To: Undisclosed recipients:MI From: US GIO Sent Sat 7/12/2014 1:31:37 AM Subject: The J.P. Morgan View : What if we are in a 2% world? JPM The J.P. Morgan View 2014-07-11 1438533.pdf J.P. Morgan Global Asset Allocation The J.P. Morgan View: What if we are in a 2% world? • Asset allocation — We investigate the risk scenario that global growth stays with a 2% handle, instead of the rebound to 3% plus we project. Impact would make us favor income over growth assets and for the moment keep us OW EM. • Economics — Further cuts in Q2 Euro area and Japan bring global growth to 1.9%, after already dismal 1.4% in Ql. • Fixed Income — Despite weaker near-term data, our medium-term growth outlook for the Euro area improves, keeping us long periphery vs. core. • Equities — Divergent macro and flow momentum keep us OW EM. • Credit — The US HG sector that has lagged the broader HG market most is 30yr single A non- Financials. • FX — We still expect the USD index to rise 1% in Q3, plus 1.5% in Q4. • commodities -Oil price to average $115/bbl and S120/bbl in 2015-16. • Click here for video. • Risk assets are down from the peaks reached only last week, and bonds rallied on little news beyond problems with a Portuguese bank. EM outperformed DM in equities and currencies. The move does underline that many investors expect a pullback in risk markets after the almost straight-line rally of the last few months if not years. But most of these same market participants also say they plan to buy on pullbacks. • We are less worried about near-term disturbances and flows and more about the medium-term outlook for economic growth. Over the past three years. the world economy has grown only at a 2.5% pace. below potential and thus not able to make up for what we lost in the recession. Each year. we keep EFTA_R1_00470154 EFTA01981552