From: US GIO To: Undisclosed recipients:; Subject: The J.P. Morgan View : Eight questions. Fewer answers. Date: Fri, 15 Feb 2013 21:55:01 +0000 Attachments: JPM_TheJ.P._Morgan_View_2013-02-15_1054856.pdf Inline-Images: image I .gif W2,J.P. Morgan Logo Global Asset Allocation The J.P. Morgan View: Eight questions. Fewer answers. Click here for the full Note and disclaimers. • Asset allocation — Bullish retail sentiment and the mini cliff from sequestration pose near-term risks to risky assets. But our ability to anticipate short-term market moves is not great, and we thus stick with our value-based medium-term ovenveights of equities and credit against safe bonds and cash. • Economics — Global growth fell to a cycle-low of 1.3% in Q4, but recent data keep us confident with a 2.4% pace for QI with upside risk. Full sequestration is now very likely for March I. We lower US H2 from 2.75% to 2.25%, saar. • Fixed Income — Higher BoE inflation forecast likely to feed into higher inflation risk premia. • Equities — Fade US equity outperformance. The sequestration raises the risk of a US growth disappointment in Q2, thus favoring our OW EM vs. US. • Credit — Short interest in the major HY and EM credit ETFs is approaching record highs. • Currencies — No change in trades, despite G20 and next week's Bal succession: Short JPY vs USD and EUR, short GBP vs SEK and EUR, and long selective EM FX: KRW, BRL, and MXN. • Commodities — We go outright short Brent, and ow long Brent time spread. • Markets are little changed this week, but are still moving our way, with riskier assets still edging out safe assets. We use the opportunity to play Agony Aunt for the week, and try to answer a selection of your most frequent questions of the past month. We do not have full answers for all, but are not too concerned, given the adage the beginning of all wisdom is to know what you don't know. • Has the rotation out of bonds started? We are seeing a trial run, le