From: US GIO <MMIIIIMa> To: Undisclosed recipients:; Subject: Eye on the Market, January 23, 2013 Date: Thu, 24 Jan 2013 01:34:18 +0000 Attachments: 01-23-2013_-_EOTM_-_True_Confessions.pdf Inline-Images: image001.png; image002.png; image004.png; image005.png; image006.jpg Eye on the Market, January 23, 2013 Topics: market and economic update, and the latest televised confession Market update. We released our 2013 Outlook on January 2nd; please contact your J.P. Morgan team for an electronic or printed copy. Since that time, more of the same: • Reflation. Equity volatility has fallen to pm-crisis lows as central banks drive up financial markets via ultra-low interest rates, hoping for whatever trickle-down effect they can get in the economy. Piles of cash held by pensions, endowments, central banks, individuals, etc, are looking for return, and on the march. While earnings growth is slowing, equity valuations are not stretched in an historical context. Expect another year of markets outperforming what growth alone would imply. • US growth is running at —2%. Income, consumption, housing and capital spending were improving at year-end. Higher income tax rates and the end of the payroll tax holiday will probably slow growth for a quarter or two before a modest rebound later in the year. Q4 S&P profits are coming in better than lowered expectations, and 2013 estimates are stabilizing at 10% y/y. • China's economy has been improving (production, demand, trade, housing, capital spending), reinforcing consensus growth expectations of 8% . In the rest of emerging Asia, exports and production are rising gradaully after last year's slowdown • In a schizophrenic Europe, economic data is still weak while capital markets keep improving. German growth stalled, the % of employed Italian men hit a new all-time low of 66%, and Spain's unemployment rate is about to pass Greece. Employment is usually a lagging indicator, but forward-looking surveys for Ital