• • J. P Morgan he J.P. Morgan View How can risk markets rally in an ugly world? Global Asset Allocation J.P.AAorgan Chase Bank NA, J.P. Morgan Securities Ltd. Nov 11, 2011 • Economics - US data keep supporting a 2.5% pace in H2. Jan LoeysA.- • Portfolio strategy — Heavy ovenveights in cash, that pays no yield, and less acute risks on US growth and Chinese inflation keep us overweight risk assets John Normand • Fixed Income — We close tactical shorts in long end Treasuries, and keep only a value-based short in 2-year Germany. Nikolaos Panigirtzoglou • Equities — Both US and European companies have beaten Q3 EPS consensus by 4% on average. • Credit — We keep a preference for long US vs. European credit. Seamus Mac Gorain • Foreign exchange — Large-scale ECB bond buying should not be a negative for the euro. But we keep hedges by being long JPY. • Commodities — We close the short leg of our EM Asia vs. US relative trade and double up on the long leg. Be long brent, gasoil, gold, sugar, corn and wheat. Matthew Lehmann Leo Evans • After a quite volatile week, risk markets are net up on the week, and safe bonds are down, though by amounts that could be reversed in minutes. Let's just call it range trading, therefore. The great majority of institutional investors YTD returns through Nov 10 we see remain quite sceptical about risk assets as the politics of fiscal consoli- dation in a slow-growth world continue to be quite ugly. And the Euro Area is %. equities are in lighter colour. little closer to agreement on measures to stop their debt crisis, while now more openly debating whether it is better to just shrink the currency union. Gold US High Grade O EMBIG O How is it possible for risk markets to gain in a world with so much risk, unknowns, volatility, disequlibria, and pure political ineptitude? One answer is to look at the main problem that end investors face — where do I get a return? US Fixed Income C Global Gov Bonds" T