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As of September 30, 2013

As of December 31, 2014

i h M rk ®i h M rk ®

1



Global Market Insights Strategy Team

Americas Europe Asia

Dr. David P. Kelly, CFANew York

Stephanie H. FlandersLondon

Tai HuiHong Kong

Andrew D. GoldbergNew York

Maria Paola ToschiMilan

Geoff LewisHong Kong

Anastasia V. Amoroso, CFAHouston

Vincent JuvynsLuxembourg

Yoshinori ShigemiTokyo

. ,Chicago

,Madrid

,Hong Kong

Julio C. CallegariSão Paulo

Tilmann Galler, CFAFrankfurt

Ian HuiHong Kong

David M. Lebovitz David Stubbs, PhD Ben LukNew Yor Lon on Hong Kong

Gabriela D. SantosNew York

Lucia GutierrezMadrid

Ainsley E. Woolridge

New York

Kerry Craig, CFA

London

Hannah J. AndersonNew York

Alexander W. DrydenLondon

Abigail B. DwyerNew York

Nandini RamakrishnanLondon

2Past performance is no guarantee of comparable future results. For China and Australia distribution, please note thiscommunication is for intended recipients only and is for wholesale clients only in Australia. For details, please refer to the fulldisclaimer at the end. Unless otherwise stated, all data is as of December 31, 2014 or most recently available.



Page Reference

4. S&P 500 Index at Inflection Points5. Returns and Valuations by Style6. Returns and Valuations by Sector

36. Fixed Income Yields and Returns37. Global Fixed Income38. Municipal Finance39. High Yield Bonds40. Emerging Market Debt

Equities Page 4

7. Stock Valuation Measures: S&P 500 Index8. Corporate Profits and Leverage9. Sources of Earnings per Share Growth10. Equity Performance in Bull Markets11. Interest Rates and Equities12. Deploying Corporate Cash13. Annual Returns and Intra- ear Declines

41. Fixed Income Sector Returns

42. Global Equity Markets43. International Equity Earnings and Valuations44. Global Economic Growth45. Manufacturing Momentum

International Page 42

14. Equity Correlations and Volatility15. Stock Market Since 1900

16. Economic Growth and the Composition of GDP17. Consumer Finances18. Credit Conditions

46. Sovereign Debt Stresses47. Europe: Cyclical Headwinds and Tailwinds48. Europe: Unemployment, Inflation, and Credit Markets49. Japan: Economic Snapshot

50. China: Economic and Credit Growth51. Demographics and Development52. Emer in Market Currencies

Economy Page 16

19. Cyclical Sectors20. Residential Real Estate21. Long-term Drivers of Economic Growth22. Federal Finances23. Unemployment and Wages24. Labor Market Perspectives

53. Emerging Market Equities54. Global Equity Valuations: Developed Markets55. Global Equity Valuations: Emerging Markets

56. Asset Class Returns

Asset Class Page 56

.26. Inflation27. Trade and the U.S. Dollar28. Energy: Supply, Demand and Prices29. Energy Price Impacts30. Consumer Confidence and the Stock Market

.58. Alternative Asset Class Returns59. Fund Flows60. Yield Alternatives: Domestic and Global61. Global Real Assets62. Global Commodities63. Life Expectancy and Pension Shortfall

PFixed Income 1

3

31. Interest Rates and Inflation32. The Fed and Interest Rates33. Shape of the Yield Curve34. Global Monetary Policy35. Sources of Bond Returns

.

65. Diversification and the Average Investor66. Cash Accounts67. Corporate DB Plans and Endowments



S&P 500 Index at Inflection Points

2,200Index level 1,527 1,565 2,059

S&P 500 Index

Dec. 31, 2014P/E (fwd.) = 16.2x

Characteristic Mar-2000 Oct-2007 Dec-2014

E q u

i t i e s

1,800

2,000

. . . .Dividend yield 1.1% 1.8% 1.9%10-yr. Treasury 6.2% 4.7% 2.2%

E q u

i t i e s ,

Oct. 9, 2007

1,400

1,600

. ,P/E (fwd.) = 25.6x

1,527

+101%

. .1,565

+204%+

1,000

1,200

-49%

-57%

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14600

800 Oct. 9, 2002P/E (fwd.) = 14.1x

777

Dec. 31, 1996P/E (fwd.) = 16.0x

741Mar. 9, 2009

P/E (fwd.) = 10.3x677

4

Source: Standard & Poor’s, First Call, Compustat, FactSet, J.P. Morgan Asset Management.Dividend yield is calculated as the annualized dividend rate divided by price, as provided by Compustat. Forward Price to Earnings Ratio is a bottom-upcalculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is providedby FactSet Market Aggregates. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment ofdividends. Past performance is not indicative of future returns.Guide to the Markets – U.S. Data are as of 12/31/14.



Returns and Valuations by Style

Value Blend Growth Value Blend Growth

4Q14 2014 Current P/E vs. 20-year avg. P/E

15.5 16.2 18.7

Value Blend Growth

e

L a r g e5.0% 4.9% 4.8%

L a r g e13.5% 13.7% 13.0%

M i d

6.1% 5.9% 5.8% M i d

14.7% 13.2% 11.9% E q u

i t i e s

14.0 16.1 21.0

16.4 18.6 20.0

14.2 16.5 21.9

L a r g

M i d

S m a l l

9.4% 9.7% 10.1% S m a l l

4.2% 4.9% 5.6%

Since Market Low (March 2009)Since Market Peak (October 2007)Current P/E as % of 20-year avg. P/E

E.g.: Large Cap Blend stocks are fairly

16.4 18.1 20.0

14.5 17.3 21.5 S m a l l

Value Blend Growth Value Blend Growth

L a r g e42.1% 54.0% 70.1%

L a r g e254.4% 244.2% 246.9%

d d

valued compared to histor ical average.

Value Blend Growth

L a r g e110.1% 100.6% 89.0%

M i . . . M

i . . .

S m a l l

48.1% 57.6% 66.7% S m a l l

266.2% 279.9% 293.3%

M i d

118.1% 112.7% 94.5%

S m a l l

113.1% 104.4% 93.3%

5

Source: Russell Investment Group, Standard & Poor’s, FactSet, J.P. Morgan Asset Management. All calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Peak represents period 10/9/07 – 12/31/14, illustrating market returnssince the S&P 500 Index high on 10/9/07. Since Market Low represents period 3/9/09 – 12/31/14, illustrating market returns since the S&P500 Index low on 3/9/09. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with theexception of the large blend category, which is reflected by the S&P 500 Index. Past performance is not indicative of future returns. P/E ratios reflectlatest available data. Earnings estimates are as of November for Russell Indexes and as of December for Standard & Poor’s.Guide to the Markets – U.S. Data are as of 12/31/14.



Stock Valuation Measures: S&P 500 Index

U.S. Equity: Valuation Measures Historical AveragesValuation Latest

1-year 5-year 10-year 25-year*. . .

P/E Price to Earnings 16.2x 15.4x 13.5x 13.8x 15.6x

CAPE Shiller's P/E 27.3 25.5 22.5 22.9 25.3Div. Yield Dividend Yield 1.9% 1.9% 2.0% 2.0% 2.1%

REY Real Earnings Yield 3.7% 3.7% 4.3% 3.3% 2.3% E q u

i t i e s

r ce o oo . . . . .

P/CF Price to Cash Flow 11.4 10.8 9.3 9.7 11.3

EY Spread EY Minus Baa Yield 1.5% 1.6% 2.2% 1.3% -0.7%

S&P 500 Earnings Yield vs. Baa Bond YieldS&P 500 Index: Forward P/E Ratio

18x

20x

22x

24x

26x

8%

10%

12%

14%

S&P 500 Earnings Yield(Inverse of fwd. P/E): 6.2%

Current: 16.2x

' ' ' ' ' ' ' ' ' ' ' ' '8x

10x

12x

14x

16x

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '142%

4%

6%

Moody’s Baa Yield: 4.7%

Average: 15.6x

7

Source: Standard & Poor’s, FactSet, Robert Shiller Data, FRB, J.P. Morgan Asset Management. Price to Earnings is price divided by consensus analystestimates of earnings per share for the next 12 months. Shiller’s P/E uses trailing 10-years of inflation adjusted earnings as reported by companies.Dividend Yield is calculated as the trailing 12-month average dividend divided by price. Real Earnings Yield is defined as (trailing four quarters of reportedearnings/price) - year over year core CPI inflation. Price to Book Ratio is the price divided by book value per share. Price to Cash Flow is price divided byNTM cash flow. EY Minus Baa Yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) minusthe Moody’s Baa seasoned corporate bond yield. *P/CF is a 20-year avg. due to cash flow data availability.Guide to the Markets – U.S. Data are as of 12/31/14.



Corporate Profits and Leverage

$31

S&P 500 Earnings Per Share and PerformanceIndex level and quarterly operating earnings

Profit Margins

4Q14*: $30.50 10%

11%

S&P 500 Operating EPS % of Sales per Share**-

3Q14*:10.1%

$23

$27

E q u

i t i e s

2Q07: $24.06

6%

7%

8%

9%

3Q14:8.8%

, . . ,

$15

$19

Total Leverage

4%

5%

'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10

$7

$11

160%

180%

200%

220%

, ,

-$1

$3

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14' ' ' ' ' ' ' ' ' '

80%

100%

120%

140%4Q14:100%

verage:

8

Source: BEA, Standard & Poor’s, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. *Most recently available data is 3Q14 as 4Q14 is a Standard & Poor’s preliminary estimate. **S&P 500Operating EPS % of Sales per Share fell to 0% in 4Q2008 and is adjusted on the chart. Past performance is not indicative of future returns.Guide to the Markets – U.S.Data are as of 12/31/14.



Sources of Earnings per Share Growth

50%

S&P 500 Year-Over-Year EPS GrowthGrowth broken into revenue, changes in profit margin & changes in share count

Share of EPS Growth 3Q14*

20%

30%

40%

E q u

i t i e s Margin 3.6%

Revenue 6.3%

Share count 0.1%

0%

10%

-30%

-20%

-10%

-50%

-40%

3Q143Q123Q103Q083Q063Q043Q023Q003Q983Q963Q94

9

Source: Standard & Poor’s, Compustat, J.P. Morgan Asset Management.EPS levels are based on operating earnings per share. *Most recently available data is 3Q14. Past performance is not indicative of future returns.4Q2008, 1Q2010 and 2Q2010 reflect -101%, 92% and 51% growth in operating earnings, and are adjusted on the chart.Guide to the Markets – U.S.Data are as of 12/31/14.



Equity Performance in Bull Markets

300% 90%% of days during bull markets the S&P 500 is at and near record highs

S&P 500 Performance and Average Valuation S&P 500 Levels Near Market HighsPrice returns to peak after crossing average real earnings yield

Returns to eak rice after avera e valuation

0%

240%

78%

70%

80%

E q u

i t i e s 1991-2000

2002-2007

2009-Today

Returns before markets pass average valuation

*

“Average valuation” isdefined as the average realearnings yield of the S&P

49%

83%180%

36%

42%

40%

50%

60%500 from 1963 until today

16%

30%

4%

0%

60%

120%

13%

33%

17%20%

30%

29% 49% 73% 121% 59% 180% 101% 204%

15%

0%'66 '70 '74 '82 '87 '90 '02 '09

0%

10%

New High Within 1% Within 5%

Start of Bull MarketPercent of days during a Bull Market

10

Source: Standard & Poor’s, J.P. Morgan Asset Management.Valuations are based on real earnings yield for the S&P 500 which is defined as (trailing four quarters of reported earnings/price) - year over year coreCPI inflation. Period after average valuation defined by 15-day moving average passing below average real earnings yield. *As depicted on the left handchart, the return to peak price for the current bull market is 0% as the S&P 500 has yet to cross its long run average real earnings yield. The S&P 500would need to appreciate over 22% to reach its long-term average real earnings yield of 2.5%.Guide to the Markets – U.S.Data are as of 12/31/14

,



Interest Rates and Equities

0.8

Correlations Between Weekly Stock Returns and Interest Rate MovementsWeekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963 –Dec. 2014

When yields are

0.4

0.6

E q u

i t i e s

Positiverelationshipbetween yieldmovements

e ow , r s ngrates aregenerallyassociated withrising stockprices

Last 12 Months

1963 12 Months Ago

Graph Key

0

0.2

returns

l a t i o n

C o e

f f i c i e n

t

-0.4

-0.2

Negativerelationship

between yield

C o r r

-0.8

-0.6

0% 2% 4% 6% 8% 10% 12% 14% 16%

movements anstock returns

-

11

Source: Standard & Poor’s, U.S. Treasury, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only.Guide to the Markets – U.S.Data are as of 12/31/14.



Deploying Corporate Cash

1 600

$1,800

1 700

$1,80032%

Corporate Cash as a % of Current AssetsS&P 500 companies –cash and cash equivalents, quarterly

Corporate Growth

Capital Expenditures M&A Activity$bn, nonfarm nonfinancial capex, quarterly value of deals completed

$600

$800

$1,000

$1,200

$1,400

,

$1,200

$1,300

$1,400

$1,500

$1,600

,

E q u

i t i e s

20%

22%

24%

26%

28%

$0

$200

$400

$900

$1,000

$1,100

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '1414%

16%

18%

Dividend Payout Ratio

Cash Returned to Shareholders

$100

$120

$140

$160

$30

$33

$36

$39

50%

60% , , , -

Dividends per Share

$20

$40

$60

$80

$15

$18

$21

$24

' ' ' ' ' ' ' ' ' ' ' ' ' ' ''00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '1420%

30%

Share Buybacks

12

Source: Standard & Poor’s, FRB, Bloomberg, FactSet, J.P. Morgan Securities, J.P. Morgan Asset Management. (Top left) Standard & Poor’s,FactSet, J.P. Morgan Asset Management. (Top right) M&A activity is the quarterly value of officially agreed transactions and capital expendituresare for nonfarm nonfinancial corporate business. (Bottom left) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. (Bottom right) Standard& Poor’s, Compustat, FactSet, J.P. Morgan Asset Management.

Guide to the Markets – U.S. Data are as of 12/31/14.



Annual Returns and Intra-year Declines

40%

S&P 500 Intra-year Declines vs. Calendar Year ReturnsDespite average intra-year drops of 14.2%, annual returns positive in 27 of 35 years*

2014

26

1517

26

1512

27 26

20

31

27

20

26

14

23

13 13

30

11

20%

30%

E q u

i t i e s

-10

1 2

-7

47

-2

-10

3 4

0

-7 -8-9

-8 -8 -6 -6 -5

-9

-3-8 -8 -7 -8

-10 -10

-6-7-10%

%

10%

-13

-23

-17 -18 -17

-13

-34

-20

-

-19

-12

-17

-30

-34

-14

-28

-16-19

-30%

-20%

-38

-49

-60%

-50%

-

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

13

Source: Standard & Poor’s, FactSet, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough duringthe year. For illustrative purposes only. *Returns shown are calendar year returns from 1980 to 2014.Guide to the Markets – U.S.Data are as of 12/31/14.



Equity Correlations and Volatility

70%

Large Cap StocksCorrelations Among Stocks

Sovereign DebtCrisis

LehmanGreat Depression /World War II

30%

40%

50%

E q u

i t i e s an ruptcy

Tech Bust & 9/11

ras

OPEC Oil

Crisis

Cuban Missile Crisis

0%

10%

'26 '32 '38 '44 '50 '56 '62 '68 '74 '80 '86 '92 '98 '04 '10

Volatilit Measure ‘08 Peak Avera e LatestDaily Volatility of DJIA

Average: 27.0Dec. 2014: 37.4%

2.0%

2.5%

3.0%

3.5%

45

60

75

90DJIA (Left) 3.30% 0.71% 0.58%VIX (Right) 80.9 20.0 19.2

DJIA vol. shownin 3-month

moving average

'30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100.0%

0.5%

1.0%

1.5%

0

15

30

14

Source: (Top) Empirical Research Partners LLC, Standard & Poor’s, J.P. Morgan Asset Management. Capitalization weighted correlation of top 750 stocks by marketcapitalization, daily returns, 1926 – Sep. 1, 2014. (Bottom) CBOE, Dow Jones, J.P. Morgan Asset Management. DJIA volatility are represented as three-month movingaverages of the daily absolute percentage change in the Dow Jones Industrial Average.Charts shown for illustrative purposes only. Guide to the Markets – U.S.Data are as of 12/31/14.



Stock Market Since 1900

S&P Composite Index

Log Scale –

1,000

300

E q u

i t i e s

1001966 – 1974

101900 – 1924

1937 – 1948

'00 '10 '20 '30 '40 '50 '60 '70 '80 '90 '00 '10

15

Source: Robert Shiller, FactSet, J.P. Morgan Asset Management.Data shown in log scale to best illustrate long-term index patterns.Past performance is not indicative of future returns. Chart is for illustrative purposes only.

Guide to the Markets – U.S.

Data are as of 12/31/14.



Economic Growth and the Composition of GDP

1810%

Real GDPYear-over-year % chg

3 14

Components of GDP3Q14 nominal GDP, trillions USD

3.2% HousingReal GDP

y $14

$16

6%

8% YoY % chg: 2.7% 13.3% Investment Ex-housing

18.2% Gov’t Spending

QoQ % chg: 5.0%

E c o n o

$8

$10

$12

2%

4%

3.0%

$4

$6

-2%

0%

.

ExpansionAverage:

2.3%

-$2

$0

$2

' ' ' ' ' ' ' ' ' '-6%

-4%

- 2.9% Net Exports

16

Source: BEA, FactSet, J.P. Morgan Asset Management.Values may not sum to 100% due to rounding. Quarter over quarter percent changes are at an annualized rate. Average represents the annualized growt h rate for thefull period. Expansion average refers to the period starting in the second quarter of 2009.





Consumer Finances

$100 14%

Household Debt Service RatioDebt payments as % of disposable personal income, seasonally adjusted

4Q07:

Consumer Balance Sheet3Q14, Trillions of dollars outstanding, not seasonally adjusted

Total Assets: $95.4tn 3Q-‘07 Peak: $82.1tn

$80

$90

11%

12%

13%

y

1Q80:10.6%

4Q14**:9.9%

.

Homes: 24%

1Q-‘09 Low: 67.0tn

$50

$60

$70

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '149%

10%

E c o n o

Household Net Worth 4Q14**:

Deposits: 9%

Pension Funds: 21%

Other Tangible: 6%

$30

$40

$60,000

$70,000

$80,000

$90,000

,$82,9072Q07:

$67,874Other Non-revolving: 1%Revolving*: 6%

Auto Loans: 7%Other Liabilities: 9%

Student Debt: 9%

$0

$10

$20

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$10,000

$20,000

$30,000

$40,000

50,000

Total Liabilities: $14.1tnOther Financial

Assets: 39%

Mortgages: 68%

17

Source: (Left) FRB, J.P. Morgan Asset Management. Data include households and nonprofit organizations. (Right) BEA, FRB, J.P. Morgan AssetManagement. *Revolving includes credit cards. **4Q14 household debt service ratio and 4Q14 household net worth are J.P. Morgan Asset Managementestimates. Values may not sum to 100% due to rounding.Guide to the Markets – U.S.Data are as of 12/31/14.



Credit Conditions

14%

Common Equity as a % of Total Assets

2013:

All FDIC insured institutions, 1934 –201312%

Delinquency Rates All banks, seasonally adjusted

8%

10%

12%

y

11.1%

Average: 7.7%

4%

6%

8%

10%Consumer Loans

Commercial and Industrial Loans

7.0%

4%

6%

'34 '40 '46 '52 '58 '64 '70 '76 '82 '88 '94 '00 '06 '12 E c o n o

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '140%

2%

0.8%

.

Loan Growth

Lending Standards for Approved Mortgage Loans

720

740

760

10%

20%

30%Real Estate Loans Nov. 2014:

12.8%

row n oans ou s an ng a commerca an s, o , seasona y a us eNov. 2014:

744

660

680

700

' ' ' ' ' ' ' ' ' ' ' ' ' ' ''00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14-30%

-20%

-10%

0%

Commercial and Industrial Loans

Nov. 2014:2.7%

18

Source: (Top left) FDIC, J.P. Morgan Asset Management. (Top right) Federal Reserve, FactSet, J.P. Morgan Asset Management. (Bottom left): Federal Reserve, FactSet, J.P.Morgan Asset Management. (Bottom Right) McDash, J.P. Morgan Securitized Product Research, J.P. Morgan Asset Management.

All data reflect most recently available releases.




Cyclical Sectors

24Millions, seasonally adjusted annual rateLight Vehicle Sales

46

47

Manufacturing and Trade InventoriesDays of sales, seasonally adjusted

y 14

1618

20

Average: 15.3

Dec. 2014:16.8

41

4243

44

45

Oct. 2014:39.5

E c o n o

'96 '98 '00 '02 '04 '06 '08 '10 '12 '148

10

12

Housing Starts

Real Capital Goods Orders

'96 '98 '00 '02 '04 '06 '08 '10 '12 '1437

38

39

1,600

2,000

2,400ousan s, seasona y a us e annua rae

$60

$65

$70

$75on- eense cap a goo s or ers ex. arcra , n, seasona y a us e

Nov. 2014:61.0

' ' ' ' ' ' ' ' ' '0

400

800

,

Nov. 2014:1,028

verage: ,

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14$40

$45

$50

$55

Average: 56.8

19

Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, FactSet, J.P. Morgan Asset Management. (Bottom left) Census Bureau,FactSet, J.P. Morgan Asset Management. (Bottom right) Census Bureau, FactSet, J.P. Morgan Asset Management.Capital goods orders deflated using the producer price index for capital goods with a base year of 2004.Guide to the Markets – U.S.Data are as of 12/31/14.



Residential Real Estate

40%125

Indexed to 100, seasonally adjustedHome Prices Housing Affordability Index

Avg. mortgage payment as a % of household income

20%

25%

30%

5

y115

120Case Shiller 20-cityFHFA Purchase Only

Average Existing Home Nov. 2014:12.1%

Avera e: 20.3%

10%

15%

'75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05 '08 '11 '14 E c o n o

100

105

110

Home Inventories

90

95

3.5

4

4.5, ,

Nov. 2014:2.4

' ' ' ' ' ' ' ' ' '75

80

85

' ' ' ' ' ' ' ' ' ' '1.5

2

2.5

20

Sources: (Left) National Association of Realtors, Standard & Poor’s, FHFA, FactSet, J.P. Morgan Asset Management. (Top right) Census Bureau, J.P. Morgan Asset Management.Monthly mortgage payment assumes the prevailing 30-year fixed-rate mortgage rates and average new home prices excluding a 20% down payment. (Bottom right) CensusBureau, National Association of Realtors, J.P. Morgan Asset Management.





Long-term Drivers of Economic Growth

Private nonresidential fixed investment, % of GDP16%

Gross Investment and DepreciationDepreciationGross investments endin

5%

Five year moving average of year-over-year % changeGrowth in Employment and Real Output Per Worker*

8%

12%

y

4%

verage growt50 yr. 10 yr. 5 yr.

Employment 1.5% 0.5% 1.1%

Real OutputPer Worker 1.5% 1.1% 1.3%

GDP 3.0% 1.6% 2.4%

'90 '95 '00 '05 '100%

4%

E c o n o

Real Capital Stock Growth

2%

3%

Real Output Per Worker

3%

4%

5%

2013: 1.6%

, - -

1%

Employment Growth

0%

1%

2%

'70 '80 '90 '00 '10-1%

0%

21

Source: BEA, BLS, FactSet, J.P. Morgan Asset Management.*Labor Force includes the population age 16+ working or looking for work, Real Output Per Worker is calculated as real GDP growth minus civilianemployment growth. Averages are calculated as the annualized growth rate.





Federal Finances

$4.0

The 2015 Federal BudgetCBO Baseline forecast, trillions USD

-12%

Federal Budget Surplus/Deficit% of GDP, 1990 –2024, 2014 CBO Baseline

Forecast

$3.0

$3.5

y

o a pen ng: . n

Other

$550bn (15%)

Net Int.: $251bn (7%)

Borrowing:$469bn (13%)

Other: $302bn (8%)

-

-8%

-6%-4%

-2%

2015:-2.6%

$2.0

$2.5

E c o n o

Defense:$608bn (16%)

Non-defense Disc.:$506bn (13%) Social Insurance:

$1,065bn (28%)'90 '95 '00 '05 '10 '15 '20 '25

0%

2%

4%

Federal Net Debt (Accumulated Deficits)

$1.0

$1.5 Social Security:$887bn (24%)

Income:

Corp.: $389bn (10%)

80%

100%

120% , , ,

2024:77.2%2015:

74.0%

Forecast

$0.0

$0.5Medicare & Medicaid:

$948bn (25%)

,

20%

40%

60%

' ' ' ' ' ' ' ' ' ' '

22

Source: U.S. Treasury, BEA, CBO, St. Louis Fed, J.P. Morgan Asset Management.2015 Federal Budget is based on the CBO’s August 2014 Baseline Budget Forecast. Other spending includes, but is not limited to, health insurance sub sidies, incomesecurity, and federal civilian and military retirement.Note: Years shown are fiscal years (Oct. 1 through Sep. 30). 2015 numbers are CBO estimates as of August 2014.Guide to the Markets – U.S. Data are as of 12/31/14.



Unemployment and Wages

Civilian Unemployment Rate and Year-over-Year Growth in Wages of Production and Non-Supervisory WorkersSeasonally adjusted, percent

m y

10%

Oct. 2009:

10.0%

E c o n o

6%

8%

50-yr. Average: 6.1%

Unemployment

4% 49-yr. Average: 4.3%

Nov. 2014:5.8%

Nov. 2014:

2.2%

'70 '80 '90 '00 '100%

2% Wage Growth

23

Source: BLS, FactSet, J.P. Morgan Asset Management.Guide to the Markets – U.S.




Labor Market Perspectives

Employment – Total Private PayrollTotal job gain/loss (thousands)

6008.8mm 67%

68%Labor Force Participation Rate

y -400

-2000

200

400 jobs lost

10.9 mm jobs 64%

65%

66%

E c o n o

Net Job Creation Since Feb. 2010 – Millions of Jobs

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14-1,000

-800

-600 gained

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '1462%

63%

Nov. 2014: 62.8%

Ratio of Unemployed to Job Openings

4

5

6

7

3.22.9

2.1 1.9

1 mm

2 mm

3 mm

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '141

2

3

Oct. 2014: 1.9

0.9

-0.5

-1 mm

0 mm

Info. Fin &Bus. Svcs .

Mfg. Trade &Trans.

Leisure,Hosp t. &

Other Svcs.

Edu. &Health Svcs.

Mining &Construct.

Gov't

24

Source: BLS, FactSet, J.P. Morgan Asset Management.





Employment and Income by Educational Attainment

18%

Unemployment Rate by Education Level

$84,852$90,000

Average Annual Earnings by Highest Degree EarnedFull-time workers aged 18 and older, 2012, USD

14%

16%

y

High School No CollegeSome College

College or Greater $70,000

$80,000

+28K

10%

12%

E c o n o

Nov. 2014:

5.6%

.8.5% $56,665

$50,000

$60,000

+26K

4%

6%Nov. 2014:

4.9%

$30,627

$20,000

$30,000

$40,000

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '140%

2%Nov. 2014:

3.2%

$0

$10,000

'

25

Source: BLS, Census Bureau, FactSet, J.P. Morgan Asset Management.Unemployment rates shown are for civilians aged 25 and older.





Inflation

15%

CPI and Core CPI% change vs. prior year, seasonally adjusted CPI

ComponentsWeight in

CPI 12-month Change

y

12%

-yr. vg. ov.

Headline CPI 4.2% 1.3%

Core CPI 4.1% 1.7%Headline PCE 3.6% 1.2%Core PCE 3.5% 1.4%

oo ev. . .

Housing 32.3% 3.0%

Apparel 3.5% -0.3%

Transportation 5.6% 1.8%

E c o n o

6%

9%Medical Care 5.8% 2.3%

Recreation 2.0% -2.8%

Edu. & Comm. 0.6% -4.0%

3%

Other 1.6% 1.5%

Headline CPI 100.0% 1.3%

Less:

'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-3%

0% Energy 8.9% -4.8%

Food 14.1% 3.2%

Core CPI 77.1% 1.7%

26

Source: BLS, FactSet, J.P. Morgan Asset Management.CPI used is CPI-U and values shown are % change vs. one year ago and reflect November 2014 CPI data. CPI component weights are as of November 2014.Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs anevolving chain-weighted basket of consumer expenditures instead of the fixed weight basket used in CPI calculations.Guide to the Markets – U.S. Data are as of 12/31/14.



Trade and the U.S. Dollar

-7%

Current Account Balance and Oil Imports, % of GDP

4Q05:115

U.S. Dollar IndexMonthly average of nominal trade-weighted exchange index: major currencies

-6%

-5% y

-6.2%

105

110Forecast*

-4% E c o n o

90

95

**-3%

-2%

3Q14:-2.3%

urren ccoun a ance

80

85

. :84.0

.84.3

-1%

0%' ' ' ' ' ' ' ' '

Net Oil Imports

:-3.1%

3Q14:-1.0%

'96 '98 '00 '02 '04 '06 '08 '10 '12 '1465

70 Mar. 2008:70.3

27

Source: BEA, EIA, Federal Reserve, FactSet, J.P. Morgan Asset Management.*Oil imports as a percent of GDP is an EIA forecast. **December U.S. Dollar index value is a J.P. Morgan Asset Management estimate.





Energy: Supply, Demand and Prices

$160

Change in Production and Consumption of Oil

2013 2014* 2015* Growth since

Production, consumption and inventories, million barrels per dayPrice of OilBrent crude, nominal prices , USD/bbl

$60

$80

$100

$120

y

2013Production

U.S. 12.3 13.9 14.9 20.7%

OPEC 36.0 36.0 35.9 -0.3%

'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$0

$20

$40

E c o n o

Other 41.8 42.1 41.9 0.4%

Global 90.2 92.0 92.8 2.9%

Consumption

Dec. 2014:$57.33

U.S. Natural Gas Production**

EIA

20

25

30

35U.S. 19.0 19.0 19.1 0.7%

Europe 13.6 13.5 13.4 -1.9%

Japan 4.5 4.4 4.2 -6.4%

China 10.6 11.0 11.3 6.9%

Gbl. Natural Gas Prices

Japan $13.86Germany $10.16U.S. $3.65

,

Shale Gas

Forecast

' ' ' ' ' ' '0

5

10

15Other 42.8 43.6 44.3 3.6%

Global 90.5 91.4 92.3 2.0%

Inventory Change -0.3 0.5 0.4

Other***

28

Source: EIA, FactSet, J.P. Morgan Asset Management. *Forecasts are from EIA Annual Energy Outlook and start in 2013. **Production numbers as of 2013. ***Other includesconventional on and offshore natural gas drilling, tight gas, and coalbed methane. Natural gas prices are $/mmbtu and are as of December 2014.





Energy Price Impacts

14% Imports as a % of GDP

Percent of Income Spent on Gasoline and Motor OilBefore-tax income quintile, percent of spending, 2013

Oil Importers and ExportersNet imports as a percent of GDP, 2013

-

6%

8%

10% -3.6%

0.9%

1.6%

- - - -

Canada

U.K.

U.S. e d y

0%

2%

Lowest Second Third Fourth Highest

2.2%

2.4%

2.4%

Italy

France

GermanyGasoline Prices

D e v e

l o

E c o n o

3.6%

-13.6%

0.7%

Japan

Russia*

Brazil

,

$3.00

$4.00

$5.00 Dec. 2014:$2.61

g

2.4%

4.8%

5.3%

China

South Africa

India' ' ' '

$0.00

$1.00

$2.00

D e v e

l o p

i

29

Source: (Top left) BEA, (Bottom Left) Department of Labor, FactSet, (Right) EIA, IMF, J.P. Morgan Asset Management.

*Russia imports as a percent of GDP was -13.6% in 2013 and is adjusted on the chart.





Consumer Confidence and the Stock Market

130Consumer Sentiment Index – University of Michigan

Impact on Consumer Sentiment from a…

y110

120

Mar. 1984

Jan. 2000

-2.0%Jan. 2004

+4.4%

- . p s+1.9+2.8-5.2

y-o-y r se n gaso ne pr ces10% y-o-y rise in home prices10% y-o-y rise in the S&P 5001% y-o-y rise in the unemployment rate

E c o n o

90

100

Average: 84.8

+13.5%May 1977

+1.2%

.-6.2%

Jan. 2007-4.2%

.93.6

60

70

Oct. 1990

Mar. 2003+32.8% Oct. 2005

+14.2%

' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '40

50

Feb. 1975+22.2%

May 1980+19.2%

.

Nov. 2008+22.3%

Aug. 2011+15.4%Sentiment Cycle Low and

subsequent 12-month S&P 500 Indexreturn

30

Source: University of Michigan, FactSet, J.P. Morgan Asset Management.Peak is defined as the highest index value before a series of lower lows, while a trough is defined as the lowest index value before a series of higherhighs. Subsequent 12-month S&P 500 returns are price returns only, which excludes dividends. Impact on consumer sentiment is based on a multivariate monthly regression between 1/31/2000 – 5/31/2014.




Interest Rates and Inflation

20%Nominal and Real 10-year Treasury Yields

Average

15%

. ,15.84%

–Nominal Yields 6.30% 2.17%Real Yields 2.50% 0.46%

Inflation 3.80% 1.71%

10%

c o m

eNominal 10-yearTreasury Yield

5%

F i x e

d I . , .

Real 10-yearTreasury Yield

'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15-5%

Dec. 31, 2014: 0.46%Rising Rate Corp. Bonds S&P 5001958-1981 3.0% 8.6%Ann. Inflation 5.0% 5.0%Ann. Real Return -2.0% 3.5%

Falling Rate Corp. Bonds S&P 5001982-2014 9.6% 11.7%Ann. Inflation 3.0% 3.0%Ann. Real Return 6.6% 8.6%

31

Source: Federal Reserve, BLS, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for December 2014,where real yields are calculated by subtracting out November 2014 year-over-year core inflation. All returns above reflect annualized total returns, whichinclude reinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance.Guide to the Markets – U.S.Data are as of 12/31/14.



The Fed and Interest Rates

7%

Fed’s Balance Sheet: Assets$ trillions

Other

Federal Funds Rate ExpectationsFOMC and market expectations for the Fed Funds rate

$4.0

$4.5Federal Funds Rate

3%

4%

5%U.S. Treasuries

Agency MBS

$1.5

$2.0

$2.5

$3.0

$3.5

FOMC Long Run Projection

FOMC Year-End EstimatesMarket Expectations

0%

1%

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17

c o m

e

Fed’s Balance Sheet: Liabilities

Federal Reserve Summary of Economic Projections

$0.0

$0.5

$1.0

'04 '06 '07 '08 '09 '10 '11 '12 '13 '14

F i x e

d I

$2.5

$3.0

$3.5

$4.0

$4.5

Excess Reserves

Required Reserves

Other Liabilities

FOMC December 2014 Forecasts*Percent

2014 2015 2016 2017 LongRun

Change in real GDP, Q4 to Q4 2.4 2.8 2.8 2.4 2.2

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0.0

$0.5

$1.0

$1.5

$2.0Unemployment Rate, Q4 5.8 5.3 5.1 5.1 5.4

PCE Inflation, Q4 to Q4 1.3 1.3 1.9 1.9 2.0

Federal Funds Rate, end of year 0.13 1.13 2.50 3.63 3.75

32

Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.Monetary base is defined as the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits heldin the central bank's reserves. Other liabilities of the Federal Reserve primarily consist of currency outstanding. Market expectations are the federalfunds rates priced into the fed futures market. *Forecasts of 17 Federal Open Market Committee (FOMC) participants, midpoints of central tendencyexcept for federal funds rate which is a median estimate.




Shape of the Yield Curve

4.5%

Yield CurveU.S. Treasury Yield Curve

4.0%

1.5%

2.0%

2.5%

3.0%

3.5%

. Dec. 31, 2013

Dec. 31, 2014

1.1% 2.0%2.2%

2.8%

3.0%

2.5%

1.8%

0.1%

0.0%

0.5%

1.0%

Nominal 2 Year and 10 Year U.S. Treasury Yields Treasuries Outstanding – 3Q14

c o m

e 3m 1y 2y 3y 7y 10y 30y5y

0.3%0.7%

.

0.8%0.4%

0.5%

0.6%

0.7%

.

2.6%

2.8%

3.0%

. , ,

F i x e

d I

Foreign official

State and local

gov'ts

Financialinstitutions

7%

Households6%

Other 1%

Jan '14 A r '14 Jul '14 Oct '14 Jan '150.2%

0.3%

0.4%

2.0%

2.2%

2.4%

10Y UST (RHS)2Y UST (LHS)

32%

FederalReserve

19%Foreign private

15%

Mutual funds9%

7%

33

Source: Federal Reserve, FactSet, J.P. Morgan Asset Management.Guide to the Markets – U.S.Data are as of 12/31/14.



Global Monetary Policy

80%

Central Bank Assets – Percent of Nominal GDPJPMAM

Forecast* 1

Correlation of Government Bonds6-month rolling correlation of weekly change in USTs and German Bund yields

60%

70%

0.2

0.4

0.6

0.8

10-yr. Bonds

40%

50%

c o m

e

Real Policy Rates – Monthly

-0.2

0

'10 '11 '12 '13 '14

2-yr. Bonds

20%

30%

F i x e

d I

3%4%5%6%7%Bank of Japan

Emerging Markets

0%

10%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15-3%-2%-1%0%1%

' ' ' ' ' ' ' ' ' ' ' ' ' ' '

uropean en ra an

U.S. Federal Reserve Developed Markets

34

Source: J.P. Morgan Global Economics Research, FactSet, J.P. Morgan Asset Management.Real policy rates represent GDP weighted aggregates estimated by J.P. Morgan Global Economics Research. Real policy rates are short-term targetinterest rates set by central banks minus year-over-year inflation. *Central bank assets as percent of nominal GDP is forecasted through 2015 using J.P. Morgan Global Economics Research nominal GDP forecasts and assumptions for central bank balance sheet size based on statements released byeach respective central bank and its governors.Guide to the Markets – U.S.Data are as of 12/31/14.



Sources of Bond Returns

Coupon Return2014 “C”

Total Return2014 “A + B + C”

Treasury Base Rate Return2014 “A”

Spread to Treasury Return2014 “B”

20145-yr. 5-yr.

2013.

8.2%

26.0%

10-yr.

30-yr.

.

2.6%

3.4%

.

10.7%

29.4%

10-yr.

30-yr.

c o m

e

4.4%

-3.3%

10-yr. Muni

U.S. HY -1.1%

4.3%

6.8%

8.7%

2.5%

10-yr. Muni

U.S. HY

F i x e

d I 0.3%

3.7%

2.0%

IG Corp .

U.S. MBS

-1.2%

-0.5%

0.4%

5.6%

4.2%

3.7%

4.8%

7.5%

6.1%

IG Corp.

U.S. MBS

2.7%

-1.4%

U.S. Agg .

FRN (BBB)

0.1%

0.1%

3.2%

1.3%

6.0%

0.1%

U.S. Agg .

FRN (BBB)

35

Source: Federal Reserve, Barclays, J.P. Morgan Asset Management. All returns reflect year to date returns. Treasury base, spread, and coupon returns based on Barclays and J.P. Morgan Asset Managementestimates. The sum of charts A and B equate to price return for each sector. Indices used include Barclays US Treasury Bellwethers (10Y),Barclays US Aggregate, Barclays US Aggregate Credit – Corporate Investment Grade, Barclays US Aggregate Credit – Corporate High Yield,Barclays Muni 10-year Index, Barclays US MBS Index, Barclays Floating Rate Index, and Barclays Emerging Markets USD.Guide to the Markets – U.S. Data are as of 12/31/14.

- - - - - - - -



Fixed Income Yields and Returns

Price Impact of a 1% Rise/Fall in Interest Rates*

-2.0%0.9%2y USTU.S. Treasuries # of

issuesCorrelation to

10-year Avg.

Maturity 12/31/2014 9/30/2014 4Q14 2014

Yield Return

-17.8%

-8.6%

-5.7%

-4.7%

23.2%

9.5%

6.7%

.

30y UST

10y UST

TIPS

5y UST 2-Year 95 0.63 2 years 0.67% 0.58% 0.17% 0.66%

5-Year 97 0.90 5 1.65% 1.78% 1.14% 2.89%

10-Year 17 1.00 10 2.17% 2.52% 3.57% 10.74%

30-Year 20 0.92 30 2.75% 3.21% 10.06% 29.38%

c o m

e

-3.9%

-3.2%

-0.1%

3.9%

3.6%

0.1%

ABS

Convertibles

Flo ating Rate

TIPS 35 0.58 10 0.49% 0.55% -0.03% 3.64%

Sector

Broad Market 9,054 0.85 7.7 years 2.25% 2.36% 1.79% 5.97%

MBS 410 0.80 6.5 2.60% 2.88% 1.79% 6.08%

F i x e

d I

-

-5.6%

-5.5%

-4.3%

5.5%

5.5%

3.4%

4.2%

Munis

US Aggregate

MBS

US HY Municipals 9,080 0.45 10.0 2.04% 2.13% 1.38% 8.72%

Corporates 5,212 0.45 10.7 3.11% 3.10% 1.77% 7.46%

High Yield 2,253 -0.24 6.5 6.61% 6.13% -1.00% 2.45%

Floating Rate 49 -0.21 2.7 1.61% 0.98% -1.43% 0.08%

Source: U.S. Treasury, Barclays Capital, FactSet, J.P. Morgan Asset Management. Fixed income sectors shown above are provided by Barclays Capital and are represented by – Broad Market: Barclays U.S. Aggregate; MBS: U.S. Aggregate Securitized - MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond 10-year Index; High Yield: Corporate High

+

-6.7%

.7.7%

-30% -10% 10% 30%

IG Corps Convertibles 518 -0.29 -- 1.11% 1.14% 1.06% 8.17%

ABS 1,727 -0.04 4.4 2.15% 2.18% 1.27% 3.44%

36

. . .CMBS. Treasury securities data for # of issues based on U.S. Treasury benchmarks from Barclays Capital. Yield and return information based on bellwethers for Treasury securities.Sector yields reflect yield to worst, while Treasury yields are yield to maturity. Correlations are based on 10-years of monthly returns for all sectors. Change in bond price is calculatedusing both duration and convexity according to the following formula: New Price = (Price + (Price * -Duration * Change in Interest Rates))+(0.5 * Price *Convexity * (Change in Interest Rates)^2). *Calculation assumes 2-year Treasury interest rate falls 0.67% to 0.00%, as interest rates can only fallto 0.00%. Chart is for illustrative purposes only. Past performance is not indicative of future results.Guide to the Markets – U.S. Data are as of 12/31/14.



Global Fixed Income

$100

Global Bond MarketUSD, trillions

12/31/89 6/30/14EM: $14tn

Yield

Aggregates Correl to

Duration 12/31/2014 9/30/2014 4Q14 2014

Return

70

$80

$90U.S. 60.7% 36.1%Dev. ex U.S. 38.2% 49.5%EM 1.1% 14.4%

-

U.S. 0.83 5.6 Yrs 2.25% 2.36% 1.79% 5.97%

Gbl. ex. U.S. 0.37 7.1 1.29% 1.46% -2.61% -2.21%

Japan 0.49 8.3 0.36% 0.52% -6.38% -8.35%

$50

$60 Developed exU.S.: $50tn

c o m

e

Germany 0.25 6.0 0.58% 0.76% -1.87% -3.70%

U.K. 0.17 9.4 1.94% 2.36% 1.57% 5.82%

Italy 0.07 6.6 1.50% 1.67% -1.80% 0.84%

$20

$30

$40

U.S.: $35tn

F i x e

d I . . . . - . .

Sector

Euro Corp. 0.11 4.8 1.04% 1.20% -2.73% -4.82%

Euro HY. -0.39 3.9 4.65% 4.58% -3.27% -6.02%

$0

$10

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

EMD ($) 0.20 6.7 5.62% 5.39% -0.55% 7.43%

EMD (LCL) 0.08 4.9 6.50% 6.74% -5.71% -5.72%

EM Corp. -0.26 5.6 5.56% 5.28% 0.31% 6.74%

37

Source: Barclays Capital, BIS, FactSet, J.P. Morgan Asset Management. All returns are in USD. Fixed income sectors shown above are provided by Barclays Capital and are

represented by the global aggregate for each country except where noted. EMD sectors are represented by the J.P. Morgan EMBIG Diversified Index (USD), the J.P. Morgan GBI EMGlobal Diversified Index (LCL), and the J.P. Morgan CEMBI Broad Diversified Index (Corp). European Corporates are represented by the Barclays Euro Aggregate Corporate Indexand the Barclays Pan-European High Yield index. Sector yields reflect yield to worst. Duration is modified duration. Correlations are based on 7-yearsof monthly returns for the all sectors. Past performance is not indicative of future results.Guide to the Markets – U.S. Data are as of 12/31/14.



Municipal Finance

12% 10%% of current expenditures

10-Year Muni Taxable Equivalent Yield

3Q14: 7.9%

Taxable equivalent Muni and Treasury yieldsState & Local Government Debt Service

10%

6%

7%

8%

Taxable Equivalent 10-yr. Muni Yield

6%

8%

3%

4%

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

Municipal Bond Issuance*

c o m

e

4%

,

10-yr. Treasury Yield F i x e

d I

$300

$400

$500

0%

2%

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

Spread

$0

$100

$200

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14

38

Source (Left chart): Barclays Capital, U.S. Treasury, FactSet, J.P. Morgan Asset Management. (Top right) BEA, J.P. Morgan Asset Management. (Bottom right) SIFMA, J.P.Morgan Asset Management.Taxable equivalent yields are calculated for the highest federal marginal tax bracket. 2014 tax rate includes the net investment income tax of 3.8%.*Excludes maturities of 13 months or less and private placements. Interest payments include interest accrued on defined benefit liabilities.2014 issuance data is as of November 2014.Guide to the Markets – U.S. Data are as of 12/31/14.



High Yield Bonds

20% Average LatestHY Spreads 5.9% 5.7%HY Defaults Rates 4.0% 3.0%

U.S. High Yield Spreads and Defaults

HY Spreads

5%

10%

e au a es

0%'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

c o m

e

Global High Yield SpreadsS read over Treasuries

Sector Weights Other 5%100%

7%

9%

F i x e

d I

Euro HY

Telecom 18%Telecom 21%

Industrial 20%

Industrial 29% Industrial 24%Energy 17%

Energy 2% Energy 11%Other 17%

60%

80%

3%

5%

'12 '13 '14

U.S. HY

Consumer 28% Consumer 31%Consumer 17%

Financial 7%Financial 13%

Financial 22%

e ecom

0%

20%

U.S. HY Euro HY EM HY

39

Source: U.S. Treasury, J.P. Morgan, Strategic Insight, J.P. Morgan Asset Management. Default rates are defined as the par value percentage of the total market trading at orbelow 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. Spreads indicated are benchmark yield to worst less comparablematurity Treasury yields. Yield to worst is defined as the lowest potential yield that can be received on a bond without the issuer actually defaultingand reflects the possibility of the bond being called at an unfavorable time for the holder. J.P. Morgan Domestic HY, J.P. Morgan Euro HY, andJ.P. Morgan CEMBI Non-IG indexes were used for Spreads and Industry Weights. Past performance is not indicative of comparable future results.Guide to the Markets – U.S. Data are as of 12/31/14.



Emerging Market Debt

1,317Russia

Local denominated debt, 5 years, spread to Treasuries, basis pointsEMD Indices by Region EMD Sovereign Spreads

Brazil 27% Latin America Latin America30%

100%

1,089Brazil

India

S. Africa 9%

Turkey 10%

Poland 11%

Mexico 20%

Asia 39%

Europe 31%

Europe 13%

40%

60%

592Indonesia

ColombiaEMD Indices by Credit Ratings c o m

e

Other 23% Middle East &Africa 13%

Middle East &Africa 18%

0%

20%

Local Sovereign USD Sovereign USD Corporate

Mexico

China

Philippines

5 year average F i x e

d I

Current spread

Graph Key

InvestmentGrade 85%

InvestmentGrade 65%

InvestmentGrade 69%60%

80%

100%

146

49

0 200 400 600 800 1,000 1,200 1,400

Hungary

PolandNon Investment

Grade 15%

NonInvestmentGrade 35%

NonInvestmentGrade 31%

0%

20%

40%

Lo cal So verei n USD So verei n USD Co r o rate

40

Source: J.P. Morgan Global Economic Research, FactSet, J.P. Morgan Asset Management.Spreads measure the credit risk premium over comparable maturity U.S. Treasury bonds. The J.P. Morgan EMBI Global (EMBIG) Index is a USD-denominated external debt indextracking bonds issued by sovereigns and quasi-sovereigns in developing nations. The J.P. Morgan Corporate Emerging Bond Index Broad (CEMBI) is aUSD-denominated external debt index tracking bonds issued by corporations in developing nations. The J.P. Morgan Government Bond Index – EM(GBI-EM) is a local currency denominated index tracking bonds issued by emerging market sovereigns. Past performance is not indicative of Comparable future results. Index breakdown may not equate to 100% due to rounding.Guide to the Markets – U.S. Data are as of 12/31/14.

633

626288

428

348

181

168



Global Equity Markets

Weights in MSCI All Country World Index% global market capitalization, float adjusted

Countr / Re ion

4Q14 2014

Local USD Local USD

UnitedStates

51%

Europe ex-U.K.16%

U.K. 7%

EmergingMarkets

Regions / Broad Indexes

U.S. (S&P 500) - 4.9 - 13.7EAFE 1.8 -3.5 6.4 -4.5

- - -11%

Japan7%

C a n a

d a

4 %

Global Equity Market Correlations

- . . . - . . - .

Pacific ex-Japan 3.1 -1.5 5.8 -0.3

Emerging Markets 0.1 -4.4 5.6 -1.8

MSCI: Selected Countr ies

0.50

0.60

0.70

0.80

0.90 - ,

o n a

l

United Kingdom -0.4 -4.2 0.5 -5.4

France -1.7 -5.8 3.6 -9.0

Germany 4.0 -0.4 2.8 -9.8

Japan 6.7 -2.4 9.8 -3.7

0.00

0.10

0.20

0.30

0.40

' ' ' ' ' ' ' ' ' '

Dec. 2014: 0.44

I n t e r n a t i China 7.0 7.2 8.3 8.3

India 1.5 -0.7 26.4 23.9

Brazil -7.5 -14.8 -2.8 -13.7

Russia -5.9 -32.8 -12.1 -45.9

42

Source: Standard & Poor’s, MSCI, FactSet, J.P. Morgan Asset Management. All return values are MSCI Gross Index (official) data. Chart is for illustrative purposes only. Past performance is not indicative of future results. Pleasesee disclosure page for index definitions. Countries included in global correlations include Argentina, South Africa, Japan, UK, Canada, France,Germany, Italy, Australia, Austria, Brazil, China, Colombia, Denmark, Finland, Hong Kong, India, Malaysia, Mexico, Netherlands, New Zealand, Peru,Philippines, Portugal, Korea, Spain, Taiwan, Thailand, Turkey, United States.Guide to the Markets – U.S. Data as of 12/31/14.



International Equity Earnings and Valuations

18x

Forward Price to EarningsEarnings per Share

260’07/’08 Peak Current % Change

EPS for next 12-month consensus, local currency, rebased to 100 P/E ratios for next 12-month consensus EPS

Average Current

16x220

240MSCI EM 217 167 -23%S&P 500 150 179 19%MSCI Europe 161 123 -24%

MSCI EM 11.3x 11.0xS&P 500 13.8x 16.2xMSCI Europe 12.0x 14.1x

12x

14x

180

200

10x

o n a

l

120

140

160

6x

8x

' ' ' ' ' ' ' ' ' ' '

I n t e r n a t i

' ' ' ' ' ' ' ' ' '80

100

43

Source: MSCI, FactSet, J.P. Morgan Asset Management.Forward Price to Earnings Ratio is based on each index price, divided by consensus estimates for earnings per share (EPS) in the next 12 months (NTM),and is provided by FactSet Market Aggregates. Past performance is not indicative of future returns.





Global Economic Growth

Year-over-year % chg. – forecasts from JPMSIEmerging Market Country Real GDP Growth

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

Historical

3Q15

JPMSI Forecast

10%

2%

4%

6%

Developed Market Country Real GDP Growth

-4%

-2%

Emerging Markets China India Korea Mexico South Africa Russia Brazil

o n a

l

- - .

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

s or ca

3Q15

orecas

4%

6%

8%

10%

I n t e r n a t i

-4%

-2%

0%

2%

44

Source: J.P. Morgan Global Economic Research, J.P. Morgan Asset Management.

Forecast and aggregate data come from J.P. Morgan Global Economic Research. Historical growth data collected from FactSet Economics.



. . . .



Sovereign Debt Stresses

10%

Bubble size = 10-yearovernment bond ield

GDP Growth, Gross Debt to GDP and Borrowing Costs

Turkey

na

India

Indonesia

Malaysia

10%

5%

6%

8%

0 1 4 F )

Brazil

South Africa

Mexico

U.S.

Korea

France

GermanyJapanRussia

Singapore

EU

Aust ralia

U.K.

0%

2%

G r o w

t h ( 2 0 1 2 –

Greece

ItalySpain

or uga

-4%

-2%

o n a

l R e a

l G D P

-8%

-6%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% I n t e r n a t i

Gross Debt-to-GDP Ratios 2013245%

Developed MarketsEmerging Markets

46

Source: IMF, FactSet, Bloomberg, J.P. Morgan Economics, Barclays, J.P. Morgan Asset Management.Growth and debt data are based on the October 2014 World Economic Outlook.Borrowing costs based on local currency debt. EU overall borrowing cost based on Barclays Capital Euro-Aggregate 7-10 year treasury. South Africa’sborrowing cost is based on 7-year government bond yield due to data availability.Guide to the Markets – U.S. Data are as of 12/31/14.



Europe: Cyclical Headwinds and Tailwinds

13.9%14%35%12/31/14

Government Fiscal DragEuropean Sovereign Funding Costs10-year benchmark bond yield % of potential GDP, reduction in structural deficits from one period to the next

10%

12%30%

Greece 9.42%Portugal 2.67%Italy 1.86%

Spain 1.61%Ireland 1.24%Germany 0.53%

2010-2013

2013-2016

r e f i s c a l d r a g

6.0%

4.6%

6%

8%

20%

M

LTRO

3.5%.

3.3% 3.1%2.7%

0.5%1.2% 1.1% 1.4%

0.5% 0.8%

2%

4%

o n a

l10%

15%

OMT

s f i s c a

l d r a g

-0.4% -0.1%

-2% I n t e r n a t i

' ' ' ' ' '0%

5% L e

47

Source: Tullett Prebon, FactSet, IMF, J.P. Morgan Asset Management. Data are based on the October 2014 World Economic Outlook.Government deficits are calculated by the IMF as the general government structural balance. The structural balance excludes the normal impact of the business cycle, providing aclearer measure of the independent impact of changes in government spending and taxation on demand in the economy.*Eurozone includes a J.P. Morgan Asset Management estimate for the 2016 structural deficit as a % of GDP.Guide to the Markets – U.S.Data are as of 12/31/14.



Europe: Unemployment, Inflation and Credit Markets

20%

10%

12%

Euro Area

Oct. 2014: 11.5%Unemployment Rates Euro Area Credit Growth% year-over-year loan growth

5%

10%

15%

4%

6%

8%

U.S.

Nov. 2014: 5.8%

Nov. 2014: -1.6%Households

Nov. 2014:-0.4%

-5%

%

'06 '07 '08 '09 '10 '11 '12 '13 '14'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '140%

2%

Europe Inflation Euro Area Asset-Backed Securities Outstanding

o n a

l

CoreEuro AreaPeriphery

- -

3%

4%

5%

€2,500

€3,000

I n t e r n a t i

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14-1%

0%

1%

€1,000

€1,500

,

' ' ' ' ' ' ' ' ' ' '

48

Source: Eurostat, BLS, SIFMA, ECBC, FactSet, IMF, J.P. Morgan Asset Management.(Top left) Unemployment rate levels for the U.S. and Euro Area are not directly comparable due to calculation differences. (Bottom right) Euro Area securitization outstandingincludes Covered Bonds, Asset-Backed Securities, Residential Mortgage-Backed Securities, Commercial Real Estate Mortgage-Backed Securities,and Small and Medium-Sized Enterprise Asset-Backed Securities.Guide to the Markets – U.S.Data are as of 12/31/14.



Japan: Economic Snapshot

¥120

¥130

¥18,000

¥20,000Inflation and Japanese Government Bond YieldsYear-over-year % change for inflation Japanese Yen per U.S. Dollar

Nikkei 225

Japanese Yen and the Stock Market

6%

8%

¥90

¥100

¥110

¥10 000

¥12,000

¥14,000

¥16,000Owners of Japanese Gov. BondsOther Domestic 74%Bank of Japan 21%Foreign 4%

4%'05 '06 '07 '08 '09 '10 '11 '12 '13 '14

¥70

¥80

¥6,000

¥8,000

Government Fiscal Balance

0%

2%

o n a

l

Nominal 10-year Yield -12%

-10%

-8%

-6%

-4%

forecast

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

-2% I n t e r n a t i Core CPI

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

-2%

0%

2%

4%

49

Source: (Left) Bank of Japan, OECD, IMF, FactSet, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management.

Core CPI is defined as CPI excluding fresh food. Other Domestic includes banks, insurance and pensions, public pensions, and households. Valuesmay not sum to 100% due to rounding. Government bond data is calculated from the Bank of Japan’s December 2014 flow of funds.




China: Economic and Credit Growth

16% 40%

China Real GDP ContributionYear-over-year % change Year-over-year % change, 3-month moving average for credit

Credit* vs. GDP Growth

12%30%

35%Investment

Consumption

Net Exports

9.6%

9.2%

10.4%9.3%

Credit

Real GDP

GDP Deflator

4.5%

8.1%

5.5% 4.5%

3.9% 4.2%

8%

20%

25%7.7% 7.7%

0.9%

4.2%4.6%

4.5% 5.2%4.1% 3.8%

4%

5%

10%

o

n a

l

-3.5%

.

-0.4% -0.2% -0.3%

-4%2008 2009 2010 2011 2012 2013

-5%

0%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

I n t e r n a t i

50

Source: National Bureau of Statistics of China, The People’s Bank of China, EM Advisors Group, FactSet, CEIC, J.P. Morgan Asset Management.Values may not sum to 100% due to rounding. *As defined by Total Social Financing: RMB bank loans, bankers acceptance bills, trust loans,entrusted loans, corporate bond financing, foreign currency loans, and non-financial equity financing. TSF data uses an assumption of outstandingcredit in Dec. 2001.Guide to the Markets – U.S. Data are as of 12/31/14.



Demographics and Development

$60,000

The Impact of UrbanizationUrbanization ratios and GDP per capita (current USD), 1961 – 2013

Demographic Snapshot

Investment(% of GDP)

GDP PerCapita

Population % of Pop.

under 20

$50,000 Japan

U.S.2013: $53,142 Developed

U.S. $53,101 316 mm 26% 20%

Canada 51,990 35 22 24

U.K. 39,567 64 24 14

$30,000

$40,000

D P p e r

C a p

i t a

Germany 44,999 81 18 17

France 43,000 64 24 19

Japan 38,491 127 18 21

Ital 34,715 60 19 17

$10,000

$20,000

G

China

Korea

o n a

l 1961: $2,935

Emerging

Korea 24,329 50 22 26

India 1,505 1,243 38 35

Brazil 11,311 198 33 18

$-15% 25% 35% 45% 55% 65% 75% 85% 95%

Urbanization Ratio

India

I n t e r n a t i

Mexico 10,630 118 38 22

Russia 14,819 143 21 24

China 6,747 1,361 20 48

51

Source: FactSet, World Bank, United Nations, J.P. Morgan Global Economics Research, OECD, Bureau of Statistics of China, Ministry of Statistics &Programme Implementation of India, J.P. Morgan Asset Management.

GDP per capita and Investment as % of GDP in the Demographic Snapshot table are IMF estimates for 2014.





Emerging Market Currencies

Russia

25%

2014 Currency PerformancePerformance of foreign currency versus USD

Commodity Exposure and External Vulnerability

ChileIndonesia

Colombia Depreciation(-0% to -10%)

17%

m o

d i t y E

x p o r t e r

2014Currency Performance

-13.4%

-18.7%

-45.2%

Chile

Colombia

Russia

Brazil Mexico

South Africa Depreciation

(over -10%)

1%

9%

-8% -6% -4% -2% 0% 2% 4% 6% 8%

N e

t C o

-9.5%

-11.1%

-11.2%

South Africa

Mexico

Brazil

ChinaIndia

Turkey-7%

o n a

l

o d i t y I m p o r t e r s

-2.4%

-4.0%

-8.1%

China

Korea

Turkey

Korea

-23%

-15%

I n t e r n a t i

N e

t C o m

Current Account Sur lusCurrent Account Deficit

-1.7%

-2.0%

-50% -40% -30% -20% -10% 0% 10% 20%

Indonesia

India

52

Source: IMF, U.N. Commodity Trade Statistics Database, FactSet, J.P. Morgan Asset Management.Commodities defined by SITC codes 0-4. Net commodity exporters/importers plotted as a % of GDP.Current accounts as a percentage of GDP are IMF estimates for 2014.Guide to the Markets – U.S. Data are as of 12/31/14.



Emerging Market Equities

400

EM Earnings by RegionMSCI EM Index by RegionEPS for next 12-month consensus, local currency, rebased to 100

Europe

Africa/Mideast8%

Latin Americaex Brazil

7%Brazil12%

200250

300Latin AmericaAsia

Asia ex China& Korea

28%Korea16%

Europe10%

'05 '06 '07 '08 '09 '10 '11 '12 '13 '1450

100

MSCI EM Country Index by Sector

China19%

o n a

lOther

Commodities

Financials18%

15%23%

69%

19% 14%17%

9%

13% 7%21% 24% 31%

14%

60%

80%

100%

I n t e r n a t i Tech

Consumer 4%

24%10%

20% 15%35%

23%

23%14%

40%36%

15%

33% 17%

0%

20%

40%

*

53

Source: MSCI, FactSet, J.P. Morgan Asset Management. “Other” is comprised of Health Care, Industrials, Telecom, and Utilities sectors.*Mexican Telecom sector accounts for 17% of the country’s market capitalization. Values may not sum to 100% due to rounding.Guide to the Markets – U.S.Data are as of 12/31/14.



Global Equity Valuations: Developed Markets

+5 Std Dev+6 Std Dev+7 Std Dev

Developed Market Countries

r a g e

Expensive

Example


Average-1 Std Dev-2 Std Dev

+4 Std Dev

e v

f r o m

G

l o b a

l A v e

Expensiverelative to own

history

world

Cheap relativeAverageCurrent

-3 Std Dev-4 Std Dev-5 Std Dev

S t d

relative to

world

World(ACWI)

EAFEIndex

U.K. France Germany Australia Canada Japan Switzerland UnitedStates

Current Current 10-year avg.

o n a

l

Fwd. P/E P/B P/CF Div. Yld. Fw d. P/E P/B P/CF Div. Yld.

World (ACWI) 0.71 14.8 2.1 8.7 2.5% 13.1 2.0 7.5 2.5%EAFE Index -0.48 14.2 1.6 7.5 3.2% 12.7 1.7 6.7 3.2%U.K. -0.76 13.8 1.8 7.3 3.9% 11.4 2.0 7.4 3.7%France -0.69 13.8 1.4 7.7 3.3% 11.5 1.6 5.9 3.5%

Index

I n t e r n a t i Germany -0.58 12.9 1.6 7.5 2.9% 11.5 1.6 5.8 3.1%

Australia -0.37 14.7 1.9 8.8 4.8% 13.5 2.2 9.2 4.3%Canada 0.46 15.5 1.9 8.6 2.8% 13.7 2.1 8.5 2.3%Japan 0.70 14.3 1.4 8.1 1.8% 16.1 1.4 6.4 1.6%Switzerland 1.36 15.7 2.5 11.3 3.2% 13.5 2.4 9.9 2.8%United States 2.68 16.4 2.8 11.0 1.9% 14.0 2.4 8.7 1.9%

54

Source: MSCI, FactSet, J.P. Morgan Asset Management.Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), price to last 12 months’cash flow (P/CF) and price to last 12 months’ dividends. Results are then normalized using means and average variability over the last 10 years.The grey bars represent one standard deviation in variability relative to that of the MSCI All Country World Index (ACWI).See disclosures page at the end for metric definitions.Guide to the Markets – U.S. Data are as of 12/31/14.



Global Equity Valuations: Emerging Markets


Emerging Market Countries

r a g e Expensive

relative to

Example


Average-1 Std Dev-2 Std Dev-3 Std Dev

e v

f r o m G

l o b a

l A v

Expensiverelative to own

history

Cheap relativeto own histor

Average

Current

World(ACWI)

EMIndex

Russia Brazil China Taiwan Korea Thailand South Africa

Indonesia Mexico India

-4 Std Dev-5 Std Dev-6 Std Dev

S t d

relative to

world

Current Current 10-year avg.

o

n a

l

Fw d. P/E P/B P/CF Div. Yld. Fw d. P/E P/B P/CF Div. Yld.

World (ACWI) 0.71 14.8 2.1 8.7 2.5% 13.1 2.0 7.5 2.5%EM Index -1.49 11.0 1.4 5.4 2.8% 11.1 1.9 6.3 2.7%Russia -5.52 3.8 0.4 1.8 6.6% 7.3 1.3 4.4 2.2%Brazil -2.58 10.2 1.2 5.2 4.5% 10.0 1.8 5.6 3.2%China -2.35 9.4 1.4 4.0 3.2% 11.7 2.1 6.8 2.7%

Index

I n t e r n a t i a w an - . . . . . . . . .

Korea 0.09 9.6 1.0 5.8 1.3% 9.7 1.4 5.1 1.5%Thailand 0.22 13.2 2.1 9.4 3.0% 10.9 2.0 7.2 3.6%South Africa 1.41 15.7 2.6 11.0 3.0% 11.7 2.5 8.9 3.2%Indonesia 2.62 15.0 3.3 12.6 2.4% 12.8 3.5 10.3 2.7%Mexico 3.17 18.3 2.6 7.1 1.4% 14.7 2.8 7.5 1.8%India 3.90 16.7 3.0 12.2 1.5% 15.7 3.2 13.0 1.3%

55

Source: MSCI, FactSet, J.P. Morgan Asset Management.Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), priceto last 12 months’ cash flow (P/CF) and price to last 12 months’ dividends. Results are then normalized using means and average variability over thelast 10 years. The grey bars represent one standard deviation in variability relative to that of the MSCI All Country World Index (ACWI). See disclosurespage at the end for metric definitions. See disclosures page at the end for metric definitions.Guide to the Markets – U.S. Data are as of 12/31/14.



Correlations and Volatility

zU.S.

LargeCap EAFE EME Bonds

Corp.HY Munis Currcy. EMD Cmdty. REITs

HedgeFunds

EqMarket

Neutral*Ann.

Volatility

U.S. Large Cap 1.00 0.88 0.78 -0.26 0.76 - 0.09 -0.50 0.61 0.50 0.78 0.81 0.61 16%

EAFE 1.00 0.91 -0.17 0.78 - 0.03 -0.72 0.70 0.63 0.68 0.87 0.74 20%

EME 1.00 -0.11 0.82 0.04 -0.66 0.79 0.67 0.58 0.89 0.58 25%

Bonds 1.00 -0.06 0.81 -0.08 0.26 -0.24 -0.01 -0.27 -0.18 3%

Corp. HY 1.00 0.16 -0.53 0.87 0.57 0.70 0.78 0.41 12%

Munis 1.00 -0.08 0.47 -0.17 0.06 -0.07 -0.11 4%

Currencies 1.00 -0.53 -0.66 -0.40 -0.58 -0.69 7%

EMD 1.00 0.49 0.62 0.66 0.34 8%

Commodities 1.00 0.36 0.72 0.45 21%

REITs 1.00 0.54 0.43 26%

Source: Standard & Poor’s, FRB, Barclays Capital Inc., MSCI Inc., Credit Suisse/Tremont, NCREIF, DJ UBS, J.P. Morgan Asset Management.

Indexes used – Large Cap: S&P 500 Index; Currencies: Federal Reserve Trade Weighted Dollar; EAFE: MSCI EAFE; EME: MSCI EmergingMarkets; Bonds: Barclays Capital Aggregate; Corp HY: Barclays Capital Corporate High Yield; EMD: Barclays Capital Emerging Market; Cmdty.: s

e t C l a s s

Hedge Funds 1.00 0.60 7%

Eq Market Neutral* 1.00 4%

57

DJ UBS Commodity Index; Real Estate: NAREIT Equity REIT Index; Hedge Funds: CS/Tremont Multi-Strategy Index; Equity Market Neutral:CS/Tremont Equity Market Neutral Index. *Market Neutral returns include estimates found in disclosures.

All correlation coefficients and annualized volatility calculated based on quarterly total return data for period 12/31/04 to 12/31/14.

This chart is for illustrative purposes only.


A s



Fund Flows

Billions, USD AUM YTD 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999

Mutual Fund Flows

Domestic Equity 6,283 (39) 19 (159) (133) (81) (28) (149) (68) (3) 17 100 120 (25) 57 258 176

World Equity 2,158 89 141 7 4 57 26 (80) 142 151 107 72 24 (4) (23) 58 11

Taxable Bond 2,942 39 (13) 256 129 221 301 22 100 44 21 0 40 125 76 (36) 7

Tax-exempt Bond 560 24 (58) 50 (12) 12 70 8 11 15 5 (15) (7) 17 12 (14) (12)

Cumulative Flows Into Global Stock & Bond Funds

Cumulative Flows Into U.S. Equity Funds

Hybrid 1,377 31 71 45 40 35 20 (26) 40 20 43 53 39 8 7 (37) (13)

Money Market 2,623 (75) 15 (0) (124) (525) (539) 637 654 245 62 (157) (263) (46) 375 159 194

$0

$400

$800

$1,000

$1,200

$1,400

$1,600, ,

Nov. ’14: $1,406 billion into bond fundsand fixed income ETFs since ’07

Nov. ’14: $707 billion intoInstitutional

, ,

Nov. ’14: $626 billion into U.S.equity funds and ETFs byinstitutional investors since ‘07

-$800

-$400

'07 '08 '09 '10 '11 '12 '13 '14$0

$200

$400

$600

' ' ' ' ' ' ' ' s e

t C l a s s Bonds

Stocks

s oc un s an equ yETFs since ’07

RetailNov. ’14: $643 billion out of U.S.equity funds and ETFs by retailinvestors since ’07

59

A s

Source: Investment Company Institute, J.P. Morgan Asset Management.TOP: Data includes flows through November 2014 and excludes ETFs. BOTTOM: Data includes flow through November 2014 and includesETFs. ICI data are subject to periodic revisions. World equity flows are inclusive of emerging market, global equity and regional equity flows.Hybrid flows include asset allocation, balanced fund, flexible portfolio and mixed income flows.Guide to the Markets – U.S.Data are as of 12/31/14.



Yield Alternatives: Domestic and Global

S&P 500 Total Return: Dividends vs. Capital Appreciation Average annualized returns Capital Appreciation

Dividends20%

4.7% 5.4% 6.0% 5.1% 3.3% 4.2% 4.4% 2.5%1.8%

4.0%

13.9%

3.0%

13.6%

4.4%1.6%

12.6% 15.3%

-2.7%

5.9%

0%

5%

10%

15

Equity Dividend Yields REIT Yields

- .

-10%

-5%

1926 to 1929 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's 1926 to 2014

,10-year governmentbond yield

10-year governmentbond yield

,

3.6%

5.8% 5.6%

5.0%

4.1%3.8%4%

5%

6%

7%4.6%

3.8%

3.3%

2.9% 2.8%

2.5%3%

4%

5%

s e

t C l a s s

3.0% 2.9%

0%

1%

2%

3%

U.S. Canada Singapore F ranc e Aus tralia Global U. K. J apan

2.0%

1.8%

0%

1%

2%

U. S. Aust ralia U. K. France Canada Swit zerland ACW I Ja an

60

A s

Source: (Top chart) Standard & Poor’s, Ibbotson, J.P. Morgan Asset Management. (Bottom right) FactSet, NAREIT, J.P. Morgan Asset Management.Dividend vs. capital appreciation returns are through 12/31/14. Yields shown are that of the appropriate FTSE NAREIT REIT index, which excludesproperty development companies. (Bottom left) FactSet, MSCI, J.P. Morgan Asset Management. Yields shown are that of the appropriate MSCI index.Guide to the Markets – U.S.Data are as of 12/31/14.



Global Real Assets

12%25%

Commercial Vacancy Rates by Sector Percent at year end

Property Appreciation and Operating Income GrowthYoYNCREIF ODCE Index* unlevered property appreciation and NOI growth

Appreciation

0%

4%

8%

20%

Office 16.7%Retail 10.1%Industrial 9.5%Apartment 4.2%

-8%

-4%

'10 '11 '12 '13 '1415%

Allowed Return on Equity over the Cost of Debt

10%

12%

14%

16%10%

Electric

Nat. Gas

Recession

0%

2%

4%

6%

' ' ' ' ' s e

t C l a s s

0%' ' ' ' ' ' ' ' ' ' ' '

bond10y UST

61

A s

Source: Reis, Inc., PREA, NCREIF, Regulatory Research Associates, Barclays Capital, FactSet, J.P. Morgan Asset Management.Vacancy rate data provided by Reis, Inc. *NCREIF Open End Diversified Core Equity Index.Guide to the Markets – U.S.Data are as of 12/31/14.



Global Commodities

Commodity Prices Gold Prices$ / oz$3,000450

Weekly index prices rebased to 100

$1,000

$1,500

$2,000

$2,500 Dec. 2014:$1,206

,Gold

350

400 Precious Metals

Commodity Prices and Inflation- -

'75 '80 '85 '90 '95 '00 '05 '10$0

$500

250

300

Industrial Metals

2%

4%

6%

8%

20%

40%

60%

80% .

Headline CPI(Y/Y % chg.)

DJ-UBS Commodity Index(Y/Y % chg.)

100

150

200

s e

t C l a s s

' ' ' ' ' ' ' ' ' '-6%

-4%

-2%

0%

-60%

-40%

-20%

0%

' ' ' ' ' ' ' ' ' '0

50Energy

LivestockGrains

62

A s

Source: Dow Jones/UBS, EcoWin, BLS, U.S. Department of Energy, FactSet, J.P. Morgan Asset Management. CPI adjusted gold values are calculatedusing monthly averages of gold spot prices divided by the CPI value for that month. CPI is rebased to 100 at the end of the chart. Returns based onnominal prices. Commodity prices represented by the appropriate Bloomberg Commodity sub-index.





Life Expectancy and Pension Shortfall

100% 25

Probability of Reaching Ages 80 and 90 Perceived retirement shortfall by country

Expected savingsshortfall (years)

Savings expectedto last (years)

Personsaged 65, by gender, and combined couple

69%

87%

80% 20

Women

Couple – at least onelives to specified age

7 11

58%60%

10

15 8

10

108

8

10

58

6

28%

41%40%

108

14

911 11

9

1210 10 9 9

5

0%80 Years 90 Years

0

A v e r a g e

U . S .

F r a n c e

C h i n a

C a n a

d a

A u s t r a

l i a

U . K .

B r a z i l

i n g a p o r e

I n d i a

U A E

M e x i c o

s e

t C l a s s

63

Source: (Left) SSA 2010 Life Tables, J.P. Morgan Asset Management. (Right) “The Future of Retirement: A new reality” study by HSBC, J.P. Morgan AssetManagement. Figures represent the expected portion of retirement that will not be covered by retirement savings based on survey data.Guide to the Markets – U.S.Data as of 12/31/14.

A s



Historical Returns by Holding Period

Annual total returns, 1950 –2014Range of Stock, Bond and Blended Total Returns

Annual Avg. Growth of $100,00060%

50/50 Portfolio 9.0% $565,743Bonds 6.2% $327,106Stocks 10.8% $833,227

o a e urn over 20 years

51%

43%

30%

40%

50%

28%

23% 21%19%

16% 17%

18%

12%

14%

10%

20%

Stocks

-8%

-15%

-2% -2% 1% -1% 1% 2% 1%

-20%

-10%

0%

s e

t C l a s s 50/50 Portfolio

Bonds

-37%

-40%

-30%

1-yr. 5-yr. 10-yr. 20-yr.

64

A s

Sources: Barclays Capital, FactSet, Robert Shiller, Strategas/Ibbotson, Federal Reserve, J.P. Morgan Asset Management.

Returns shown are based on calendar year returns from 1950 to 2014. Growth of $100,000 is based on annual average total returns from1950-2014.





Diversification and the Average Investor

Equity Mkt. Neutral

Source: Morningstar Direct, Dalbar Inc.,J.P. Morgan Asset Management. (Top)Indexes and weights of the traditionalportfolio are as follows: U.S. Stocks:55% S&P 500; U.S. Bonds: 30%Barclays Capital Aggregate;

Traditional Portfolio More Diversified PortfolioMaximizing the Power of Diversification (1994 – 2013)

8%8%

8%

4%

26% REIT

S&P 500Russell 2000

55%

30% S&P 500

MSCI EAFE

Barclays Agg.

n erna ona oc s: .Portfolio with 25% in alternatives is asfollows: U.S. Stocks: 22.2% S&P 500,8.8% Russell 2000; InternationalStocks: 4.4% MSCI EM, 13.2% MSCIEAFE; U.S. Bonds: 26.5% BarclaysCapital Aggregate; Alternatives: 8.3%CS/Tremont Equity Market Neutral:8.3% , DJ/UBS Commodities: 8.3%

9%

MSCI EM

Barclays Agg.

NAREIT Equity REIT Index. Return andstandard deviation calculated usingMorningstar Direct.Charts are shown for illustrativepurposes only. Past performance is notindicative of future returns.Diversification does not guaranteeinvestment returns and does notReturn: 8.02%Standard Deviation: 10.64% Return: 7.95%Standard Deviation: 9.71%

20-year Annualized Returns by Asset Class (1994 – 2013)e m na e r s o oss. o om n exesused are as follows: REITS: NAREITEquity REIT Index, EAFE: MSCI EAFE,Oil: WTI Index, Bonds: Barclays CapitalU.S. Aggregate Index, Homes: mediansale price of existing single-familyhomes, Gold: USD/troy oz, Inflation:CPI. Average asset allocation investorreturn is based on an analysis by

10.3% 10.2%9.2%10%

12%

Dalbar Inc., which utilizes the net ofaggregate mutual fund sales,redemptions and exchanges eachmonth as a measure of investorbehavior. Returns are annualized (andtotal return where applicable) andrepresent the 20-year period ending12/31/13 to match Dalbar’s most recent s

e t C l a s s

6.1% 5.8% 5.7%

3.1%2.5% 2.4%

4%

6%

8%

65

. – . .Data are as of 12/31/14. A

s

0%

2%

REITs Oil S&P 500 EAFE Gold Bonds Homes AverageInvestor

Inflation



Cash Accounts

$ BillionsWeight in

MoneySupply

Money SupplyComponent

$10,000Annual Income Generated by $100,000 Investment in a 6-mo. CD

M2-M1 8,710 78.1%

Retail MMMFs 628 5.6%$4,000

$6,000

,

2014:

2006: $5,240

Savings deposits 7,558 67.8%'90 '95 '00 '05 '10 '15

$0

$2,000

M2 Money Supply as a % of Nominal GDP

$130

.

Institutiona l MMMFs 1,788 16.0%

55%

60%

65%

70%3Q14: 65.0%

652 5.8%

Total 11,149 100.0%

accounts

'80 '85 '90 '95 '00 '05 '10 '1540%

45%

50% .

s e

t C l a s s

66

Source: Federal Reserve, St. Louis Fed, Bankrate.com, J.P. Morgan Asset Management. All cash measures obtained from the Federal Reserve are seasonally adjusted monthly numbers. All numbers are in billions of U.S. dollars. Small-denomination time deposits arethose issued in amounts of less than $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions are subtracted fromsmall time deposits. Annual income is for illustrative purposes and is calculated based on the 6-month CD yield on average during each year and$100,000 invested. IRA and Keogh account balances at money market mutual funds are subtracted from retail money funds.Past performance is not indicative of comparable future results.Guide to the Markets – U.S. Data are as of 12/31/14.

A s



Corporate DB Plans and Endowments

100%

105%$2.5

Asset Allocation: Corporate DB Plans vs. EndowmentsEndowments Funded Status (%)Trillions ($)

Defined Benefit Plans: Russell 3000 Companies

80%

85%

90%

95%

$1.0

$1.5

$2.0

Assets ($)

48.0%

9.0%

27.0%

Fixed Income

Equities

70%

75%

$0.0

$0.5

'07 '08 '09 '10 '11 '12 '13 Q4 '14*

Pension Return Assumptions: S&P 500 companies

4.0%

.

15.9%

20.1%

Private E uit

Hedge Funds

27% 29%

20%20%

34%

20%

30%

40%

C o m p a n

i e s

2.0%

2.0%

7.3%

17.7%Real Estate

0% 1% 1% 1%5%

9%7%

10%6%

12%

3%0% 0% 0%

0%

10%

< 6% 6 to6.5%

6.5 to7%

7 to7.5%

7.5 to8%

8 to8.5%

8.5 to9%

9 to9.5%

9.5 to10%

> 10%

% o f

s e

t C l a s s

4.0%

3.0%

3.0%Cash

Other

67

Source: NACUBO (National Association of College and University Business Officers), Towers Watson, Compustat/FactSet, J.P. Morgan Asset

Management. Asset allocation as of 2012. *Funded status for 4Q14 estimated using market returns. Endowments represents dollar-weightedaverage data of 842 colleges and universities. Pension Return Assumptions based on all available and reported data from S&P 500 Indexcompanies. Pension Assets, Liabilities and Funded Status based on Russell 3000 companies reporting pension data. Return assumption bands areinclusive of upper range. All information is shown for illustrative purposes only.


A s