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Guide to the MarketsUK | |
MARKET INSIGHTS
Q4 2020 As of 30 September 2020
2
Global Market Insights Strategy Team
Vincent JuvynsLuxembourg
Tilmann Galler, CFAFrankfurt
Maria Paola ToschiMilan
Shogo MaekawaTokyo
Lucia Gutierrez MelladoMadrid
Tai HuiHong Kong
Marcella ChowHong Kong
Ian HuiHong Kong
Kerry Craig, CFAMelbourne
Dr. Jasslyn Yeo, CFASingapore
Karen WardLondon
Ambrose Crofton, CFALondon
Chaoping Zhu, CFAShanghai
Jai Malhi, CFALondon
Manuel Arroyo Ozores, CFAMadrid
Agnes LinTaipei
Michael Bell, CFALondon
Hugh Gimber, CFALondon
Max McKechnieLondon
John ManleyNew York
Samantha AzzarelloNew York
Dr. David Kelly, CFANew York
Dr. Cecelia MundtNew York
Meera Pandit, CFANew York
Gabriela SantosNew York
David LebovitzNew York
Jordan JacksonNew York
Jennie Li, CFANew York
3
Page reference
� Global economy
4. Global growth5. Global Purchasing Managers’ Index (PMI) for manufacturing6. Global inflation7. Global core inflation and inflation expectations8. Global fiscal policy9. Global monetary policy10. Global currencies11. Global trade12. Productivity and population growth13. Global Covid-19 cases and deaths14. Global travel and navigation app usage15. US GDP16. US Economic Monitor17. US business surveys18. US business investment19. US consumer20. US labour market21. US non-farm payrolls and initial jobless claims22. US Conference Board indicators23. US household and corporate finances24. US inflation25. US Federal Reserve policy rate26. US politics: Election polls and corporate tax rates27. US focus: Labour market and government benefits28. Eurozone GDP29. Eurozone business investment30. Eurozone consumer31. Eurozone labour market32. Eurozone inflation33. European Central Bank policy rate34. Eurozone debt35. Eurozone government debt and bond spreads36. Eurozone focus: EU recovery fund and government support for jobs37. UK GDP38. UK consumer39. UK labour market40. UK inflation41. UK Bank of England policy rate42. UK focus: Furlough scheme and trade43. Japan GDP44. China GDP45. China debt46. China inflation and policy rates47. Emerging market currencies and current account48. Emerging market structural dynamics49. Emerging market focus: China GDP, money supply and imports
� Equities
50. Global earnings expectations and equity valuations51. Global income52. Global equity sector weights53. Equity net issuance and dividend payout ratios54. US earnings55. US equity valuations56. US valuations and subsequent returns57. Equity market factors58. US bull and bear markets59. US equity market drawdowns and recoveries60. Europe ex-UK earnings61. Europe ex-UK equity valuations62. UK earnings63. UK equity valuations64. UK large, mid and small capitalisation equities65. European stocks and currencies66. Japan earnings67. Japan equity market and currency68. Emerging market equity drivers69. Emerging market equity valuations and subsequent returns70. Equity focus: Earnings and stock market dispersion71. World stock market returns
� Fixed income
72. Fixed income yields73. Global government bond yields74. US investment-grade bonds75. US high yield bonds76. Europe and UK investment-grade bonds77. Europe high yield bonds78. Emerging market bonds79. Fixed income focus: Yield compression80. Global fixed income spreads and returns
� Other assets
81. Oil82. Metals83. Alternative sources of diversification84. Alternative investments: Real assets85. Sustainable investment strategies86. Sustainable investment performance and market size87. Green bond issuance88. Asset return expectations89. Hedging considerations
� Investing principles
90. Life expectancy91. The effect of compounding92. Cash investments93. Long-term asset returns94. Annual returns and intra-year declines95. Asset class risk-return trade-off96. S&P 500 and fund flows97. US asset returns by holding period98. Asset class returns (GBP)
4
GTM – UK |
-24
-21
-18
-15
-12
-9
-6
-3
0
3
6
'06 '08 '10 '12 '14 '16 '18 '20 '22
Global growth
Real GDP growth Contribution to global real GDP growth% change year on year % change year on year
Source: (Left) BEA, Bloomberg, Eurostat, Japan Cabinet Office, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Forecasts are from Bloombergcontributor composite. (Right) OECD, Refinitiv Datastream, World Bank, J.P. Morgan Asset Management. EM is emerging markets. DM is developed markets. Dotted line represents forecasts from Bloomberg contributor composite. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
4
Global economy
China
EM ex-China
DM ex-US
US
GlobalQ4 ’20 Q4 ’21
-3.8% 2.6%
-3.9% 3.8%
-5.4% 3.7%
-6.7% 3.8%UK
Japan
Eurozone
US
Consensus forecasts:
-4
-3
-2
-1
0
1
2
3
4
5
6
'85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21
Forecast
5
51.8 52.3
51.2 52.2
52.5 52.8
51.7 53.7
49.8 51.2
52.2 56.4
53.1 53.2
49.9 50.8
49.4 50.0
52.3 50.0
53.8 55.3
51.8 53.1
55.2 54.1
53.1 53.2
47.2 47.7
53.1 53.0
50.8 47.2
48.5 49.8
52.2 55.2
52.0 56.8
64.7 64.9
41.3 42.1
51.1 48.9
2011 2012 2014 20162008 2009 2010'20
2013 20192015 2017 2018 '20
Global Purchasing Managers’ Index (PMI) for manufacturing
Source: Markit, J.P. Morgan Asset Management. The Global Purchasing Managers’ Index (PMI) for manufacturing assesses the economic health of the sector by surveying manufacturing businesses regarding output, new orders, stocks of purchases, supplier delivery times and employment. A score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. The colours range from red to yellow to green, where red is below 50, yellow is at 50 and green is above 50. Quarterly averages are shown, except the two most recent monthly data points. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
GTM – UK |
Global economy
5
India
Indonesia
Greece
Germany
China
US
UK
Eurozone
France
Italy
Spain
Ireland
Japan
Korea
Global
Developed
Emerging
Taiwan
MexicoBrazil
Russia
SwitzerlandSweden
Eur
ozon
eD
evel
oped
Em
ergi
ng
Aug Sep
6
2.7 2.8 2.4 2.1 1.9 1.9 2.2 2.4 2.3 2.1 2.1 2.0 1.9 2.0 2.4 2.7 2.9 2.8 2.2 1.4 1.1 1.4 1.6 1.5
2.1 2.3 1.9 1.6 1.4 1.4 1.6 1.8 1.5 1.5 1.4 1.3 1.3 1.2 1.5 1.7 1.8 1.7 1.1 0.3 0.1 0.5 0.7 0.6
3.5 3.5 3.1 2.9 2.7 2.6 3.1 3.3 3.4 3.2 3.2 3.1 3.0 3.3 3.8 4.2 4.7 4.4 3.9 3.2 2.6 2.8 2.9 3.0
2.1 2.3 1.9 1.5 1.4 1.5 1.4 1.7 1.2 1.3 1.0 1.0 0.8 0.7 1.0 1.3 1.4 1.2 0.7 0.3 0.1 0.3 0.4 -0.2
2.5 2.5 2.2 1.9 1.4 1.6 1.3 1.5 1.1 1.4 1.3 1.3 1.1 0.9 1.2 1.6 1.7 1.6 0.8 0.4 0.4 0.2 0.9 0.2
1.9 2.3 2.1 1.6 1.4 1.5 1.3 2.0 1.4 1.6 1.7 1.4 1.2 1.1 1.1 1.5 1.7 1.7 1.4 0.9 0.6 0.9 -0.1 0.0
1.5 1.7 1.6 1.2 0.9 1.1 1.1 1.1 0.9 0.8 0.3 0.5 0.2 0.2 0.2 0.5 0.4 0.2 0.1 0.1 -0.3 -0.4 0.8 -0.5
2.3 2.3 1.7 1.2 1.0 1.1 1.3 1.6 0.9 0.6 0.6 0.4 0.2 0.2 0.5 0.8 1.1 0.9 0.1 -0.7 -0.9 -0.3 -0.7 -0.6
1.1 1.8 1.1 0.6 0.5 0.8 1.0 1.1 0.6 0.2 0.4 0.1 0.2 -0.3 0.5 1.1 1.1 0.4 0.2 -0.9 -0.7 -1.9 -2.1 -2.3
1.2 1.1 0.8 0.8 0.8 0.7 1.1 1.7 1.0 1.1 0.5 0.6 0.6 0.6 0.8 1.1 1.1 0.9 0.5 -0.3 -0.8 -0.6 -0.6 -1.1
2.5 2.4 2.1 2.2 2.0 1.9 1.8 2.1 2.1 1.6 1.5 1.3 1.3 1.6 1.8 1.7 1.5 1.3 0.8 -0.2 0.1 0.9 0.7 1.0
1.1 1.1 1.0 0.8 0.7 0.7 0.7 1.1 0.5 0.7 0.4 0.5 0.1 -0.3 -0.3 -0.1 0.2 -0.2 -0.4 -1.0 -1.0 -1.3 -1.2 -1.4
2.4 2.4 2.3 2.1 1.8 1.9 1.9 2.1 2.0 2.0 2.1 1.7 1.7 1.5 1.5 1.3 1.8 1.7 1.5 0.8 0.5 0.6 1.0 0.2
2.3 2.5 2.2 1.9 1.6 1.5 1.9 2.0 1.8 1.6 1.8 1.7 1.7 1.8 2.1 2.3 2.5 2.3 1.5 0.3 0.1 0.6 1.0 1.3
1.2 1.4 0.8 0.3 0.2 0.2 0.5 0.9 0.7 0.7 0.5 0.3 0.2 0.2 0.5 0.8 0.7 0.4 0.4 0.1 0.1 0.1 0.3 0.2
2.5 2.5 2.2 1.9 1.7 1.5 2.3 2.5 2.7 2.7 2.8 2.8 3.0 3.8 4.5 4.5 5.4 5.2 4.3 3.3 2.4 2.5 2.7 2.4
3.0 3.3 3.4 3.2 2.8 2.7 2.5 2.8 3.1 2.8 2.8 3.1 3.1 2.9 2.7 2.6 2.7 3.0 3.0 2.7 2.2 2.0 1.5 1.3
2.1 2.0 2.0 1.3 0.8 0.5 0.4 0.6 0.7 0.7 0.6 0.0 -0.4 0.0 0.2 0.7 1.5 1.1 1.0 0.1 -0.3 0.0 0.3 0.7
1.7 1.2 0.3 -0.1 0.2 0.2 0.6 0.7 0.9 0.9 0.4 0.4 0.4 0.4 0.6 1.1 1.9 -0.2 0.0 -1.0 -1.2 -0.8 -0.5 -0.3
3.7 3.4 2.3 2.1 2.0 2.6 2.9 3.0 3.0 3.2 3.1 3.3 4.0 4.6 5.5 7.4 7.6 6.6 5.8 7.2 6.3 6.2 6.7 6.7
4.5 4.6 4.0 3.7 3.8 3.9 4.6 4.9 4.7 3.4 3.2 3.4 2.9 2.5 3.3 4.3 4.2 4.0 3.3 2.4 1.9 2.1 2.3 2.4
5.0 4.9 4.7 4.8 4.4 3.9 4.0 4.4 4.3 4.0 3.8 3.2 3.0 3.0 3.0 2.8 3.2 3.7 3.3 2.2 2.8 3.3 3.6 4.1
3.4 3.5 3.8 4.3 5.0 5.2 5.3 5.2 5.1 4.7 4.6 4.3 4.0 3.8 3.5 3.0 2.4 2.3 2.5 3.1 3.0 3.2 3.4 3.6
Global inflation
Source: Bank of Mexico, DGBAS, ECB, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, Japan Ministry of Internal Affairs & Communication, Korean National Statistical Office, National Bureau of Statistics China, ONS, Refinitiv Datastream, Riksbank, Statistics Indonesia, Swiss National Bank, US Federal Reserve, J.P. Morgan Asset Management. Figures shown are for headline inflation and are % change year on year. Heatmap colours are based on the respective central bank target inflation rates. Blue is below target, white is at target and red is above target. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
GTM – UK | 6
India
Indonesia
Greece
Germany
USUK
EurozoneFrance
ItalySpain
Ireland
JapanChina
Korea
Global
Developed
Emerging
Taiwan
MexicoBrazil
Russia
SwitzerlandSweden
Eur
ozon
eD
evel
oped
Em
ergi
ng
Jun
Apr
Mar
Dec
Jan
Feb
2018
Mar
May
Jun
Jul
Aug
Nov
Sep
Oct
Dec
Jan
2019
Feb
May
Apr
Jul
Aug
Sep
Oct
Nov
2020
7
GTM – UK |
-2
-1
0
1
2
3
4
5
'07 '09 '11 '13 '15 '17 '19
Global core inflation and inflation expectations
Core inflation Market-based inflation expectations% change year on year %, 5y5y inflation swap
Source: (Left) Bank of Japan, BLS, Eurostat, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core inflation for the US is defined as CPI excluding food and energy. Core inflation for Japan is defined as CPI excluding fresh food and energy. Core inflation for the UK and the eurozone is defined as CPI less energy, food, alcohol and tobacco. Japan core CPI has been adjusted down by 2% from April 2014 to March 2015 to remove the estimated impact of the consumption tax hike over this period. (Right) Bloomberg, J.P. Morgan Asset Management. 5y5y inflation swap represents the market’s expectation of five-year average inflation, starting in five years’ time. Data for Japan starts in March 2007 due to data availability. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
-2
-1
0
1
2
3
4
5
'07 '09 '11 '13 '15 '17 '19
Headline inflation target
Japan
UK
US
Eurozone
7
Global economy
US
Eurozone
Japan
UK
8
GTM – UK |
12.311.3
9.4
6.2
3.5 3.4 2.7
6.55.3
4.13.1
1.9 1.2 0.72.6
24.0
31.5
16.9
34.0
10.6
16.2
5.44.2
0.5
9.7
1.1
4.9
0.50
5
10
15
20
25
30
35
40
US Japan Germany UK Italy Spain France Brazil S. Africa China Korea Russia India Mexico
Global fiscal policy
Global discretionary fiscal stimulus measures in re sponse to Covid-19% of 2020 nominal GDP, based on IMF estimates
Source: IMF Fiscal Monitor, IMF June World Economic Outlook, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
8
Revenue and spending measures Loans, equity injections and guarantees
Developed markets Emerging markets
Global economy
9
GTM – UK |
0
2
4
6
8
10
12
14
16
18
20
22
24
26
-2
0
2
4
6
8
10
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Forecast*
Global monetary policy
Central bank balance sheetsUSD trillions
Source: (Left) Bank of England (BoE), Bank of Japan (BoJ), Bloomberg, European Central Bank (ECB), J.P. Morgan Securities Research, UK Debt Management Office, US Federal Reserve (Fed), J.P. Morgan Asset Management. Chart data includes the eurozone, Japan, UK and US. 2020 and 2021 estimates are from J.P. Morgan Asset Management’s Global Fixed Income, Currency and Commodities team. (Right) BoE, BoJ, ECB, Fed, Refinitiv Datastream, J.P. Morgan Asset Management. Global central bank balance sheet is the sum of the balance sheets of the BoE, BoJ, ECB and Fed. *Balance sheet forecast assumptions: BoE to have net asset purchases totalling GBP 125 bn over the forecast period; BoJ to have net asset purchases totaling JPY 100 tn over the forecast period; ECB to have net asset purchases totalling EUR 1.1 tn over the forecast period; Fed to have net asset purchases of USD 120 bn per month. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
9
Global central bank balance sheet
12-month change in balance sheet
Major central bank purchases and government bond is suanceUSD trillions
Net government bond issuance
Central bank government bond QE purchases
Net government bond supply
-4
-3
-2
-1
0
1
2
3
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
10
GTM – UK |
-40 -30 -20 -10 0 10 20
Turkey
Brazil
Mexico
South Africa
Japan
Norway
UK
Russia
Sweden
Australia
Canada
South Korea
Eurozone
US
Switzerland
India
China
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
90
95
100
105
110
115
120
125
130
135
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Global currencies
USD real effective exchange rate and interest rate differential Global real effective exchange rate valuationsIndex level (LHS); % (RHS) % premium / discount relative to its average since 1999
Source: (All charts) J.P. Morgan Securities Research, Refinitiv Datastream, J.P. Morgan Asset Management. DM is developed markets and the yield is calculated as a GDP-weighted average of the 10-year government bond yields of Australia, Canada, France, Germany, Italy, Japan, Switzerland and the UK. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
10
US minus DM 10-year government bond yield
USD broad real effective exchange rate
Developed markets
Emerging markets
11
GTM – UK |
0 5 10 15 20 25 30 35 40 45
Global trade
Exports of goods Global export volumes% of nominal GDP, 2019 % change year on year, three-month moving average
Source: (Left) IMF Direction of Trade, IMF World Economic Outlook, J.P. Morgan Asset Management. (Right) CPB Netherlands, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
11
China
EM ex-China
US
Eurozone
Other
Brazil
US
Eurozone
Canada
India
China
Russia
Mexico
Japan
Korea
UK
Emerging markets
Developed markets
-25
-20
-15
-10
-5
0
5
10
15
20
25
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19
12
GTM – UK |
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
'58 - '67 '68 - '77 '78 - '87 '88 - '97 '98 - '07 '08 - '19
Productivity and population growth
Drivers of US GDP growth Global working-age population growthAnnualised % change Annualised % change
Source: (Left) BEA, BLS, J.P. Morgan Asset Management. GDP drivers are calculated as the average annualised growth between Q4 from the preceding year in the period and Q4 of the last year of the period. (Right) United Nations (UN) Department of Economic and Social Affairs, J.P. Morgan Asset Management. Working-age population is defined as aged 15-69. Data from 2020 onwards are UN forecasts. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
2000-2020 2020-20401980-2000
Growth in workers + Growth in real output per worker
Growth in real GDP
12
1.6%
2.2%
1.9%
1.4%
1.1%
2.8% 1.0% 1.3% 1.6% 1.9% 1.0%
4.5%
3.2% 3.2%3.0% 3.0%
1.7%
0.7%
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
US UK Eurozone Japan
13
GTM – UK |
0
20
40
60
80
100
120
140
160
180
200
Feb '20 Apr '20 Jun '20 Aug '20 Oct '200
1
2
3
4
5
6
7
8
9
Feb '20 Apr '20 Jun '20 Aug '20 Oct '20
Global Covid-19 cases and deaths
Daily increase in Covid-19 cases Daily increase in C ovid-19 deathsSeven-day moving average, per million people Seven-day moving average, per million people
Source: (All charts) Johns Hopkins CSSE, J.P. Morgan Asset Management. Cases include both laboratory confirmed and “presumptive positive” cases. Europe includes countries in the EU27 plus Switzerland and the UK. LATAM includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. North America includes Canada and the US. North Asia includes China, Hong Kong, Japan, South Korea and Taiwan. South Asia includes Bangladesh, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
13
North Asia
North America
Europe
South Asia
LATAM
Global economy
North Asia
North America
Europe
South Asia
LATAM
14
GTM – UK |Global travel and navigation app usage
Travel and navigation app usage Travel and navigatio n app usage% change year on year % change year on year
Source: (All charts) App Annie, J.P. Morgan Asset Management. Data is sourced from App Annie with over 600 travel and navigation apps globally, including Google Maps, Uber, Airbnb and Booking.com. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
-100
-80
-60
-40
-20
0
20
40
Jan '20 Mar '20 May '20 Jul '20 Sep '20-100
-80
-60
-40
-20
0
20
40
Jan '20 Mar '20 May '20 Jul '20 Sep '20
14
Russia
South Korea
China
India
South Africa
Brazil
Spain
US
Germany
Italy
UK
France
Global economy
15
GTM – UK |
20
25
30
35
40
45
50
55
60
65
-12
-10
-8
-6
-4
-2
0
2
4
6
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
US GDP
Contribution to US real GDP growth and ISM composit e% change year on year (LHS); index level (RHS)
Source: BEA, Bloomberg, ISM, Refinitiv Datastream, J.P. Morgan Asset Management. The Institute for Supply Management (ISM) composite is an economy-weighted average of the manufacturing and non-manufacturing surveys. A score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. ISM data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Change in inventories
Net exports
Investment
Consumption
Government
ISM composite (RHS)
Global economy
Average since 2000
Q220
2.0% -9.0%
15
16
GTM – UK |
0
10
20
30
40
50
60
70
80
90
100
ConferenceBoard Leading
Economic Index
ConferenceBoard Leading
Credit Index
Consumerconfidence:
Presentsituation
ISM non-manufacturing
ISMmanufacturing:
New orders
Non-farmpayrolls
US Economic Monitor
US economic indicatorsPercentile rank relative to historic data since 1990
Source: BLS, Conference Board, ISM, Refinitiv Datastream, J.P. Morgan Asset Management. Elevated recession risk flags are shown when the underlying indicator is at a level consistent with the onset of any of the three recessions prior to the Covid-19 recession. Transformations used for each of the indicators are: % change year on year for the Leading Economic Index and consumer confidence present situation, index level for Leading Credit Index, ISM non-manufacturing and ISM manufacturing new orders and three-month moving average of monthly absolute change for non-farm payrolls. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Broad indicators
Latest
Higher recession risk
Consumer and services Manufacturing Labour marketElevated
recession risk
Lower recession risk
Key:
16
17
GTM – UK |
25
30
35
40
45
50
55
60
65
70
75
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Elevated recession risk
US business surveys
US ISM manufacturing: New orders US ISM non-manufact uringIndex level Index level
Source: (All charts) ISM, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the three recessions prior to the Covid-19 recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Recession
17
Elevated recession risk
35
40
45
50
55
60
65
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
18
GTM – UK |US business investment
US future capex intentions and business investment% change year on year (LHS); index level (RHS)
Source: BEA, Dallas Fed, Kansas City Fed, New York Fed, Philadelphia Fed, Refinitiv Datastream, Richmond Fed, J.P. Morgan Asset Management. Future capex intentions is an average index level of the five aforementioned Fed districts equally weighted, displayed using a three-month moving average. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
18
Business investment Future capex intentions
-20
-10
0
10
20
30
40
-20
-15
-10
-5
0
5
10
15
20
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
19
GTM – UK |
-100
-75
-50
-25
0
25
50
75
100
125
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US consumer
US consumer confidence: Present situation US house prices relative to income% change year on year Index level
Source: (Left) Conference Board, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management. The recent fall in house prices relative to income was primarily driven by a sharp increase in incomes via government benefits during the Covid-19 recession. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the three recessions prior to the Covid-19 recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Recession
19
80
90
100
110
120
130
140
'79 '84 '89 '94 '99 '04 '09 '14 '19
Elevated recession risk
20
GTM – UK |
0
2
4
6
8
10
12
14
16
'67 '72 '77 '82 '87 '92 '97 '02 '07 '12 '17
US labour market
US unemployment rate and wage growth%, wage growth is year on year
Source: BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is average hourly earnings of total private production and non-supervisory employees. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Unemployment
Wage growth
20
Sep 2020: 7.9%
Sep 2020:4.6%
21
GTM – UK |
-1,200
-1,000
-800
-600
-400
-200
0
200
400
600
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20200
300
400
500
600
700
800
900
1,000
1,100
1,200
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US non-farm payrolls and initial jobless claims
US non-farm payrolls US initial jobless claimsMonthly change in thousands, three-month moving average Thousands, 12-week moving average
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the three recessions prior to the Covid-19 recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
21
Recession
Elevated recession risk
-7,300
Sep 2020: 1,304
3,400
Sep 2020: 1,066
3,200
22
GTM – UK |
-15
-10
-5
0
5
10
15
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-4
-2
0
2
4
6
8
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Recession
US Conference Board indicators
US Leading Economic Index US Leading Credit Index% change year on year
Source: (All charts) Conference Board, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value for the Leading Economic Index and lowest for the Leading Credit Index at the start of the three recessions prior to the Covid-19 recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Elevated recession risk
Index level
Elevated recession risk
Lending conditions tightening
Global economy
22
23
GTM – UK |
-6
-4
-2
0
2
4
6
50
55
60
65
70
75
80
'90 '94 '98 '02 '06 '10 '14 '180
5
10
15
20
25
50
60
70
80
90
100
110
'90 '94 '98 '02 '06 '10 '14 '18
US household debt and net saving US non-financial co rporate debt and net saving% of nominal GDP % of nominal GDP
Source: (All charts) BEA, Refinitiv Datastream, US Federal Reserve, J.P. Morgan Asset Management. Household net saving is defined as net disposable income minus final consumption expenditure. Non-financial corporate net saving is defined as the difference between gross savings (less net capital transfers paid and excluding foreign earnings retained abroad) and capital expenditures. Non-financial corporate net saving data has been smoothed in 2018 to account for the Tax Cuts and Jobs Act of 2017. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Recession
US household and corporate finances
Non-financial corporate debt
Non-financial corporate net
saving
Householddebt
Household net saving
Global economy
23
24
GTM – UK |
-3
-2
-1
0
1
2
3
4
5
6
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-2
-1
0
1
2
3
4
5
6
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Average since 2000
August2020
Headline CPI 2.1% 1.3%
Core CPI 2.0% 1.7%
US inflation
US headline and core inflation US core goods and ser vices inflation% change year on year % change year on year
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Core goods CPI is defined as goods CPI excluding food and energy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Average since 2000
August2020
Services CPI 2.7% 2.0%
Core goods CPI 0.0% 0.4%
Headline inflation target
24
25
GTM – UK |
0
1
2
3
4
5
6
7
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
US Federal Reserve policy rate
Federal funds policy rate expectations% Fed funds rate and market expectations
Source: Bloomberg, US Federal Reserve, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. MBS: Mortgage-backed securities, CMBS: Commercial mortgage-backed securities. The list of policy actions is not exhaustive. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
25
Federal funds rate
Market expectations on 30 September 2020 (mean)
Other Federal Reserve policy actions in 2020
Adopted average inflation targeting framework
Restarted asset purchase programme• Purchases of Treasuries and agency MBS are now unlimited• Expanded the programme to include agency CMBS
Launched a Primary (PMCCF) and Secondary Corporate Credit Facility (SMCCF)
Enhanced US dollar liquidity swap arrangements with a wide range of central banks
New Paycheck Protection Program Liquidity Facility (PPPLF) and Main Street Lending Program to support funding to small businesses
26
GTM – UK |
0
10
20
30
40
50
60
'09 '19 '29 '39 '49 '59 '69 '79 '89 '99 '09 '19-2
0
2
4
6
8
10
12
14
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
US politics: Election polls and corporate tax rates
US election national polls, 2016 vs. 2020 US corpora te tax rates% point, spread of Democrat candidate over Republican candidate %, maximum corporate tax rate
Source: (Left) Bloomberg, RealClearPolitics.com, J.P. Morgan Asset Management. The lines show the spread of national polls between Hillary Clinton and Donald Trump in 2016, and Joe Biden and Donald Trump in 2020, based on the RealClearPolitics average. (Right) IRS, joebiden.com, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
1909
Trump tax cuts
Biden tax hike proposals
Biden 2020
Clinton 2016
Democrat lead
Global economy
26
27
GTM – UK |US focus: Labour market and government benefits
Source: (Left) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) BEA, Refinitiv Datastream, J.P. Morgan Asset Management. Government benefits not shown include Social Security, Medicaid, Medicare, Veterans Benefits and other transfers, which are all broadly non-cyclical. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Temporary layoffs
Permanent layoffs
Global economy
27
US unemploymentMillions of people
US government benefits% of average total personal income in 2019
Stimulus cheques
Unemployment insurance - $600 per week boost
Unemployment insurance
0
2
4
6
8
10
12
14
16
18
20
'67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '190
2
4
6
8
10
12
14
16
18
Feb '20 Mar '20 Apr '20 May '20 Jun '20 Jul '20 Aug '20
28
GTM – UK |
10
15
20
25
30
35
40
45
50
55
60
65
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Eurozone GDP
Contribution to eurozone real GDP growth and composit e PMI% change year on year (LHS); index level (RHS)
Source: Eurostat, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Average since 2000
Q220
1.1% -14.7%
28
Change in inventories
Net exports
Investment
Consumption
Government
Composite PMI (RHS)
29
GTM – UK |
-50
-40
-30
-20
-10
0
10
20
-20
-15
-10
-5
0
5
10
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Eurozone business investment
Eurozone business investment and investment confiden ce% change year on year (LHS); index level (RHS)
Source: Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
Business investment
29
Investment goods industry confidence
30
GTM – UK |
-25
-20
-15
-10
-5
0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Eurozone consumer
Eurozone consumer confidence Eurozone retail sales vol umesIndex level Real index level, rebased to 100 at Jan 2010
Source: (Left) European Commission, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns indicate recession in the eurozone. (Right) Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
30
Recession
0
50
100
150
200
250
300
350
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Total retail sales
Internet or mail orders
Clothing, textiles and footwear
31
GTM – UK |
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
4
5
6
7
8
9
10
11
12
13
14
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Eurozone labour market
Eurozone unemployment rate and wage growth%, wage growth is year on year
Source: ECB, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is compensation per employee. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
31
Aug 2020:8.1%
Q220:-4.6%
Wage growthUnemployment
-5.0
32
GTM – UK |
-1
0
1
2
3
4
5
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Eurozone inflation
Eurozone headline and core inflation Eurozone core goo ds and services inflation% change year on year % change year on year
Source: (All charts) Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food, alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average since 2000
September 2020(flash)
Services CPI 1.9% 0.5%
Core goods CPI 0.6% -0.3%
Global economy
32
Headline inflation target
Average since 2000
September 2020(flash)
Headline CPI 1.7% -0.3%
Core CPI 1.3% 0.2%
33
GTM – UK |
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
European Central Bank policy rate
European Central Bank policy rate expectations% deposit rate and market expectations
Source: Bloomberg, European Central Bank, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. The list of policy actions is not exhaustive. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
ECB deposit rate
Market expectations on 30 September 2020 (mean)
33
European Central Bank policy actions in 2020
Launched the Pandemic Emergency Purchase Programme (PEPP)• Up to €1.35trn of purchases, which will run until at least June 2021• Increased flexibility on issuer and maturity limits• Short-term deviations from the capital key permitted • Greek bonds are eligible for purchase
Expanded existing Asset Purchase Programme (APP) by €120bn for 2020
Expanded eligibility of non-financial commercial paper for the Corporate Sector Purchase Programme (CSPP)
Enhanced multiple forms of Longer-Term Refinancing Operations to backstop liquidity
Bonds downgraded to junk since 7 April made eligible collateral for ECB lending
34
GTM – UK |
40
50
60
70
80
90
100
110
120
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Eurozone debt
Eurozone debt to GDP ratios Eurozone debt service ratios% of nominal GDP % of disposable income
Source: (All charts) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. Debt service ratios are a GDP-weighted average of France, Germany, Italy and Spain. For the household sector, gross disposable income is the amount of money that all of the individuals in the household sector have available for spending or saving after income distribution measures (for example, taxes, social contributions and benefits) have taken effect. For the non-financial corporate sector, gross disposable income is essentially akin to gross operating surplus before dividends or interest are paid. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Households
Non-financial corporates
Government
Global economy
Non-financial corporatesHouseholds
34
32
33
34
35
36
37
38
39
40
5.0
5.5
6.0
6.5
7.0
7.5
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
35
GTM – UK |
0
20
40
60
80
100
120
140
160
180
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '200
1
2
3
4
5
6
7
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Eurozone government debt and bond spreads
France, Germany, Italy and Spain government debt to GDP European 10-year government bond spreads over G ermany% of nominal GDP % spread
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Italy and France data are four-quarter moving averages. Debt refers to gross debt. Dotted lines represent the IMF forecasts for government debt to GDP in 2020. (Right) Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Germany
Spain
France
Italy
Global economy
Spain
France
Italy
35
Forecast
36
GTM – UK |Eurozone focus: EU recovery fund and government support for jobs
Beneficiaries and contributors of EU recovery fund proposal* Proportion of jobs receiving government supportEUR billions, labels are % of GDP % of total employment
Source: (Left) European Commission, J.P. Morgan Asset Management. Countries shown are the top eight net beneficiaries / contributors. *Current expectations of the European Commission’s proposal. Yet to be accepted and ratified by EU member parliaments. (Right) Bundesagentur für Arbeit, INE, INSEE, Istat, ONS, RefinitivDatastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
36
Global economy Net beneficiaries
Net contributors
0
2
4
6
8
10
12
UK Germany Italy France Spain
3%
2%
4% 9%5% 5%
12%10%
-2% -1% -2% -2% -2%-2%
-1%
-2%-80
-60
-40
-20
0
20
40
60
37
GTM – UK |
0
5
10
15
20
25
30
35
40
45
50
55
60
65
-26
-24
-22
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
UK GDP
Contribution to UK real GDP growth and composite PM I% change year on year (LHS); index level (RHS)
Source: Markit, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average since 2000
Q220
1.5% -21.5%
37
Global economy
Change in inventories
Net exports
Investment
Consumption
Government
Composite PMI (RHS)
38
GTM – UK |
-40
-30
-20
-10
0
10
20
'87 '92 '97 '02 '07 '12 '17
UK consumer
UK consumer confidence UK house prices relative to incomeIndex level, three-month moving average Index level
Source: (Left) GfK, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns indicate recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Recession
38
Global economy
40
50
60
70
80
90
100
110
120
130
'87 '92 '97 '02 '07 '12 '17
39
GTM – UK |
-5
0
5
10
15
20
0
2
4
6
8
10
12
'85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
UK labour market
UK unemployment rate and wage growth%, wage growth is year on year
Source: ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is a three-month moving average of average weekly earnings for the whole economy, including bonuses and arrears. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
39
Wage growth
Unemployment
Jul 2020:4.1%
Jul 2020:-1.0%
40
GTM – UK |
-6
-4
-2
0
2
4
6
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-1
0
1
2
3
4
5
6
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
UK inflation
UK headline and core inflation UK core goods and ser vices inflation% change year on year % change year on year
Source: (All charts) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food, alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average since 2000
August2020
Headline CPI 2.0% 0.2%Core CPI 1.7% 0.9%
Average since 2000
August 2020
Services CPI 3.3% 0.6%Core goods CPI -0.6% 1.2%
40
Global economy
Headline inflation target
41
GTM – UK |
-1
0
1
2
3
4
5
6
7
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
UK Bank of England policy rate
Bank of England policy rate expectations% base rate and market expectations
Source: Bank of England (BoE), Bloomberg, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. SMEs: Small and medium-sized enterprises. The list of policy actions is not exhaustive. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
BoE base rate
Market expectations on 30 September 2020 (mean)
41
Other Bank of England policy actions in 2020
Restarted asset purchase programme, with £300bn of purchases to be made by year-end
Launched a Covid Corporate Financing Facility (CCFF) to purchase commercial paper
Launched a Term Funding Scheme for SMEs (TFSME)
Cut the countercyclical capital buffer from 1% to 0%
Temporary direct financing of government spending needs, reviving the “Ways and Means Facility” that was used in 2008
42
GTM – UK |UK focus: Furlough scheme and trade
UK jobs on furlough UK trade with partners% of total employment % of nominal GDP of exporting country/region, 2019
Source: (Left) ONS Business Impact of Covid-19 Survey, J.P. Morgan Asset Management. (Right) Eurostat, IMF, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
42
0
5
10
15
20
25
30
35
0
2
4
6
8
10
12
14
16
18
20
UK exportsto EU
UK exports toWorld ex-EU
EU exportsto UK
World ex-EUexports to UK
43
GTM – UK |
22
26
30
34
38
42
46
50
54
58
62
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Japan GDP
Contribution to Japan real GDP growth and manufactu ring PMI% change year on year (LHS); index level (RHS)
Source: Japan Cabinet Office, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average since 2000
Q220
0.7% -10.1%
43
Global economy
Change in inventories
Net exports
Investment
Consumption
Government
Manufacturing PMI (RHS)
44
GTM – UK |
-5
0
5
10
15
20
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-10
-5
0
5
10
15
20
25
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
China GDP
Contribution to China real GDP growth China industri al production and retail sales% change year on year % change year on year
Source: (Left) Bloomberg, National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. GDP forecast is from Bloomberg contributor composite. (Right) National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. Industrial production is a three-month moving average and retail sales is a six-month moving average. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Consumption
GDP growth
Investment
Net exports
Global economy
44
Q2 20202020
forecast
3.2% 2.1%
Industrial production
Retail sales
H1 ’20
45
GTM – UK |
0
20
40
60
80
100
120
140
160
180
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
China debt
China debt to GDP ratios China credit growth% of nominal GDP % change year on year
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. (Right) People’s Bank of China (PBoC), J.P. Morgan Asset Management. This chart includes two measures of credit ranging from the narrowest – bank lending – to the more extensive broad credit. Specifically, bank lending is the sum of all loans made by the commercial banking system to domestic borrowers. Broad credit includes all finance provided to non-financial entities in private and public sectors. Broad credit is all funding to domestic borrowers, including bank lending, trust loans, entrusted loans, bankers’ acceptances, corporate bonds, equity financing by non-financial enterprises, asset-backed securities, loan write-offs, central government and local government bonds. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Households
Government
Global economy
Non-financial corporates
45
0
5
10
15
20
25
30
35
40
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Broad credit
RMB bank lending
46
GTM – UK |
-10
-5
0
5
10
15
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
China inflation and policy rates
China inflation China interbank rate and reserve requirement ratio (RRR)% change year on year % rate
Source: (Left) Bloomberg, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. PPI is the Producer Price Index. (Right) People’s Bank of China, Refinitiv Datastream, J.P. Morgan Asset Management. Average RRR for large and small banks. SHIBOR is the three-month interbank rate. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average since 2007
August2020
Headline CPI 2.8% 2.4%
Core CPI 1.3% 0.5%Headline PPI 0.9% -2.0%
Global economy
46
RRRSHIBOR
5
10
15
20
25
30
0
1
2
3
4
5
6
7
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
47
GTM – UK |
-40
-30
-20
-10
0
10
20
30
'92 '96 '00 '04 '08 '12 '16 '20-2.4
-2.0
-1.6
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Emerging market currencies and current account
EM currencies vs. US dollar EM current account balance% from fair value, relative to US dollar % of nominal GDP
Source: (Left) J.P. Morgan Asset Management. Fair value is based on nominal exchange rates relative to PPP exchange rates and is adjusted for GDP per capita. (Right) Bloomberg, J.P. Morgan Asset Management. EM currencies and current account balances are created using the current weighted average of JPM GBI-EM Global Diversified Index countries. Current account balance is the balance of a country’s net trade in goods and services, its net earnings on cross-border investments and its net transfer payments. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
+1 std. dev.
Average
Global economy
47
EM current account balance improving
EM currencies expensive relative to USD
-1 std. dev.
48
GTM – UK |
USA
JPNDEU
GBRFRA
CAN
ITA ESP
AUS
NLD
CHN
IND
BRA
MEX
TUR
KOR
RUS
IDN
ARG
SAU
THA
HKG
ZAF
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
0 20 40 60 80 100
0
5
10
15
20
25
30
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20
Emerging market structural dynamics
Urbanisation, real GDP per capita and population si ze Share of global real GDPUrbanisation rates, %, and GDP per capita, USD, bubble size is population %
Source: (Left) World Bank, J.P. Morgan Asset Management. Urbanisation rate refers to the proportion of the total population living within an urban area defined by national statistical offices. Countries are labelled using three-letter International Organisation of Standardisation country codes. (Right) Refinitiv Datastream, World Bank, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
48
US
Eurozone
China
Japan
India
GD
P p
er c
apita
Urbanisation rate
Emerging markets
Developed markets
0
49
GTM – UK |
40
100
160
220
280
340
400
90
100
110
120
130
140
150
'06 '08 '10 '12 '14 '16 '18 '20 '22
Emerging market focus: China GDP, money supply and imports
Source: (Left) BEA, Bloomberg, Eurostat, National Bureau of Statistics of China, ONS, J.P. Morgan Asset Management. Forecasts are from Bloombergcontributor composite. (Right) China Customs, IMF, PBoC, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Global economy
49
-40
-20
0
20
40
60
80
-20
-10
0
10
20
30
40
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Real GDP levelsIndex level, rebased to 100 at 1Q 2006
China
Forecast
Eurozone
US
UK
% change year on yearChina M1 money supply and import growth
China import growthM1 money supply growth
50
GTM – UK |
0x
5x
10x
15x
20x
25x
30x
35x
40x
Global earnings expectations and equity valuations
Consensus estimates for global earnings per share g rowth Global forward price-to-earnings ratios % change year on year, earnings per share growth estimates x, multiple
Source: (Left) FTSE, IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. MSCI indices are used for Europe ex-UK and EM. UK is FTSE All-Share, US is S&P 500 and Japan is TOPIX. Data used are in local currency, except for EM, which is in US dollars. Year on year growth rates are calculated based on earnings estimates for the end of the calendar year. For Japan the end of the year is the fiscal year, which ends on 31 March of the following year. (Right) IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. MSCI indices are used for all regions/countries (due to data availability), except for the US, which is represented by the S&P 500. 23 March 2020 marks the recent trough of the S&P 500. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
50
Equities
US UKEuropeex-UK
Japan EMUS UKEuropeex-UK
Japan EM
20212020 2021 vs. 2019
-60
-40
-20
0
20
40
60
Range since 1990
Average since 1990
Current
23 March 2020
80x77x
51
GTM – UK |
0.1
0.2 1.8 2.0 2.3
4.6 4.8 4.8 5.3 5.7
7.6
10.7
0
2
4
6
8
10
12
UK cash UK Gilts UK IG DM equity EM equity FTSE All-Share
Global REITs EM debt Globalconvertibles
DM high yield Globalinfrastructure
Globaltransport
Global income
Equity index yields% yield
Source: (Top) Bloomberg Barclays, BofA/Merrill Lynch, Clarkson, Drewry Maritime Consultants, FTSE, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Additional yield often comes with associated capital and/or liquidity risk. Global transport yield is as of June 2020 and global infrastructure yield is as of March 2020. Yields for the bond indices are yield to worst and dividend yields for the equity indices. Global transport levered yield is rental income minus operating expenses, debt amortisation and interest expenses, expressed as a percentage of equity value. Global convertibles: Bloomberg Barclays Global Convertibles; DM equity: MSCI World; EM equity: MSCI EM; UK Gilts: UK 10-year yield; UK IG: Bloomberg Barclays Sterling Agg. –Corporates; Global REITs: FTSE NAREIT Index; DM high yield: BofA/Merrill Lynch Developed Markets High Yield Constrained; EM debt: J.P. Morgan EMBI Global; Global infrastructure: MSCI Global Infrastructure Asset Index – Low risk. (Bottom) Bloomberg, FTSE, MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Buyback yield is last 12 months’ buybacks divided by the market cap of the index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
51
Average UK inflation: 1.2%(12 months to August 2020)
% yieldAsset yield comparison
Buyback yield
Dividend yield
MSCI WorldFTSE All-Share MSCI Europe ex-UKS&P 500 MSCI EMMSCI Japan0
1
2
3
4
5
6
7
Fixed income
Equity
Alternatives
Convertibles
52
GTM – UK |
0
5
10
15
20
25
30
IT Health Care Cons. Discr. Comm. Serv. Financials Industrials Cons. Staples Utilities Materials Energy
Global equity sector weights
Global equity sector weights
MSCI World Growth and Value sector weights
% of total market cap
% of total market cap
Source: (Top) MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Indices are all MSCI, except for US, which is S&P 500. (Bottom) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Real estate is not included in these sector breakdowns due to the small size of the weight in each index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
52
Europe ex-UK EMUS UK
MSCI World Growth MSCI World Value
0
5
10
15
20
25
30
35
40
IT Health Care Cons. Discr. Comm. Serv. Financials Industrials Cons. Staples Utilities Materials Energy
53
GTM – UK |
20
30
40
50
60
70
'06 '08 '10 '12 '14 '16 '18 '20-1,000
-800
-600
-400
-200
0
200
400
'04 '06 '08 '10 '12 '14 '16 '18 '20
Equity net issuance and dividend payout ratios
US and Europe net equity issuance Dividend payout ra tiosUSD billions, 12-month rolling %, three-month moving average
Source: (Left) Bernstein, Bloomberg, J.P. Morgan Asset Management. Net equity issuance is equity issuance minus buybacks. (Right) FTSE, MSCI, Refinitiv Datastream, Standard & Poor's, J.P. Morgan Asset Management. US: S&P 500; Europe ex-UK: MSCI Europe ex-UK; UK: FTSE All-Share; EM: MSCI Emerging Markets. Dividend payout ratio shows 12-month trailing dividend per share divided by 12-month trailing earnings per share. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
53
Europe ex-UK
US
UK
Europe ex-UK
US
UK
EM
54
GTM – UK |US earnings
S&P 500 earnings and performance US nominal GDP grow th and earnings growthNext 12 months’ earnings per share estimates (LHS); index level (RHS) % change year on year
Source: (Left) IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is based on 12-month forward estimates. (Right) BEA, IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is last 12 months’ earnings per share. Nominal GDP forecasts are from J.P. Morgan Securities Research. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
54
S&P 500 index level
S&P 500 forward EPS
-40
-30
-20
-10
0
10
20
30
40
-10
-8
-6
-4
-2
0
2
4
6
8
10
'86 '90 '94 '98 '02 '06 '10 '14 '18 '22
US nominal GDP
S&P 500 trailing EPS
2020/2021 nominal GDP forecasts
0
400
800
1,200
1,600
2,000
2,400
2,800
3,200
3,600
0
20
40
60
80
100
120
140
160
180
200
'86 '90 '94 '98 '02 '06 '10 '14 '18
55
GTM – UK |
-20 0 20 40 60 80
Health Care
Financials
Cons. Staples
IT
Utilities
Materials
Comm. Serv.
S&P 500
Industrials
Energy
Cons. Discr.
10
12
14
16
18
20
22
24
26
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US equity valuations
S&P 500 forward P/E ratio S&P 500 forward P/E ratio sector breakdownx, multiple % premium / discount of the P/E ratio relative to average since 1995
Source: (Left) FactSet, IBES, Refinitiv Datastream, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. P/E ratio calculated using IBES earnings estimates for next 12 months. P/E data may differ from Guide to the Markets - US, which uses FactSet earnings estimates. Shiller cyclically-adjusted P/E (CAPE) is price-to-earnings ratio adjusted using trailing 10-year average inflation-adjusted earnings. P/B ratio is trailing price-to-book ratio. (Right) IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Average: 16.0x
Valuation measureAverage
since 1990
Latest
Shiller CAPE ratio 25.9x 30.6x
P/B ratio 2.9x 3.6x
Equities
55
30 Sep 2020:21.7x
33.6
33.5
22.6
21.7
21.3
20.3
17.4
24.6
20.1
13.1
15.4
Current P/E ratio
Premium relative to history
56
GTM – UK |
-60
-40
-20
0
20
40
60
8.0x 11.0x 14.0x 17.0x 20.0x 23.0x
US valuations and subsequent returns
S&P 500 forward P/E ratios and subsequent 1-year re turns S&P 500 forward P/E ratios and subsequent 10-y ear returns%, annualised total return* %, annualised total return*
Source: (All charts) IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. *Dots represent monthly data points since 1988, which is earliest available. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
56
Current level
-20
-15
-10
-5
0
5
10
15
20
25
30
8.0x 11.0x 14.0x 17.0x 20.0x 23.0x
Current level
57
GTM – UK |
8
12
16
20
24
28
32
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Equity market factors
S&P 500 Quality/S&P 500 relative performance MSCI Wo rld Growth and Value forward P/E ratioRelative total return index level, rebased to 100 in 1990 x, multiple
Source: (Left) J.P. Morgan Asset Management Quantitative Beta Solutions, Standard and Poor’s, J.P. Morgan Asset Management. S&P 500 Quality index is the top quartile quality stocks in the S&P 500 determined by JPMAM Quantitative Beta Strategies based on measures of profitability, financial risk and earnings quality. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. (Right) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Forward P/E ratio is the price to 12-months forward ratio, as published by MSCI. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
57
Value
GrowthRecession
90
100
110
120
130
140
150
160
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
58
GTM – UK |
-70
-60
-50
-40
-30
-20
-10
0
'58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
0
100
200
300
400
500
600
'58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US bull and bear markets
S&P 500 bull markets, %
S&P 500 bear markets, %
Source: (All charts) Bloomberg, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. A bear market represents a 20% or more decline from the previous market high using a monthly frequency; a bull market represents a 20% increase from a market trough. Charts and labels refer to price return. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
60 months101%
131 months401%
147 months582%
32 months74%
50 months86%
74 months126%
60 months229%
43 months80% 26 months
48%
17 months-57%
30 months-49%
3 months-34%
20 months-27%
21 months-48%
18 months-36%
8 months-22%6 months
-28%
58
Equities
Duration:19 Feb-23 MarPrice return: -34%
Duration:Since 23 MarPrice return: 50%
59
GTM – UK |
-60
-50
-40
-30
-20
-10
0
0 180 360 540 720 900 1,080 1,260 1,440 1,620 1,800
US equity market drawdowns and recoveries
S&P 500 drawdowns and recoveries% price return since market peak
Source: Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
1987 2007 20001980 19731968
Trading days after S&P 500 market peak
59
Equities
2020
60
GTM – UK |
0
200
400
600
800
1,000
1,200
1,400
1,600
0
20
40
60
80
100
120
140
160
'88 '92 '96 '00 '04 '08 '12 '16 '20
Eurozone nominal GDP growth and earnings growth
Europe ex-UK earnings
MSCI Europe ex-UK earnings and performanceNext 12 months’ earnings per share estimates, EUR (LHS); index level (RHS) % change year on year
Source: (Left) IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Earnings data is based on 12-month forward estimates. (Right) Eurostat, IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Earnings data is last 12 months’ earnings per share. Nominal GDP forecasts are from J.P. Morgan Securities Research. MSCI EMU is MSCI European Monetary Union and represents eurozone equities. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
60
MSCI Europe ex-UK index level
MSCI Europe ex-UK forward EPS
-50
-40
-30
-20
-10
0
10
20
30
40
50
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Eurozone nominal GDP
MSCI EMU trailing EPS
2020 / 2021 nominal GDP forecasts
61
GTM – UK |
-20 -10 0 10 20 30 40 50 60
Comm. Serv.
Financials
Health Care
Utilities
IT
Energy
Europe ex-UK
Cons. Staples
Industrials
Cons. Discr.
Materials
7
9
11
13
15
17
19
21
23
25
27
'90 '94 '98 '02 '06 '10 '14 '18
Europe ex-UK equity valuations
MSCI Europe ex-UK forward P/E ratio MSCI Europe ex-U K forward P/E ratio sector breakdownx, multiple % premium / discount of the P/E ratio relative to average since 1995
Source: (Left) FactSet, IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. P/E ratio calculated using IBES earnings estimates for next 12 months. Cyclically-adjusted P/E (CAPE) is price-to-earnings ratio adjusted using trailing 10-year average inflation-adjusted earnings. P/B ratio is trailing price-to-book ratio. (Right) IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
30 Sep 2020:17.9x
Average: 14.6x
Valuation measure
Average since 1990
Latest
CAPE ratio 21.2x 18.6x
P/B ratio 2.0x 1.8x
61
Equities
21.6
21.6
21.1
23.1
17.9
15.2
26.2
15.6
17.4
10.1
14.8
Current P/E ratio
Premium relative to history
62
GTM – UK |
-40
-30
-20
-10
0
10
20
30
40
50
60
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
UK earnings
FTSE All-Share earnings and performance FTSE All-Sha re earnings per share growthNext 12 months’ earnings per share estimates, GBP (LHS); index level (RHS) % change year on year
Source: (All charts) FTSE, IBES, Refinitiv Datastream, J.P. Morgan Asset Management. Earnings data are based on 12-month forward estimates. Margin growth is the growth rate of earnings per share divided by sales per share. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
62
FTSE All-Share index level
FTSE All-Share forward EPS
Margin growth
Sales growth
Earnings growth
1,500
2,000
2,500
3,000
3,500
4,000
4,500
100
150
200
250
300
350
'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
63
GTM – UK |
-40 -20 0 20 40 60
Comm. Serv.
Financials
Cons. Staples
Materials
MSCI UK
Energy
Health Care
Utilities
Cons. Discr.
IT
Industrials
7
9
11
13
15
17
19
21
23
25
'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
UK equity valuations
UK FTSE All-Share forward P/E ratio UK forward P/E r atio sector breakdownx, multiple % premium / discount of the P/E ratio relative to average since 1995
Source: (Left) FTSE, IBES, Refinitiv Datastream, J.P. Morgan Asset Management. P/E ratio calculated using IBES earnings estimates for next 12 months for the FTSE All-Share. (Right) IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Index used is MSCI UK, due to data availability and index classification. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
30 Sep 2020:14.6x
Average: 14.3x
63
Equities
22.6
32.8
20.7
15.8
17.5
13.5
13.9
11.3
13.6
9.6
11.0
Current P/E ratio
Premium relative to history
64
GTM – UK |
0
10
20
30
40
50
60
70
'13 '14 '15 '16 '17 '18 '19 '20
UK small & mid cap exposure
0
200
400
600
800
1,000
1,200
'87 '92 '97 '02 '07 '12 '17
UK large, mid and small capitalisation equities
FTSE 100 vs. FTSE 250 performanceIndex level, rebased to 100 in 1987 %
Source: (Left) FactSet, FTSE, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) Bloomberg, Morningstar, J.P. Morgan Asset Management. *Exposure to small & mid cap companies is the exposure of flexible cap UK funds. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
64
Average fund manager exposure*
Weight of small & mid cap in FTSE All-Share
25th - 75th percentile range
FTSE 250
FTSE 100
% of revenues from overseas
FTSE 250 60%
FTSE 100 77%
65
GTM – UK |
1.0
1.2
1.4
1.6
1.8
2.0
2.2
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
European stocks and currencies
Index level (LHS); US dollars per UK pound (RHS)
Source: (Left) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) FTSE, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
65
FTSE All-Share and sterling vs. US dollar
GBPUSD
FTSE All-Share
Sterling depreciating
MSCI Europe ex-UK and euro vs. US dollarIndex level (LHS); US dollars per euro (RHS)
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
400
600
800
1,000
1,200
1,400
1,600
'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
EURUSD
MSCI Europe ex-UK
Euro depreciating
66
GTM – UK |
0
500
1,000
1,500
2,000
2,500
3,000
0
20
40
60
80
100
120
140
160
180
'88 '92 '96 '00 '04 '08 '12 '16 '20-80
-60
-40
-20
0
20
40
60
80
100
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Japan earnings
TOPIX earnings and performance TOPIX earnings per sh are growthNext 12 months’ earnings per share estimates, JPY (LHS); index level (RHS)
Source: (All charts) FactSet, IBES, Refinitiv Datastream, TOPIX, J.P. Morgan Asset Management. Earnings data are based on 12-month forward estimates. Margin growth is the growth rate of earnings per share divided by sales per share. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
66
% change year on year
Margin growth
Sales growth
Earnings growth
TOPIX index level
TOPIX forward EPS
67
GTM – UK |Japan equity market and currency
TOPIX and the yen vs. US dollarIndex level (LHS); Japanese yen per US dollar (RHS)
Source: Refinitiv Datastream, TOPIX, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
USDJPY (inverted)
TOPIX
Equities
Yen depreciating
67
70
80
90
100
110
120
130
140400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
68
GTM – UK |Emerging market equity drivers
EM/DM relative equity performance and growth gap EM/ DM relative equity performance and USD REERRelative index level (LHS); %, next 12 months’ growth estimates (RHS) Relative index level (LHS); index level (RHS)
Source: (Left) Consensus Economics, Refinitiv Datastream, J.P. Morgan Asset Management. “EM minus DM GDP growth” is consensus estimates for emerging markets growth in the next 12 months minus consensus estimates for developed markets growth in the next 12 months, provided by Consensus Economics. (Right) J.P. Morgan Securities Research, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. For all charts, EM equity is MSCI Emerging Markets and DM equity is MSCI World. Relative equity performance is calculated from price indices in USD, and is rebased to 100 in 1997. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
68
USD REER (inverted)
EM equity outperformance & USD weakening
EM growth & equity outperformance
EM minus DM GDP growth
EM / DM relative equity performance EM / DM relative equity performance
-1
0
1
2
3
4
5
10
40
70
100
130
160
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
85
95
105
115
125
13520
40
60
80
100
120
140
160
180
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
69
GTM – UK |
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Emerging market equity valuations and subsequent returns
MSCI EM price-to-book ratio MSCI EM price-to-book ratio and subsequent 10-year returnsx, multiple %, annualised total return*
Source: (All charts) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. *Dots represent monthly data points since 1996, which is earliest available. MSCI EM Index returns are in USD. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
69
Average: 1.8x
30 Sep 2020:1.8x
-20
-10
0
10
20
30
0.8x 1.3x 1.8x 2.3x 2.8x 3.3x
Current level
70
GTM – UK |Equity focus: Earnings and stock market dispersion
Equity forward earnings estimates Equity markets yea r-to-dateNext 12 months’ earnings per share, rebased to 100 at the start of the year Total return index level, rebased to 100 at the start of the year
Source: (All charts) FTSE, IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. Indices used are; eurozone: MSCI EMU; Japan: TOPIX; UK: FTSE 100; US growth: S&P 500 Growth; US value: S&P 500 Value. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Equities
70
60
70
80
90
100
110
120
130
Jan '20 Mar '20 May '20 Jul '20 Sep '20
US growth
Japan
Eurozone
US value
UK
60
70
80
90
100
110
120
130
Jan '20 Mar '20 May '20 Jul '20 Sep '20
US growth
Japan
Eurozone
US value
UK
71
1.3% TOPIX -40.6%
59.4% MSCI EM
62.8%
23.7% Asia ex-Jp
15.6%
2.9% S&P 500
2.1%
17.3% Asia ex-Jp
19.7%
29.9% S&P 500 32.4%
20.8% S&P 500 13.7%
18.2% TOPIX 12.1%
33.5% S&P 500 12.0%
29.8% Asia ex-Jp
35.9%
1.6% S&P 500 -4.4%
26.4% S&P 500 31.5%
8.3% Asia ex-Jp
5.6%
5.9% Asia ex-Jp
9.6%
12.9% S&P 500
9.1%
-12.8% S&P 500 -37.0%
53.6% Asia ex-Jp
67.2%
22.9% MSCI EM
14.4%
-3.5% FTSE All-
Share -3.5%
17.2% Euro ex-UK
20.0%
26.3% Euro ex-UK
24.2%
11.7% Asia ex-Jp
7.7%
7.3% S&P 500
1.4%
33.1% MSCI EM
10.1%
25.8% MSCI EM
31.0%
-6.4% Portfolio
-9.3%
21.0% Euro ex-UK
27.5%
8.2% S&P 500
5.6%
4.8% MSCI EM
8.8%
8.2% Portfolio
6.1%
-22.8% Portfolio -38.8%
30.1% FTSE All-
Share 30.1%
19.5% TOPIX 1.0%
-7.7% Portfolio
-7.2%
13.4% MSCI EM
17.4%
24.7% TOPIX 54.4%
7.6% Portfolio
7.5%
5.9% Euro ex-UK
9.1%
26.2% Asia ex-Jp
6.4%
17.0% Portfolio
21.4%
-8.4% TOPIX
-16.0%
19.6% Portfolio
23.2%
1.9% TOPIX -3.4%
4.1% S&P 500
8.9%
7.3% TOPIX 3.5%
-23.9% Euro ex-UK
-42.7%
27.2% Portfolio
35.4%
18.7% S&P 500 15.1%
-11.9% TOPIX
-17.0%
12.4% Portfolio
16.7%
20.8% FTSE All-
Share 20.8%
4.3% MSCI EM
5.6%
2.9% Portfolio
1.8%
25.4% Portfolio
9.8%
16.7% Euro ex-UK
14.5%
-8.8% Asia ex-Jp
-12.0%
19.2% FTSE All-
Share 19.2%
1.5% MSCI EM
2.9%
2.8% TOPIX 5.2%
7.1% Asia ex-Jp
4.4%
-29.9% FTSE All-
Share -29.9%
19.3% Euro ex-UK
29.0%
16.9% Portfolio
12.0%
-13.9% Euro ex-UK
-12.1%
12.3% FTSE All-
Share 12.3%
18.6% Portfolio
23.6%
2.7% TOPIX 10.3%
1.0% FTSE All-
Share 1.0%
23.4% TOPIX 0.3%
15.6% TOPIX 22.2%
-8.9% MSCI EM
-9.7%
14.6% TOPIX 18.1%
-0.8% Euro ex-UK
-7.4%
2.1% Portfolio
4.6%
5.9% FTSE All-
Share 5.9%
-33.9% Asia ex-Jp
-47.7%
12.6% S&P 500 26.5%
14.5% FTSE All-
Share 14.5%
-16.5% Asia ex-Jp
-14.6%
10.9% S&P 500 16.0%
1.4% Asia ex-Jp
6.2%
1.2% FTSE All-
Share 1.2%
-3.6% Asia ex-Jp
-5.3%
19.7% Euro ex-UK
3.2%
13.1% FTSE All-
Share 13.1%
-9.1% Euro ex-UK
-10.6%
14.3% MSCI EM
18.5%
-1.8% Portfolio
-4.0%
1.3% Euro ex-UK
1.8%
5.9% Euro ex-UK
4.0%
-35.2% MSCI EM -45.7%
-6.7% TOPIX 7.6%
5.7% Euro ex-UK
5.1%
-17.6% MSCI EM -12.5%
2.8% TOPIX 20.9%
-4.1% MSCI EM
3.8%
0.0% Euro ex-UK
7.4%
-9.7% MSCI EM
-5.4%
16.8% FTSE All-
Share 16.8%
11.3% S&P 500 21.8%
-9.5% FTSE All-
Share -9.5%
13.9% Asia ex-Jp
18.2%
-19.9% FTSE All-
Share -19.9%
-2.9% FTSE All-
Share -2.9%
5.4% MSCI EM
4.3%
World stock market returns
Source: MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. Annualised return covers the period 2008 to 2019. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 25% FTSE 100; 25% S&P 500; 15% EM; 15% Euro ex-UK; 10% Asia ex-Japan; 10% TOPIX. All indices are total return. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
GTM – UK |
GBP
Local
Equities
71
2010 201620122008 2011 YTD2009 2013 2014 2015 2017 Q3 ’202018Ann.
return since ’08
2019
72
GTM – UK |
-2
0
2
4
6
8
10
Fixed income yields
Fixed income yields%
Source: Bloomberg, Bloomberg Barclays, ICE BofA, J.P. Morgan Economic Research, Refinitiv Datastream, J.P. Morgan Asset Management. Beta to MSCI World is calculated using monthly total returns since 2008. Indices used are as follows: Euro IG: Bloomberg Barclays Euro-Aggregate – Corporate; Global IG: Bloomberg Barclays Global Aggregate – Corporate; UK IG: Bloomberg Barclays Sterling Aggregate – Corporate; US IG: Bloomberg Barclays US Aggregate – Corporate; Euro HY: ICE BofA Euro Developed Markets Non-Financial High Yield Constrained Index; Global HY: ICE BofA Global High Yield Index; US HY: ICE BofA US High Yield Constrained Index; EMD Corporate: CEMBI Broad Diversified; EMD local: GBI-EM Global Diversified: EMD local – China: GBI-EM China: EMD Sovereign: EMBI Global Diversified; EMD Sov. IG: EMBI Global Diversified IG; EMD Sov. HY: EMBI Global Diversified HY. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Fixed income
Developed market government bonds Investment-grade bonds High yield bonds Emerging market bonds
-0.1 0.0 -0.1 -0.2 0.1 0.1 0.2 0.3 0.2 0.2 0.2 0.2 0.4 0.5 0.4 0.5 0.5 0.3 0.0 0.1 0.4 0.4 0.5
Return beta to MSCI World
72
73
GTM – UK |Global government bond yields
Nominal 10-year government bond yields Real 10-year government bond yields% yield % yield
Source: (All charts) Bloomberg, J.P. Morgan Asset Management. Real government bond yields are the difference between nominal bond yields and inflation breakeven yields and so reflect inflation-protected yields. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
73
US
Germany
UK
Fixed income
US
Germany
UK
-1
0
1
2
3
4
5
6
7
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20-3
-2
-1
0
1
2
3
4
5
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
74
GTM – UK |
0
1
2
3
4
5
6
7
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US investment-grade bonds
US investment-grade spread%, option-adjusted spread over US government bond yield
Source: (Left) Bloomberg Barclays, Refinitiv Datastream, J.P. Morgan Asset Management. Index is Bloomberg Barclays US Aggregate – Corporate. (Right) Bloomberg Barclays, J.P. Morgan Asset Management. Index used is Bloomberg Barclays US Agg. Corporate – Investment Grade. Fallen angels are credit names that have been downgraded from investment-grade rating to high yield. Rising stars are credit names that have been upgraded from high yield status to investment grade. YTD is year-to-date. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Fixed income
74
30 Sep 2020:1.4%
US investment-grade fallen angels and rising stars% of the index (par value, average for the year)
Rising stars
Fallen angels
-10
-8
-6
-4
-2
0
2
4
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
YTD
75
GTM – UK |
0
3
6
9
12
15
18
21
24
0
2
4
6
8
10
12
14
16
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '200
3
6
9
12
15
18
21
24
0
2
4
6
8
10
12
14
16
18
20
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
US high yield ex-energy spread and defaults
US high yield bonds
%, default rate (LHS); %, option-adjusted spread (RHS)
Source: (All charts) Bloomberg, ICE BofA, J.P. Morgan Securities Research, J.P. Morgan Asset Management. HY spreads are using the ICE BofA US High Yield Energy and ex-Energy, Metals & Mining indices. Default rates are defined as the par value percentage of the total market trading at or below 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. *2020 default rate is for the last 12 months. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Fixed income
75
Latest
Ex-energy default rate* (LHS) 3.8%
Ex-energy spread (RHS) 4.9%
US high yield energy sector spread and defaults%, default rate (LHS); %, option-adjusted spread (RHS)
Latest
Energy default rate* (LHS) 17.3%
Energy spread (RHS) 8.7%
76
GTM – UK |
0
1
2
3
4
5
6
7
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Europe and UK investment-grade bonds
Euro and UK investment-grade spreads%, option-adjusted spread over local government bond yield
Source: (Left) Bloomberg Barclays, Refinitiv Datastream, J.P. Morgan Asset Management. Indices are Euro inv. grade: Bloomberg Barclays Euro Aggregate –Corporate; UK inv. grade: Bloomberg Barclays Sterling Aggregate – Corporate. (Right) Bloomberg Barclays, J.P. Morgan Asset Management. Index used is Bloomberg Barclays Euro Aggregate – Corporate. Fallen angels are credit names that have been downgraded from investment-grade rating to high yield. Rising stars are credit names that have been upgraded from high yield status to investment grade. YTD is year-to-date. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Euro
UK
Fixed income
76
30 Sep 2020:1.5%
30 Sep 2020:1.2%
Euro investment-grade fallen angels and rising star s% of the index (par value, average for the year)
Rising stars
Fallen angels
-5
-4
-3
-2
-1
0
1
2
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19
YTD
77
GTM – UK |
0
3
6
9
12
15
18
21
24
0
2
4
6
8
10
12
14
16
18
20
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Europe high yield bonds
Euro high yield spread and defaults%, default rate (LHS); %, option-adjusted spread (RHS)
Source: Bloomberg, ICE BofA, Refinitiv Datastream, J.P. Morgan Securities Research, J.P. Morgan Asset Management. Option-adjusted spread shown for ICE BofAEuro Developed Markets Non-Financial High Yield Constrained Index. Defaults are defined as bonds downgraded to C rating. The calculation universe is based on par value percentage of the EUR and GBP HY Non-Financials Corporate bond universe. Defaults include missed coupon payments, restructuring and distressed exchanges. *2020 default rate is for the last 12 months. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
34%
Fixed income
77
40Latest
Default rate* (LHS) 2.3%
Spread (RHS) 4.8%
78
GTM – UK |
2
3
4
5
6
7
8
9
10
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Emerging market bonds
Real 10-year government bond yields% yield, local currency
Source: (Left) Bloomberg, J.P. Morgan Asset Management. Real yield is calculated by using nominal yield less current CPI for the respective countries. (Right) Bloomberg, J.P. Morgan Asset Management. EM sovereigns local currency is the J.P. Morgan GBI-EM Global Diversified; EM sovereigns USD is the J.P. Morgan EMBIG Diversified; EM corporates USD is the J.P. Morgan CEMBI Broad Diversified. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Fixed income
78
Developed markets
Emerging markets
Corporate and sovereign EMD spreads %, spread over 10-year US Treasury
Average since 2008
Latest
EM sovereigns local 4.0% 3.8%
EM sovereigns USD 3.5% 4.5%
EM corporates USD 3.6% 3.9%
-2
-1
0
1
2
3
4
5
6
7
79
GTM – UK |Fixed income focus: Yield compression
Developed and emerging markets average policy rates%
Source: (Left) Bloomberg, J.P. Morgan Asset Management. Policy rates are an average of the policy rates in 19 emerging market countries and 13 developed market countries or regions. (Right) Bloomberg, ICE BofA, J.P. Morgan Asset Management. Index shown is the ICE BofA Global Government Bond index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
79
Developed market government bond yields% of ICE BofA Global Government Bond Index
Fixed income
Developed market
Emerging market
0
10
20
30
40
50
60
70
80
90
100
'14 '15 '16 '17 '18 '19 '20
% yielding below 1%
% yielding below 0%
0
2
4
6
8
10
12
14
16
18
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
80
GTM – UK |
40.1% US HY 17.5%
10.6% Euro HY
6.3%
7.1% US Treas.
0.9%
11.0% UK IG 11.0%
11.6% US Treas.
8.9%
2.3% Euro HY
2.5%
11.3% US HY 7.6%
31.4% EM Debt 10.2%
4.9% UK IG 4.9%
3.8% US HY -2.3%
10.6% EM Debt 15.0%
9.9% Infl Linked
9.9%
1.5% UK IG 1.5%
10.6% EM Debt
6.9%
27.6% Euro HY 10.2%
2.3% Infl Linked
2.3%
3.6% US IG -2.5%
10.1% US IG 14.5%
9.3% US IG 6.6%
0.1% US HY 4.7%
9.3% US IG 5.7%
26.6% US IG 6.1%
2.0% UK Gilts
2.0%
1.9% Portfolio
-1.5%
10.0% US HY 14.4%
8.2% UK Gilts
8.2%
-1.3% UK Gilts -1.3%
8.4% Portfolio
6.3%
25.2% Infl Linked
25.2%
0.7% EM Debt 10.3%
1.7% EM Debt
-4.3%
7.9% Portfolio
10.6%
6.9% Portfolio
5.2%
-1.6% Portfolio
0.9%
8.3% Euro HY
7.0%
23.1% Portfolio
10.7%
0.2% Portfolio
5.0%
0.5% UK Gilts
0.5%
7.2% UK Gilts
7.2%
4.8% UK IG 4.8%
-2.2% Infl Linked
-2.2%
7.4% Infl Linked
7.4%
20.5% US Treas.
1.0%
-1.8% US HY 7.5%
-0.3% Infl Linked
-0.3%
6.5% Infl Linked
6.5%
3.8% Euro HY -3.0%
-2.2% EM Debt
2.3%
7.0% US Treas.
3.4%
12.3% UK IG 12.3%
-2.8% US IG 6.4%
-2.2% UK IG -2.2%
4.7% Euro HY 10.9%
2.1% US HY -0.4%
-3.0% US IG 1.5%
6.1% UK IG 6.1%
10.7% UK Gilts 10.7%
-6.5% US Treas.
2.3%
-3.0% Euro HY -4.0%
2.7% US Treas.
6.9%
2.0% EM Debt
-0.5%
-4.3% US Treas.
0.2%
5.6% UK Gilts
5.6%
Global fixed income spreads and returns
Fixed income spreads Fixed income returns%, option-adjusted spread
Source: (All charts) Bloomberg, Bloomberg Barclays, ICE BofA, J.P. Morgan Economic Research, Refinitiv Datastream, J.P. Morgan Asset Management. 23 March 2020 marks the recent high in US credit spreads. Euro IG: Bloomberg Barclays Euro Agg. – Corporate; US HY: ICE BofA US High Yield Constrained; EM Debt: J.P. Morgan EMBI Global Diversified; Euro HY: ICE BofA Euro Developed Markets Non-Financial High Yield Constrained; US IG: Bloomberg Barclays US Agg. Corporate – Investment Grade; UK IG: Bloomberg Barclays Sterling Agg.– Corporates; UK Gilts: Bloomberg Barclays Sterling Gilts; US Treasuries: Bloomberg Barclays US Agg. Gov. – Treasury; Infl Linked: ICE BofA UK Gilt Inflation-Linked Government. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 20% UK Gilts; 15% US Treasuries; 10% Linkers; 15% US IG; 10% UK IG; 10% US HY; 5% Euro HY; 15% EM Debt. Annualised return covers period 2008 to 2019. Returns are unhedged in sterling and local currencies. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
|
£:
LCL:
Fixed income
80
Range since 2000
Average
Current
US IGEuro IG UK IG US HYEuro HYEMD
(USD Sov.)
20172016 2018 2019 Q3 ’20YTDAnn. return
since ’08
23 March 2020
1.2 1.4 1.5
4.34.8
5.4
2.5
3.72.8
7.2
9.0
10.9
0
2
4
6
8
10
12
14
16
18
20
81
GTM – UK |
0
5
10
15
20
25
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Oil
Source: (Left) Baker Hughes, Bloomberg, J.P. Morgan Asset Management. (Right) EIA, Refinitiv Datastream, J.P. Morgan Asset Management. Dotted lines are J.P. Morgan Asset Management estimates based on announced cuts. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
81
WTI crude oil price and US rig countUSD/barrel (LHS); number of rigs (RHS)
RigsOil price
Crude oil production by countryMillion barrels per day
US
OPEC (ex-Saudi Arabia & Iraq)
Russia
Saudi Arabia
Iraq
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
0
20
40
60
80
100
120
140
160
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Forecast
82
GTM – UK |
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
'12 '13 '14 '15 '16 '17 '18 '19 '20
Metals
Gold vs. real US 10-year Treasury yield$ per Troy ounce (LHS); %, inverted (RHS)
Source: (Left) Refinitiv Datastream, J.P. Morgan Asset Management. Real yield is the US 10-year Treasury inflation-protected security yield. (Right) Bloomberg, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
82
30 Sep 2020
Gold (LHS) $1,900
Real 10-year yield (RHS) -0.9%
Metal pricesIndex level, rebased to 100 in Jan 2007
0
25
50
75
100
125
150
175
200
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Nickel
Copper
Zinc
Aluminium
83
GTM – UK |Alternative sources of diversification
Source: (Left) CBOE, FTSE, Hedge Fund Research Indices (HFRI), Refinitiv Datastream, J.P. Morgan Asset Management. Macro hedge fund (total return in USD) relative performance is calculated relative to the FTSE All-Share (total return in GBP). VIX is the implied volatility of S&P 500 Index based on options pricing.(Right) Hedge Fund Research Indices (HFRI), Refinitiv Datastream, J.P. Morgan Asset Management. 2000 bear market is from 31 March 2000 to 31 October 2002, 2008 bear market is from 31 October 2007 to 28 February 2009, 2020 bear market is from 31 January 2020 to 30 April 2020. Hedge fund strategies are defined in the HFRI hedge fund strategy classification system. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
83
Hedge fund style returns during bear markets% total return
VIX
Macro hedge fund relative performance to FTSE All-Share
Macro hedge fund relative performance & volatilityIndex level (LHS); % change year on year (RHS)
2000 bear market
2008 bear market
2020 bear market
-40
-30
-20
-10
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
-40
-30
-20
-10
0
10
20
30
84
GTM – UK |Alternative investments: Real assets
Source: (Left) MSCI, J.P. Morgan Asset Management. Infrastructure returns represented by the “low risk” category of the MSCI Global Quarterly Infrastructure Asset Index. Data show rolling one-year returns from income and capital appreciation. The chart shows the full index history, beginning in the first quarter of 2009. (Right) 2020 Long-Term Capital Market Assumptions, J.P. Morgan Multi-Asset Solutions, J.P. Morgan Asset Management. The resulting projections include only the benchmark return associated with the portfolio and do not include alpha from the underlying product strategies within each asset class. Macro hedge fund return expectations are currency hedged. The assumptions are presented for illustrative purposes only. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
84
Global core infrastructure returns%, rolling 4-quarter returns from income and capital appreciation
Income
Capital appreciation
% annual compound return in GBPExpected returns and volatility in coming 10-15 yea rs
0
1
2
3
4
5
6
7
0 2 4 6 8 10 12 14
100% UK Gilts
100% UK large cap
Com
poun
d re
turn
Volatility
60% UK large cap40% UK Gilts
60% UK large cap10% UK Gilts
10% UK core real estate10% Global infrastructure equity
10% Macro hedge funds
-5
0
5
10
15
20
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
85
Sustainable investment strategies
Source: J.P. Morgan Asset Management. Guide to the Markets - UK. As of 30 September 2020.
GTM – UK | 85
ESG INTEGRATION: Consideration of material ESG information as part of the investment decision-making process
DEDICATED SUSTAINABLE STRATEGIES
EXCLUSIONS POSITIVE TILT BEST-IN-CLASS THEMATIC IMPACT
The exclusion from a fund or portfolio of
certain sectors, companies or practices based on specific ESG
criteria
An investment style in which the portfolio will
be tilted towards sectors, companies or projects with positive ESG characteristics, while also excluding companies based on
ESG criteria
A comparative investment style that
involves investing only in companies that lead
their peer groups in ESG performance, while
also excluding companies based on
ESG criteria
Top-down investment approach, investments
in themes or assets specifically related to
sustainability
Investments made with the primary goal of achieving specific,
positive environmental/social benefits while also
delivering a financial returnO
ther assets
86
GTM – UK |
0
2
4
6
8
10
12
14
16
Sustainable investment performance and market size
Sustainable investment assets under managementUSD trillions
Source: (Left) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. The MSCI World ESG Leaders Index is a capitalisation-weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers. The MSCI World Governance-Quality Index aims to reflect the performance of a strategy that is seeking to capture both the financial and corporate governance aspects of Quality investing. (Right) Global Sustainable Investment Alliance (GSIA), J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
17%
114%25%
19%
8%
2016
Compound annual growth rate
2018
Other assets
86
Europe US Japan Canada Australia/New Zealand
MSCI World ESG performanceIndex level in USD, rebased to 100 at Jan 2020
MSCI World
MSCI World Governance-Quality
MSCI World ESG leaders
60
70
80
90
100
110
120
Jan '20 Mar '20 May '20 Jul '20 Sep '20
87
GTM – UK |
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 2017 2018 2019
Green bond issuance
Green bond issuance by regionUSD billions
Source: Climate Bonds Initiative, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.Data as of 30 September 2020.
Other assets
Latin America
Africa
Supranational
North America
Asia Pacific
Europe
87
88
GTM – UK |Asset return expectations
2020 Long-Term Capital Market Assumptions expected returns in coming 10-15 years%, annualised return in GBP
Source: 2020 Long-Term Capital Market Assumptions, J.P. Morgan Multi-Asset Solutions, J.P. Morgan Asset Management. Returns are nominal and in GBP. Past returns are calculated from the start of 2009 up to the end of 2019, or the most recent available data. The projections in the chart above are based on J.P. Morgan Asset Management’s proprietary long-term capital market assumptions (10-15 years) for returns of major asset classes. The resulting projections include only the benchmark return associated with the portfolio and do not include alpha from the underlying product strategies within each asset class. The assumptions are presented for illustrative purposes only. Past performance and forecasts are not reliable indicators of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
88
Fixed income
Equity
Alternatives
Historical return since 2009
-4
-2
0
2
4
6
8
10
12
14
16
UK govt.inflation-linked
Gilts
UK Gilts UK cash UK investment-grade corporate
bonds
US large cap Globalinfrastructure
UK core realestate
UK large cap Eurozone largecap
EM equity
89
GTM – UK |
-50
-40
-30
-20
-10
0
10
20
30
40
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18
Hedging considerations
Source: (Left) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. The grey bar shows the GBP unhedged annual return for MSCI World, the blue bar shows the profit or loss that a GBP investor would experience from hedging their equity exposure, and the green square shows the GBP hedged annual return for MSCI World. (Right) Bloomberg, J.P. Morgan Asset Management. A positive number implies that an investor gains a yield pickup when hedging currency risk, and a negative number implies that an investor pays to hedge currency risk, based on 3-month FX forward rates. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Other assets
89
Developed market equity returns in GBP%, annual price return
Rolling hedging costs%, annualised hedging cost based on 3-month FX forwards
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
'16 '17 '18 '19 '20
EUR asset to GBP
USD asset to GBP
Hedging getting more expensive
JPY asset to GBP
Unhedged return
Hedged return
Hedging impact
90
GTM – UK |Life expectancy
Probability of reaching ages 80 and 90% probability, persons aged 65, by gender and combined couple
Source: ONS 2016-2018 Life Tables, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.Guide to the Markets - UK. Data as of 30 September 2020.
Men
Women
Couple – at least one lives to specified age
Investing
principles
90
67
24
76
35
92
51
0
20
40
60
80
100
80 years 90 years
91
GTM – UK |
0
20,000
40,000
60,000
80,000
100,000
120,000
'86 '90 '94 '98 '02 '06 '10 '14 '180
100,000
200,000
300,000
400,000
500,000
600,000
700,000
25 30 35 40 45 50 55 60 65
The effect of compounding
£5,000 invested annually with 5% growth per year £5, 000 investment with/without income reinvestedGBP GBP, FTSE All-Share returns
Source: (Left) J.P. Morgan Asset Management. For illustrative purposes only, assumes all income reinvested, actual investments may incur higher or lower growth rates and charges. (Right) Bloomberg, FTSE, J.P. Morgan Asset Management. Based on FTSE All-Share Index and assumes no charges. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Investing
principles
Starting at age 35
Starting at age 25
Without dividends reinvested
With dividends reinvested
Age
£354,000
£24,000
£640,000
£86,000
91
92
GTM – UK |
0
2
4
6
0
2,000
4,000
6,000
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19
0
10
20
30
40
50
60
70
80
90
100
0 5 10 15 20 25 30 35 40
Cash investments
Income generated by £100,000 in a three-month bank depositGBP (LHS); % change year on year (RHS)
Source: (Left) Bloomberg, ONS, J.P. Morgan Asset Management. Inflation is the percentage change year on year for UK consumer prices. Data shown are yearly averages. (Right) J.P. Morgan Asset Management. For illustrative purposes only, assumes no return on cash and an inflation rate of 2%. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
2007: £6,000
Investing
principles
92
Income Inflation
GBP, thousandsEffect of 2% inflation on purchasing power of £100, 000
Years
£100,000
£44,5002020: £370
93
GTM – UK |
0
1
10
100
1,000
1900 1920 1940 1960 1980 2000 2020
Long-term asset returns
Total return of £1 in real termsGBP, log scale for total returns
Source: Bloomberg, Bloomberg Barclays, Dimson, FactSet, FTSE, J.P. Morgan, Marsh and Staunton ABN AMRO/LBS Global Investment Returns calculated from the Yearbook 2008, J.P. Morgan Asset Management. Equities: FTSE 100; Bonds: JPMorgan GBP Government Bond Index; Cash: three-month GBP LIBOR (prior to 2008 cash is short-dated Treasury bills). Latest point as of end of 2019. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Annualised real returns
1900–2019 2000–2019
Equities 5.2% 1.6%
Bonds 1.7% 3.7%
Cash 0.7% -0.5%
Equities: £433
Bonds: £7
Cash: £2
Investing
principles
93
94
GTM – UK |
22
46
30
-14
15 15
23
-10
19
12
20
11
21
-8
-15
-25
17
9
18
13
2
-33
25
11
-7
8
17
-2 -3
129
-13
14
-22
-9
-37
-9
-14
-22
-12
-18
-4
-18
-4-6
-10
-25
-11 -12
-30 -31
-17
-6 -7
-10-13
-43
-23
-17-19
-12 -12 -10
-15
-12
-4
-17
-8
-36
-50
-40
-30
-20
-10
0
10
20
30
40
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Annual returns and intra-year declines
FTSE All-Share intra-year declines vs. calendar-yea r returnsDespite average intra-year drops of 15.2% (median 12.2%), annual returns are positive in 24 of 34 years%
Source: FTSE, Refinitiv Datastream, J.P Morgan Asset Management. Returns shown are price returns in GBP. Intra-year decline refers to the largest market fall from peak to trough within a short time period during the calendar year. Returns shown are calendar years from 1986 to 2019. YTD is year-to-date. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Intra-year decline
Calendar-year return
Investing
principles
94
YTD
95
GTM – UK |
Global equities
Global high yield bonds
Emerging market debt
Global investment-grade bonds
UK Gilts
Cash
0
2
4
6
8
10
12
0 2 4 6 8 10 12 14
Asset class risk-return trade-off
Historic risk vs. return for selected asset classes%, annualised return 2004 – 2019 in GBP
Source: Bloomberg Barclays, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Volatility is the standard deviation of annual returns since 2004. Cash: JP Morgan Cash United Kingdom (3M); UK Gilts: Bloomberg Barclays Sterling Gilts; Global investment-grade bonds: Bloomberg Barclays Global Aggregate – Corporate; Emerging market debt: J.P. Morgan EMBI Global; Global high yield bonds: Bloomberg Barclays Global High Yield; Global equities: MSCI All-Country World Index (includes developed and emerging markets). Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Investing
principles
Volatility
Com
poun
d re
turn
95
Higher return
Higher risk
96
GTM – UK |
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
-175
-150
-125
-100
-75
-50
-25
0
25
50
75
100
125
150
175
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
S&P 500 and fund flows
US mutual fund and ETF flows and S&P 500USD billions, three-month net flows (LHS); index level (RHS)
Source: FactSet, Investment Company Institute, Standard & Poor’s, J.P. Morgan Asset Management. Fund flows are US long-term equity fund flows with ETF flows included from 2006 onwards. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.In
vesting
principles
96
3-month net fund flows S&P 500 index level
Avoid selling at the bottom
97
GTM – UK |
48% 49%
30%24% 24%
21%17% 17% 18%
13% 15%
-18%-24%
-7% -3% -1% -3%0% 1%
4%1%
4%
-50
-25
0
25
50
75
61%
-43%
US asset returns by holding period
Range of equity and bond total returns%, annualised total returns, 1950-present
Source: Strategas/Ibbotson, J.P. Morgan Asset Management. Large cap equity represents the S&P 500 Composite and Bonds represents the Strategas/Ibbotson US Government Bond Index and US Long-term Corporate Bond Index. Returns shown are per annum and are calculated based on monthly returns from 1950 to latest available and include dividends. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
Investing
principles
Large cap equity
Bonds
50/50 portfolio
97
1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling
98
Asset class returns (GBP)
Source: Bloomberg Barclays, FTSE, J.P. Morgan Economic Research, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Annualised return covers the period from 2008 to 2019. Vol. is the standard deviation of annual returns. Govt bonds: Bloomberg Barclays Global Aggregate Government Treasuries; HY bonds: ICE BofA Global High Yield; EMD: J.P. Morgan EMBI Global Diversified; IG bonds: Bloomberg Barclays Global Aggregate – Corporates; Cmdty: Bloomberg Commodity; REITs: FTSE NAREIT All REITS; DM Equities: MSCI World; EME: MSCI EM; Hedge funds: HFRI Global Hedge Fund Index; Cash: JP Morgan Cash United Kingdom (3M). Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 30% DM equities; 10% EM equities; 15% IG bonds; 12.5% government bonds; 7.5% HY bonds; 5% EMD; 5% commodities; 5% cash; 5% REITs and 5% hedge funds. All returns are total return, in GBP, and are unhedged. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2020.
GTM – UK |
Investing
principles
98
Govt bonds 52.6%
EME 59.4%
REITs 31.6%
EMD 8.1%
REITs 14.9%
DM Equities 25.0%
REITs 35.1%
REITs 8.2%
HY bonds 36.9%
EME 25.8%
Govt bonds 5.8%
DM Equities 23.4%
Govt bonds 8.7%
EME 4.8%
REITs 12.0%
EME 24.4%
IG bonds 26.5%
HY bonds 44.2%
EME 22.9%
REITs 8.1%
HY bonds 14.1%
Portfolio 6.0%
EMD 14.1%
EMD 7.0%
Cmdty 33.3%
DM Equities 12.4%
HY bonds 2.7%
REITs 23.1%
IG bonds 8.5%
Cmdty 4.2%
HY bonds 11.1%
Govt bonds 15.6%
EMD 21.8%
DM Equities 16.4%
Cmdty 20.5%
Govt bonds 7.1%
EME 13.4%
HY bonds 6.0%
DM Equities 12.1%
DM Equities 5.5%
EME 33.1%
Portfolio 5.6%
IG bonds 2.4%
EME 14.3%
DM Equities 4.6%
DM Equities 3.3%
EMD 10.6%
Cmdty 14.7%
Cash 6.9%
Portfolio 15.9%
HY bonds 17.5%
IG bonds 5.1%
EMD 12.3%
Hedge Funds 4.7%
IG bonds 9.6%
Govt bonds 2.3%
EMD 31.4%
EMD 0.7%
REITs 1.9%
Portfolio 12.6%
Hedge Funds 4.1%
Portfolio 0.9%
DM Equities 9.8%
REITs 14.2%
Hedge Funds 6.3%
EMD 15.6%
DM Equities 15.9%
HY bonds 3.4%
DM Equities 11.4%
REITs 1.3%
Portfolio 8.8%
IG bonds 2.0%
REITs 30.4%
HY bonds 0.6%
EMD 1.7%
EMD 10.6%
Portfolio 3.4%
HY bonds 0.3%
Portfolio 8.1%
HY bonds 13.9%
Portfolio 2.3%
REITs 13.5%
EMD 15.8%
Cash 1.2%
Portfolio 7.5%
Cash 0.5%
HY bonds 6.1%
Hedge Funds 1.9%
DM Equities 29.0%
Cash 0.4%
Cash 0.9%
HY bonds 9.3%
HY bonds 3.0%
Cash 0.0%
IG bonds 7.8%
DM Equities 12.9%
HY bonds -0.1%
IG bonds 6.1%
Portfolio 14.8%
Portfolio -1.3%
IG bonds 6.3%
IG bonds -1.5%
Hedge Funds 5.6%
HY bonds 1.4%
Portfolio 27.0%
REITs -0.2%
Portfolio -0.5%
IG bonds 7.2%
EMD 1.9%
IG bonds -1.5%
Govt bonds 6.2%
EMD 9.7%
Cmdty -10.9%
Cmdty 5.9%
Govt bonds 9.2%
DM Equities -4.3%
Cash 1.4%
EME -4.1%
Govt bonds 5.4%
Portfolio 1.2%
IG bonds 24.4%
IG bonds -0.4%
Hedge Funds -0.9%
Hedge Funds 4.4%
EME 1.5%
Govt bonds -1.8%
EME 5.4%
IG bonds 8.4%
REITs -13.2%
Cash 2.2%
IG bonds 9.2%
Hedge Funds -8.2%
Hedge Funds -1.0%
Govt bonds -6.1%
EME 4.3%
Cash 0.7%
Hedge Funds 22.3%
Govt bonds -2.0%
DM Equities -2.5%
Cmdty 3.5%
Cash 0.6%
Hedge Funds -1.9%
Hedge Funds 3.2%
Portfolio 7.8%
DM Equities -17.4%
Hedge Funds 1.0%
Hedge Funds 8.5%
Cmdty -12.7%
Govt bonds -2.6%
EMD -7.0%
Cash 0.6%
EME -9.7%
Govt bonds 21.3%
Hedge Funds -3.2%
Cmdty -5.7%
Govt bonds 1.5%
Cmdty -9.9%
EMD -2.2%
Cash 1.4%
Hedge Funds 7.2%
EME -35.2%
Govt bonds -8.6%
Cash 0.9%
EME -17.6%
Cmdty -5.4%
Cmdty -11.2%
Cmdty -11.8%
Cmdty -20.3%
Cash 0.7%
Cmdty -7.1%
EME -8.9%
Cash 1.0%
REITs -11.6%
REITs -3.0%
Cmdty -2.8%
Cash 1.7%
2010 20122011 20162009 2013 2014 2015
Ann. return
since ’08 Vol.20182017 20192008 Q3 ’20YTD
J.P. Morgan Asset Management: Index definitions
All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The Russell 1000 Index ® measures the performance of the 1,000 largest companies in the Russell 3000. The Russell 1000 Growth Index ® measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index ® measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWIconsisted of 45 country indices comprising 23 developed and 22 emerging market country indices. The Tokyo Price Index (TOPIX) is a capitalization-weighted index lists all firms that are considered to be under the 'first section' on the TSE, which groups all of the large firms on the exchange into one pool. The second section groups all of the remaining smaller firms.The FTSE 100 Index is an index of the 100 largest companies (by market capitalization) in the United Kingdom.The FTSE All Share Index is an index of the 630 largest companies (by market capitalization) in the United Kingdom.The MSCI Value and Growth IndicesSM cover the full range of developed, emerging and All Country MSCI Equity indexes. As of the close of May 30, 2003, MSCI implemented an enhanced methodology for the MSCI Global Value and Growth Indices, adopting a two dimensional framework for style segmentation in which value and growth securities are categorized using different attributes - three for value and five for growth including forward-looking variables. The objective of the indexdesign is to divide constituents of an underlying MSCI Standard Country Index into a value index and a growth index, each targeting 50% of the free float adjusted market capitalization of the underlying country index. Country Value/Growth indices are then aggregated into regional Value/Growth indices. Prior to May 30, 2003, the indices used Price/Book Value (P/BV) ratios to divide the standard MSCI country indices into value and growth indices. All securities were classified as either "value" securities (low P/BV securities) or "growth" securities (high P/BV securities), relative to each MSCI country index.The following MSCI Total Return IndicesSM are calculated with gross dividends:This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits.The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. West Texas Intermediate (WTI) is underlying commodity in the New York Mercantile Exchange's oil futures contracts. The Bloomberg Barclays U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. This U.S. Treasury Index is a component of the U.S. Government index. The Bloomberg Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. The Bloomberg Barclays Euro-Aggregate Index consists of bond issued in the euro or the legacy currencies of the sovereign countries participating the European Monetary Union (EMU).The Global Bond Index Emerging Market Broad Diversified Index (GBI-EM) is a comprehensive global local emerging markets index, and consists of liquid, fixed-rate, domestic currency government bonds.
The Bloomberg Barclays Global Aggregate Corporate Index consists of corporate issues in Europe, the US and Asia-pacific regions. The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.The JPMorgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an investable universe of corporate bonds. Both indices are also available in Diversified version. The MSCI World High Dividend Yield Index is composed of those securities that have higher-than-average dividend yield within its parent index, a track record of consistent dividend payments and the capacity to sustain future dividend payments.
J.P. Morgan Asset Management: Risks and disclosures
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment
decision-making, the program explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are
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Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency
(registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset
Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by
J.P. Morgan Institutional Investments, Inc., member of FINRA; J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc.
In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.
Copyright 2020 JPMorgan Chase & Co. All rights reserved.
Prepared by: Karen Ward, Tilmann Galler, Vincent Juvyns, Maria Paola Toschi, Michael Bell, Hugh Gimber, Ambrose Crofton, Jai Malhi and Max McKechnie.
Unless otherwise stated, all data as of 30 September 2020 or most recently available.
Guide to the Markets - UK
JP-LITTLEBOOK
0903c02a82868379
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