and Srini
Ramaswamy
Fixed income Global Fixed Income Markets, Pavan Wadhwa and Fabio
• Steep curves, low volatility, falling inflation, and central banks on hold for a Bassi
long time are all supportive forces for bonds. With continued heavy supply, Emerging Markets Outlook and Strategy, Joyce Chang
this will likely keep bonds in a range in the first few months of 2010. But from
Key trades and risk: Emerging Market Equity Strategy,
Q2 onwards, demand is set to weaken as QE ends. Bank buying of bonds, Adrian Mowat et al.
which reached $1.2 trillion this year among the G4, should fall to half this level
Flows and Liquidity, Nikos Panigirtzoglou and Grace Koo
due to weakening deposit inflows and rising credit demand. From Q2, we thus
foresee rising bond yields, culminating in a 100bp rise across the UST curve, The current inventory of our 2010 outlooks for various
50bp in the EU and 30bp in Japan. In Europe and the US, we see modest product areas are available at www.morganmarkets.com,
under the “Strategy” section.
flattening in 2s10s, but less than is priced in. JGBs should steepen.

Dec 18, 2009 2

Global Asset Allocation
The J.P. Morgan View

• We overweight inflation linkers only in the UK given strong demand and high
headline inflation. In the US, underweight agencies and MBS due to an end to
QE sponsorship. Overweight EU and Japan vs UK and the US given different
supply outlooks. We stay in carry and yield compression trades.

Equities
• Equity markets should continue to rise next year supported by low policy rates MSCI AC World EPS/Sales to rise in 2010 as
profit margins expand
and further compression of risk premia. Economic data and earnings surprises
have been the dominant driver for equities in 2009, but asset reflation is likely 0.10
to be a more important driver in 2010, suggesting more gradual and more 0.09
modest equity price appreciation relative to that seen since March.
0.08
Dec-10
• We do expect strong 25% EPS growth for next year as the collapse of profit 0.07
margins over the course of 2008 (see top chart) has effectively increased
0.06
operating leverage allowing company profits to rise much faster than sales in
an environment of low labour and funding costs. However, EPS growth of 25% 0.05
in 2010 appears to be a consensus view if one looks at either bottom-up analyst 0.04
estimates or fund manager surveys. This implies a fading of the earnings 06 07 08 09 10
surprise factor into next year. However, asset reflation, fuelled by low policy Source: Bloomberg, J.P. Morgan
rates and declining uncertainty, looks set to continue unabated into 2010,
favouring the high-risk high-beta parts of the equity market, i.e. small caps,
cyclical sectors and EM across regions.

• Flows have the potential to turn a lot more supportive for equity markets next Uncertainty, proxied by the dispersion of analysts
year as retail investors turn their attention to equities due to falling returns on earnings forecasts, continues to decline
bond funds and as M&A and share buyback activity picks up. The sectors y-axis shows the ratio of the standard deviation of analysts
that are likely to benefit the most from the pick up in M&A activity next year forecasts for S&P500 earnings 12 months ahead divided
are Consumer Durables & Apparel, Telecoms/Media & Technology, Insurance by the mean
0.18
and Food beverages & Tobacco (See Deal making in high definition, Dec 3).

• The rush by US banks to repay TARP has created supply indigestion causing 0.14
Financials to underperform. We are positive on Financials for next year and
view the recent underperformance as an attractive entry point. Asset reflation, 0.10
a stabilization in housing prices and the prospect of dividend increases are
supportive of Financials for 2010. Positions are also favourable as banks 0.06
appear to be the most underowned sector according to fund manager surveys.
0.02
• Another theme we see for 2010 is an increase in the importance of stock and 85 88 91 94 97 00 03 06 09
sector picking vs country picking. In EM, we favour banks in China, Korea
and Singapore but avoid Telecoms in these countries. We like Real Estate in Source: Datastream and J. P. Morgan

HK and Australia but avoid banks.

Credit
• Credit spreads made another new cycle low with US HG and HY 9bp and 11bp
lower this week to 148bp and 700bp. 2009 has been an exceptional year for
credit. The strength of the credit market recovery has brought investors record
returns, more than 17% in US HG and more than 56% for US HY. More details in ...

• For 2010, we continue to see improving fundamentals, declining downgrade
rates and default rates to support further spread tightening in credit markets.
With major central banks on hold through the year, the zero return on cash will
likely push investors further into credit, especially into high-quality bonds.
• In corporates, investors should continue to overweight US HG and HY. With
EM Corporate Outlook and Strategy, Victoria Miles et al.
US Credit Markets Outlook and Strategy, Eric Beinstein et al.
High Yield Credit Markets Weekly, Peter Acciavatti et al.
European Credit Outlook & Strategy, Steven Dulake et al.

Dec 18, 2009 3

Global Asset Allocation
The J.P. Morgan View

banks repaying TARP funds, financial bonds significantly outperformed and

US HG and HY spreads
we expect the outperformance to continue into 2010, as valuation remains bp
cheap relative to other sectors. Regional banks and subordinated notes are 1800 800
particularly attractive as spread compression continues. Within EM, Asia and
1600 HY
Emerging Europe corporate debt offers the most attractive opportunities.
1400 HG 600
• Overweight EM sovereign debt into 2010 as demand is strong and the EMBIG 1200
average rating is expected to move into investment grade. Consumer ABS 1000
400
across the capital structure remains cheap vs other fixed income, especially 800
AAA ABS and single-A Bankcard ABS. Limited supply is setting the stage for 600
continued spread tightening in AAA CMBS and RMBS. 400 200

200
Foreign Exchange
0 0
• The dollar ended the decade 10% lower than where it started on a trade- 1999 2001 2003 2005 2007
weighted basis, and only 3% down this year. On a rate of growth basis, there
is not much to choose among the G3, but the US has the poorest external Source: J.P. Morgan

balance, with a still large current account deficit, and capital outflows from
equities and FDI. Over the first half of 2010, we thus see the dollar falling again
to 1.62 vs EUR and 82 vs JPY. But over H2, as growth outperforms and the first
Fed rate hikes beckon, we see the dollar recovering its H1 losses ending the FX weekly change vs USD
year largely unchanged. The risk to focus on is the recent outperformance of
2%
US versus European and Japanese activity data. If this continues then the
dollar is unlikely to weaken much. 1%

• EM currencies performed outstandingly this year, gaining 12% on our ELMI 0%

index and 14.5% on our GBI-EM. With equity weights (MSCI EM), the excess
-1%
return moves to 20%. Similar returns in EUR and JPY. For next year, we predict
similar returns against the G3 –– 7% on ELMI and 9% on GBI-EM. Stronger -2%
EM growth, positive carry, current account surpluses, capital inflows and
earlier rate hikes are all positives. Among EM, we see the highest return in -3%
Central and Eastern Europe. Asian EM FX should rally once China starts to USD EUR GBP JPY CHF CAD AUD
revalue in H2, but the gains should be only single-digit as Asian policy makers TWI
are not about to let their currencies fluctuate totally freely. Source: J.P. Morgan

Alternatives
• Commodities rallied strongly this year, gaining 16% on JPMorgan’s index.
Industrials and precious metals led the rally, earning 76% and 32% on the
economic recovery and fears of QE induced inflation. Oil was largely in a range
this year.

• We are neutral on commodities next year, finding that our analysts’ forecasts
for an index-weighted 3.5% rise in spot prices are already fully priced into
futures curves through which participants invest in the asset class. Spot crude
oil, for example, is projected to reach $78 by the end of next year, but the More details in ...
forwards are already at $80. Commodities have been supported this year by
heavy inflows, that should weaken next year as inflation surprises on the Alternative Investments Outlook and Strategy
downside and return momentum fades. FX Markets Weekly, John Normand et al.

Energy Monthly, Lawrence Eagles et al.

• Hedge funds as an asset class earned some 17% YTD through Nov, exactly
offsetting last year’s losses. All styles participated with the exception of CTAs Metals Review and Outlook, Michael Jansen
and equity short bias. For 2010, we expect hedge funds to earn 12%, based on Global Metals Quarterly, Michael Jansen
our forecasts for the asset classes they trade and the average alpha they have
Grains & Oilseeds Monthly, Lewis Hagedorn
delivered over the years.

Dec 18, 2009 4

Global Asset Allocation
The J.P. Morgan View

Interest rates Current Mar-10 Jun-10 Sep-10 Dec-10 YTD Return*

United States Fed funds rate 0.125 0.125 0.125 0.125 0.125
10-year yields 3.49 3.90 4.10 4.25 4.50 -2.2%
Euro area Refi rate 1.00 1.00 1.00 1.00 1.00
10-year yields 3.15 3.30 3.35 3.50 3.65 3.1%
United Kingdom Repo rate 0.50 0.50 0.50 0.75 1.00
10-year yields 3.85 3.90 4.10 4.25 4.45 -0.1%
Japan Overnight call rate 0.10 0.10 0.10 0.10 0.10
10-year yields 1.25 1.30 1.40 1.50 1.55 0.9%

Credit Markets Current Index YTD Return*

US high grade (bp over UST) 167 JPMorgan US Index (JULI) 18.2%
US high grade (bp over swaps) 148
Euro high grade all (bp over swaps) 86 JPMorgan Euro Credit Index (MAGGIE) 15.6%
USD high yield (bp vs. UST) 701 JPMorgan Global High Yield Index 57.7%
Euro high yield (bp over Euro gov) 743 JPMorgan Euro Credit Index (MAGGIE) 72.5%
EMBIG (bp vs. UST) 316 EMBI Global 28.2%

Quarterly Averages
Commodities Current 10Q1 10Q2 10Q3 10Q4 JPMCCI Index YTD Return*
WTI ($/bbl) 73.2 72.0 76.0 80.0 85.0 Energy 5.8%
Gold ($/oz) 1108 1250 1400 1300 1200 Precious Metals 24.2%
Copper ($/metric ton) 6826 7350 8000 6800 6250 Industrial Metals 72.4%
Corn ($/Bu) 3.98 4.12 4.40 4.15 4.10 Agriculture 8.3%

3m cash YTD Return*

Foreign Exchange Current Mar-10 Jun-10 Sep-10 Dec-10 index in USD
EUR/USD 1.44 1.55 1.62 1.55 1.50 EUR 5.6%
USD/JPY 90.1 85 82 85 89 JPY 1.4%
GBP/USD 1.62 1.65 1.74 1.68 1.67 GBP 14.6%
AUD/USD 0.89 0.95 1.02 0.99 1.00 AUD 32.5%
USD/CAD 1.07 1.02 0.99 1.00 1.01 CAD 17.3%
NZD/USD 0.71 0.73 0.76 0.76 0.74 NZD 26.0%
YTD Return
Equities Current (local ccy) Sector Allocation * US YTD ($) Europe YTD ($) Japan YTD (¥) EM YTD ($)
S&P* 1096 24.3% Energy OW 12.1% OW 41.0% -1.5% N 80.2%
Topix 894 5.9% Materials OW 43.9% N 87.0% N 22.3% 101.2%
FTSE 100 5281 24.2% Industrials OW 21.3% OW 42.4% N 15.4% 54.4%
MSCI Eurozone* 156 25.8% Discretionary OW 39.6% OW 32.9% N 38.9% OW 109.5%
MSCI Europe* 1098 25.5% Staples UW 14.2% UW 38.3% UW -8.4% UW 0.9%
DAX 5895 22.5% Healthcare N 19.0% UW 20.3% UW -6.8% UW 35.1%
CAC 3866 25.3% Financials OW 14.1% OW 45.7% OW -10.5% OW 75.8%
MSCI EM* 42029 58.5% Information Tech. OW 55.0% N 32.0% N 14.1% OW 95.9%
MSCI EM $* 955 72.7% Telecommunications N 6.6% N 19.6% N -11.6% UW 24.9%
*Levels/returns as of Dec 17, 2009 Utilities UW 12.3% OW 8.0% UW -18.1% UW 51.4%

Source: Bloomberg, Datastream, IBES, Standard & Poor's Services, J.P. Morgan estimates

Dec 18, 2009 5

Global Asset Allocation
The J.P. Morgan View

Global Economic Outlook Summary

Real GDP Real GDP Consumer prices
% over a year ago % over previous period, saar % over a year ago
2008 2009 2010 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 3Q09 4Q09 2Q10 4Q10
The Americas
United States 0.4 -2.4 ↑ 3.4 ↑ -0.7 2.8 4.5 ↑ 3.0 4.0 4.0 3.5 -1.6 1.2 2.2 1.1
Canada 0.4 -2.6 2.4 -3.1 0.4 3.0 3.0 3.0 3.5 4.0 -0.9 0.8 1.4 2.3
Latin America 3.8 -3.2 ↓ 4.4 ↑ 0.9 ↓ 6.5 ↑ 5.1 ↓ 4.3 ↓ 4.5 ↑ 3.5 ↓ 3.2 ↑ 5.9 5.6 6.4 ↓ 7.0 ↓
Argentina 6.8 -4.0 4.0 1.1 1.0 ↑ 1.0 ↑ 8.0 ↓ 8.0 ↓ 3.0 ↓ 3.0 ↓ 5.9 6.5 ↑ 8.0 ↓ 9.0 ↓
Brazil 5.1 0.1 ↓ 6.2 ↑ 4.4 ↓ 5.1 ↓ 7.7 ↑ 6.3 ↑ 5.0 5.1 ↑ 4.0 4.4 4.2 4.5 4.7
Chile 3.2 -1.7 ↓ 5.0 -1.2 4.6 8.0 ↓ 6.0 5.0 ↑ 3.0 ↑ 4.0 ↑ -0.6 -1.8 ↓ 2.0 2.6
Colombia 2.4 -0.5 3.0 2.7 1.9 3.2 3.5 4.3 5.5 4.5 3.2 3.3 3.9 4.3
Ecuador 6.5 -1.0 2.0 ↑ -1.0 -2.0 0.0 3.0 ↑ 3.5 ↑ 4.0 4.5 ↑ 3.5 3.8 ↑ 3.8 ↑ 4.2 ↑
Mexico 1.3 -7.0 3.5 -1.1 12.2 4.0 ↓ 2.3 ↓ 3.4 ↑ 1.4 ↓ 2.2 ↑ 5.1 4.6 4.5 ↓ 5.1 ↓
Peru 9.8 1.0 5.5 ↑ -1.6 9.0 ↑ 13.0 3.0 3.5 4.0 ↑ 5.0 ↑ 1.9 1.1 1.5 2.0
Venezuela 4.8 -2.7 ↓ 1.0 ↓ -4.1 -7.8 1.0 ↓ 1.0 ↓ 4.0 ↑ 7.5 ↑ 2.0 ↑ 28.7 29.0 34.2 37.9
Asia/Pacific
Japan -1.2 ↓ -5.3 ↓ 1.9 ↓ 2.7 1.3 ↓ 2.5 1.8 ↓ 1.5 2.0 ↑ 2.2 ↑ -2.2 -1.8 -2.0 ↓ -1.6 ↓
Australia 2.4 1.1 ↑ 3.3 ↑ 2.5 2.1 ↑ 3.5 ↓ 3.7 ↑ 3.4 ↑ 3.3 ↓ 4.1 ↓ 1.3 2.2 ↑ 2.6 ↑ 2.6
New Zealand 0.1 -1.3 2.7 ↓ 0.3 2.6 ↑ 2.2 ↑ 3.6 ↑ 3.0 ↓ 2.9 ↓ 2.6 ↓ 1.7 2.3 ↓ 2.2 ↓ 1.8 ↑
Asia ex Japan 5.8 4.3 ↑ 7.4 ↑ 12.9 9.9 5.9 ↑ 7.0 ↑ 7.2 ↑ 7.1 ↓ 6.7 1.4 2.6 ↓ 4.3 ↓ 3.6
China 9.0 8.6 9.5 14.8 10.0 9.1 9.0 9.5 9.3 8.7 -1.3 0.6 ↓ 2.9 ↓ 2.7
Hong Kong 2.4 -3.3 4.5 14.8 1.6 5.0 4.2 4.0 3.8 3.5 -0.9 1.4 ↑ 2.4 ↑ 2.3 ↑
India 6.1 6.8 ↑ 7.8 ↑ 9.8 11.6 1.8 ↑ 10.4 ↑ 8.1 ↑ 7.0 ↓ 8.7 ↓ 11.8 12.2 11.9 6.2
Indonesia 6.1 4.4 5.5 4.3 5.3 5.0 6.0 4.0 8.5 5.0 2.8 2.7 5.3 6.3
Korea 2.2 0.2 4.9 11.0 13.6 3.6 2.0 4.0 4.0 3.5 2.0 2.4 3.1 3.6
Malaysia 4.6 -2.4 5.0 10.1 9.4 4.5 1.6 5.3 5.7 5.3 -2.4 -0.5 1.7 2.4
Philippines 3.8 1.0 5.0 7.0 4.1 5.0 6.0 5.0 3.5 4.0 0.3 2.4 4.1 4.7
Singapore 1.1 -2.1 6.5 21.7 14.2 -3.6 8.2 7.0 4.9 4.9 -0.4 -0.4 3.4 2.9
Taiwan 0.7 -3.0 5.8 18.8 8.3 6.0 3.8 5.0 4.6 3.5 -1.3 -1.4 ↓ 0.9 ↓ 2.0 ↓
Thailand 2.6 -2.9 5.5 9.0 5.5 5.3 4.9 5.7 5.3 5.3 -2.2 1.9 5.5 4.4
Africa/Middle East
Israel 4.0 0.0 3.0 1.0 2.2 2.5 3.0 3.5 3.5 4.0 3.2 3.3 3.4 3.3
South Africa 3.7 ↑ -1.9 ↑ 3.0 -2.8 0.9 3.4 4.1 ↓ 3.8 3.6 4.1 6.4 6.1 ↓ 4.2 ↓ 4.8
Europe
Euro area 0.5 -3.9 2.5 -0.6 1.5 2.5 3.0 3.0 3.0 2.5 -0.4 0.5 1.2 1.3
Germany 1.0 -4.7 3.3 ↓ 1.8 2.9 3.5 ↓ 3.5 3.5 3.5 2.5 -0.4 0.5 0.9 1.3
France 0.3 -2.2 ↑ 2.9 ↑ 1.1 1.1 3.0 ↑ 3.5 ↑ 3.5 ↑ 3.5 ↑ 2.5 -0.5 0.6 1.4 0.9
Italy -1.0 -4.7 ↑ 1.8 ↑ -1.9 2.3 ↓ 2.0 ↑ 2.0 2.0 2.0 2.0 ↓ 0.1 0.7 1.1 1.1
Norway 2.1 -1.1 2.8 1.3 2.0 3.0 3.0 3.0 3.0 2.8 ↓ 1.8 1.3 1.2 ↑ 0.9 ↑
Sweden -0.5 -4.3 ↓ 3.0 ↓ 1.2 0.7 2.5 ↓ 4.0 4.0 ↑ 3.5 3.0 -1.1 -0.5 ↓ 0.6 ↓ 0.5
Switzerland 1.8 -1.5 2.2 -1.1 1.2 2.3 2.5 2.8 ↑ 3.0 3.0 -1.0 -0.1 ↑ 0.9 ↑ 0.7
United Kingdom 0.6 -4.6 1.6 -2.3 -1.2 2.0 2.0 2.5 2.8 3.5 1.5 2.2 2.3 1.4
Emerging Europe 4.1 -5.4 ↓ 3.9 ↓ 1.9 3.9 5.5 3.6 3.3 3.3 3.7 7.0 6.2 ↑ 5.1 ↓ 5.1 ↓
Bulgaria 6.0 -5.8 -2.0 … … … … … … … … … … …
Czech Republic 2.5 ↓ -4.0 2.5 0.6 ↓ 3.3 ↑ 5.0 2.5 2.0 2.0 3.0 0.1 0.5 1.8 3.2
Hungary 0.6 -6.5 1.0 -7.6 ↑ -6.9 ↑ 3.5 3.0 3.0 3.0 3.0 5.0 5.1 3.8 2.8
Poland 5.0 1.7 3.2 2.0 2.0 5.5 3.0 3.0 3.0 3.5 3.5 3.3 1.9 2.3
Romania 7.1 -6.0 2.0 … … … … … … … 5.0 4.7 5.5 6.5
Russia 5.6 -8.5 5.0 4.5 7.9 6.5 4.5 4.0 4.0 4.5 11.4 9.3 ↓ 6.5 ↓ 7.0 ↓
Turkey 0.9 -5.7 ↓ 5.0 … … … … … … … 5.3 5.5 ↑ 6.7 ↑ 5.1 ↓

Global 1.3 -2.5 3.4 1.4 3.0 ↓ 3.8 ↑ 3.4 3.7 ↑ 3.7 3.5 ↑ -0.1 1.3 2.0 1.6 ↓
Developed markets 0.3 ↓ -3.4 2.7 -0.2 ↑ 1.8 ↓ 3.3 ↑ 2.8 3.2 ↑ 3.3 ↑ 3.0 -1.0 0.6 ↑ 1.2 0.8 ↓
Emerging markets 5.0 0.7 5.9 ↑ 7.6 ↓ 7.7 ↑ 5.5 5.6 ↓ 5.8 ↑ 5.5 ↓ 5.2 ↑ 3.5 4.0 4.9 ↓ 4.6 ↓

Source: J.P. Morgan

Dec 18, 2009 6

Global Asset Allocation
The J.P. Morgan View

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customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82

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Global Asset Allocation
The J.P. Morgan View

Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have
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General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan
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“Other Disclosures” last revised December 7, 2009.

Copyright 2009 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan.

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