J. P Morgan he J.P. Morgan View Did markets overreact? Global Asset Allocation J.P.Morgan Chase Bank NA, J.P. Morgan Securities Ltd. Oct 28, 2011 • Economics — We raise US Q4 GDP from 1.0% to 2.5%, after having done the same to Q3 over the past month. Jan Loeys' • Portfolio strategy — Equities and credit may have overreacted to an EU John Normand Summit that was short on details, but we stay long risk assets as the EU is heading in the right direction, and we should get support from reduced US recession risks. Nikolaos Panigirtzoglou • Fixed Income — We remain defensive on Euro area peripherals, despite EU leaders' statement of intent. • Equities — We close our underweight in China and move BRICs to an over- weight within EM, i.e long MSCI BRICs vs MSCI EM. Seamus Mac Gorain • Credit — All-time record US HY inflows signal further spread narrowing. Matthew Lehmann • Foreign exchange — European bank recapitalization could lead to repatria- tion on foreign holdings, but the impact on EUR will likely be small. • Commodities —We expect the Brent-WTI spread to narrow further to $101 bbl by the end of next year. • Risk markets all rallied hard this week following the Euro Summit statement on YTD returns through Oct 27 Thursday morning that suggested a more determined commitment by EU heads of state to address the root causes of their debt crisis. We retain a long risk position — overweight riskier asset classes against defensive ones — on a judgement that Europe is finally recognizing what it must do to contain the crisis; that it is showing an increased willingness to implement such measures; that global investors remain broadly defensively positioned; and that you get badly penalised — through record low yields — if you choose to stay in safe %. equities are in lighter colour. Gold EMBIG US High Grade US Food Income assets. US High Yield EM Local Bonds" ■ ° This week's violent lurch up in equity prices took many market participa