J.P. Morgan Global Asset Allocation 09 November 2012 The J.P. Morgan View Do US elections change anything? • Asset allocation — The equity market has priced out the Romney win scenario, but from these levels, our economic and market outlook and risks arc unchanged. Thcsc keep us medium-term overweight equities and credit, despite the likely volatility as the fiscal cliff is negotiated. Within equities, we stay underweight the US, and move most of the overweight into EM Asia. We have moved some of our credit overweight from the US to Europe. • Economics — The data flows continue to confirm that June/July was likely the bottom in global activity growth, and that we arc gently lifting from those levels, even as it will take well into next year before growth returns to trend. • Fixed Income — Look for yields to head higher, but focus more risk on spread compression trades. • Equities — We focus our overweights on EM Asia, Cyclical stocks and US Home builders. • Credit — We see the current dip as an opportunity to add risk. • Currencies — Be long the dollar during the fiscal cliff negotiations. • Commodities — A further set of better Chinese economic data keeps us long base metals. • Equity markets are taking the Obama victory quite badly. with US stocks down some 4% on Wednesday and Thursday. This has pushed up global bond markets, and credit spreads are wider, but commodities are largely ignoring this turmoil. We don't think an Obama victory truly changes the economic outlook, or risks, but it does eliminate the Romney hope that appeared to have been in market pricing. • By definition, the Romney scenario is now priced out of the market. The US elections confirm the status quo in Washington. and to us, they do so also for the broad economic and market outlook, from current levels. Hence, we do not see much reason to change our investment allocations, and remain medium-term overweight both credit and equities against cash, government debt