From: US GIO To: Undisclosed recipients:; Subject: The J.P. Morgan View : Amidst near-term fog, focus on medium-term value. Date: Fri, 22 Feb 2013 23:43:59 +0000 Attachments: JPM_TheJ.P._Morgan_View_2013-02-22_1060315.pdf Inline-Images: image I .gif :AI Morgan Logo Global Asset Allocation The J.P. Morgan View: Amidst near-term fog, focus on medium-term value. Click here for the full Note and disclaimers. • Asset allocation —The near-term outlook has become more uncertain as risk positions have built, and US economic data should see softening as a result of fiscal tightening. We accept higher correction risk near term, but keep average ovenveights of equities and credit on excellent medium-term value. All ow credit longs are duration hedged. • Economics — End of Euro Area recession is delayed to next quarter. Softer US spending data over the coming 2 months raise uncertainty on 2013. • Fixed Income — We cover our MBS overweight as it is suffering from bond managers selling on fears of an early end to QE buying of MBS. • Equities — We cover ow Cyclicals overweight as the next manufacturing PMI risks moving down. • Credit —Investors signal they reduced risk in EM fixed income in our survey. • Currencies — Mid-year forecasts raised to stronger dollar vs JPY (97) and GBP (1.47). Cross-currency correlation has collapsed. • Commodities — Gasoline prices should move lower over the coming month. • After powerful growth-bullish moves in January, investors and markets are now hesitating and are cutting positions as they wonder whether the widely forecast economic rebound in really coming. Equities are slightly down this month, while commodities fell badly this week, giving back much of their January gains. Bonds are gently up this week, while the dollar spiked against most currencies. Credit is again sitting in the middle, not liking the fall in equities, but benefiting from lower government bond yields. • We have signaled upside risks on ou