From: GIO Group JP Morgan <gio.group.jp.morgangpmorgan.com> To: Undisclosed recipients:; Subject: GIO Trade Update Date: Mon, 02 Aug 2010 22:04:11 +0000 Attachments: GIO_Trade_Update_20 I 0-08-02_(Update).pdf Inline-Images: image005.png; image006.png Global Investment Opportunities Group (GIO) Opportunistic Investments A • t 2 2010 J-P. Morgan MID-TERM ELECTIONS We believe this year's mid-term elections in the US offer support for holding risky assets despite the recent slowdown in economic data. Historically, performance of risky assets has been better in mid-term election year than the other 3 years in the election cycle. In a recent Eye on the Market, our Chief Investment Officer Michael Cembalest showed a chart showing consistently positive returns in the third year of the U.S. electoral cycle. The strong performance is also true for shorter investment horizons as the S&P 500 is typically up in the months following elections. While some of the performance is likely due to seasonality, 4O returns are better in mid-term election years than the other 3 years with average increase of 8% vs. 2.5% in other years, respectively. Historically the consistently strong performance has been due to the government's actions to boost sentiment ahead of elections but, as we pointed out in the Eye on the Market, our government's hands are more tied today than in prior elections for providing fiscal benefits. However, potentially offsetting the lack of stimulative promises would be removal of the specter of policy uncertainty. Recently there have been more articles and statements suggesting the current regulatory environment is hampering business investment as managers are wary to invest in projects with potential policy changes looming (a la healthcare and financial reform). However, if political gridlock increases as a result of Republicans gaining more seats in Congress, managers may feel more confident in gauging how onerous future legislation could be