Outlook 2024

Investing
Reconfigured
After the Rate Reset:
Five considerations for the year ahead
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Foreword

In many ways, this past year has defied expectations. The widely anticipated U.S. recession hasn’t happened.
Growth across many economies has proven surprisingly resilient. Inflation has retreated from its multi-decade
highs. Global multi-asset portfolios have regained more than half of the ground that was lost from the
market peak in late 2021 to the trough in October 2022.

At the same time, a historic rise in global bond yields has reconfigured the investing landscape. Higher rates give
investors more choices in crafting their financial plans; investors have not had such an opportunity since the
global financial crisis.

In our 2023 Outlook, entitled “See the potential,” we encouraged clients to look past the headwinds
to growth and consider the prospects for stronger markets. That turned out to be pretty good advice.

To prepare for the year ahead, we rely on the experience of our Global Investment Strategy Group to help
us identify both the risks and opportunities that our clients may face. In their view, higher bond yields and
reasonable equity valuations mean that forward-looking returns across many asset classes seem more
promising than they have been in more than a decade.

Whatever markets have in store, we rely on each other and on the relationships we have forged over
time to deliver you our best. We are honored to stand by your side as your financial partner.

Thank you for your continued trust and confidence in J.P. Morgan.

Sincerely,

David Frame Martin Marron

CEO, U.S. Private Bank CEO, International Private Bank

03
Highlights from
the 2024 Outlook
Inflation will likely settle.
You should still hedge against it.
Equities are one option. Real assets are another.

The cash conundrum.

Yes, yields are tempting.
But we think this is as good as it gets.

Bonds are more competitive with stocks.

The rate reset has run its course. It’s time
to consider locking in higher yields.

Equities seem to be on the march to new highs.

The consensus isn’t wrong.
AI is a game changer.

Contained credit stress.

Investors should consider capitalizing on stressed
real estate and private credit.

04
Contents
INTRODUCTION INFLATION CASH

Pgs. 6–9 Pgs. 10–15 Pgs. 16–19

After the rate reset Inflation will likely settle The cash conundrum

BONDS STOCKS CREDIT

Pgs. 20–23 Pgs. 24–29 Pgs. 30–35

Bonds are more Equities seem to be on Contained credit stress

competitive with stocks the march to new highs

CONCLUSION GLOBAL PERSPECTIVES

Pgs. 36–37 Pgs. 38–47

An investment Extend the horizon

landscape reconfigured

05 05
INTRODUCTION

After the Rate

Reset: Investing
Reconfigured
There haven’t been this many attractive
investment choices to consider in more than
a decade. But how do you personalize the
possibilities with a strategy that optimizes your
specific financial needs and goals? We think
the key to harness the dynamics of a new rate
world is to understand—and further explore—
five important considerations.

06
The big shift
Three years ago, nearly 30% of all global government debt traded with a
negative yield. It seemed the era of super-low interest rates might never end.

to a new interest But it did.

rate world
Today, negative yielding debt has all but disappeared. Over half of the
developed world’s sovereign debt trades with a yield higher than 4%, and
U.S. Treasury yields across the curve, from 3-month bills to 30-year bonds,
range from ~4.5% to 5.5%.

The rise in global bond yields is not just historic—it marks the most
important development in markets since the world emerged from the
COVID-19 pandemic.

It has also reconfigured the investing landscape. Rates near 5% give

investors more choices in crafting their goal-aligned wealth plans than
at any time since the global financial crisis (GFC).fle

THE RATE RESET HAS DELIVERED SIGNIFICANT

MOVES ACROSS THE YIELD CURVE
6% U.S. Treasury yield curve, %

5%

4%
Today

3% June 2023

2%
Dec 2021

1%

0%
1M 2M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y
Source: Bloomberg Finance L.P. Data as of November 15, 2023.

07
INTRODUCTION

Many investors have already paid a price for this newfound flexibility. added at least $18 billion more in checking, savings and certificates of
Global multi-asset portfolios have managed only meager gains since deposit as well. Simply put, our clients are holding significantly more
stocks took off in November 2020 on the news of Pfizer’s successful cash than they did two years ago.
COVID vaccine trial. For the first time ever, investment grade debt
(including sovereign securities, municipal bonds and corporate credit) Cash is understandably tempting. And at the same time, higher bond
is at risk of delivering negative total returns for three years in a row. yields and reasonable equity valuations mean that forward-looking
Despite a strong calendar year in 2023, broad equity markets have returns across many asset classes seem more promising than they
also struggled to find direction amid wild swings by certain stocks and have since before the GFC.
sectors.
In short, it’s clear the markets have entered an entirely new interest
As multi-asset portfolios have treaded water, cash hasn’t looked as rate regime. We suggest that investors consider capitalizing sooner
enticing in over 15 years. Not surprisingly, perhaps, our clients have rather than later on what we think is a once-in-a-generation opening
added at least $120 billion to money market funds, Treasury bills and that may not be available a year from now. But how do you personalize
other short-term fixed income investments to generate incremental yield the many possibilities with a strategy that optimizes your specific
with limited downside risk. This hasn’t drained their deposits—they have financial needs and goals?

We think the key to

harness the new dynamics 01 Inflation will likely settle. You should still
hedge against it.

of a 5% rate world is to
understand—and further 02 The cash conundrum: the benefits and risks
of holding too much.
explore—these five
important considerations:
03 Bonds are more competitive with stocks—
adjust the mix according to your ambitions.

04 With AI momentum, equities seem to be on

the march to new highs.

05 Pockets of credit stress loom, but they will

likely be limited.

08 08
INFLATION

01

Inflation will
likely settle.
You should still
hedge against it.

10
It’s important to mention the circumstances that caused the rate reset But to be clear: We believe the near-term path for inflation is lower.
in order to explain our view on the course we think inflation and rates
will take. In 2021 and 2022, as inflation soared globally, nearly all Inflation has already retreated from its recent—and unexpected—highs.
major central banks aggressively hiked interest rates (except the Bank In the United States, inflation has collapsed from a peak of over 9% to
of Japan and the People’s Bank of China). While shorter-term interest under 3.5% today. We are especially encouraged by the recent cooling
rates quickly moved higher, longer-term yields only caught up in the in inflation rates for services sectors such as hotels and recreation,
late summer and early fall. where price increases tend to be stickier. The outlook for shelter
inflation, which currently accounts for around three-quarters of all of
One possible reason for this move is that investors are starting to the year-on-year change in the Consumer Price Index (CPI), gives us the
believe inflation will be higher than it was in the late 2010s and higher most confidence that price inflation will continue to fall in the United
policy rates will be needed to help keep it in check. States. The most current data on where shelter inflation is heading,
including home prices and new rents, signal that shelter inflation will
We agree with this assessment. continue to cool to a manageable level.

11
INFLATION

Inflation is similarly decelerating outside the United States, but more As a result, U.S. wage growth, proxied by the Employment Cost Index
slowly. In developed world economies, it has declined to 4% from a peak excluding incentive pay, has slowed from over 6% to around 4%.
of ~8%. Globally, realized inflation has been coming in below economists’
forecasts since April 2023, and we think price inflation in both the United Central bankers will continue to look for further moderation, but the
States and Europe will approach central banks’ 2% mandate by the end progress is clear—and encouraging. Still, we think 2% inflation will likely
of 2024. represent more of a floor than a ceiling for price moves. Market-based
indicators of future inflation (such as breakeven inflation rates and
On the wage front, labor demand and supply are in a better balance. inflation swaps) suggest that investors also expect both U.S. and Euro
The gap between job openings (demand for labor) and unemployed Area inflation to run between 2.0% and 2.5% over the next 5–10 years.
workers (supply of labor) in the United States has shrunk from its This would compare with the 1.5% to 2.0% range that prevailed from
peak of over 6 million to close to 2.5 million today. An increase in 2015 through 2020. We expect developed world inflation will similarly
immigration has also boosted the number of available workers. settle between 2% and 2.5%, and with more variability than existed in
Year-to-date, foreign-born workers accounted for more than 40% the 2010s.
of the 3 million–plus new jobs in the United States.

INFLATION HAS ALREADY RETREATED FROM MULTI­DECADE HIGHS

CPI, YoY percentage change
10%
Advanced Economies*
9%
8% United States
7%
6%
5%
4% 4.0%
3% 3.2%
Fed Target
2%
1%
0%
’17 ’18 ’19 ’20 ’21 ’22 ’23 ’24

*Our universe of advanced economies includes: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain,
Sweden, Switzerland, United Kingdom, United States.

Sources: Bureau of Labor Statistics, Haver Analytics. Data as of October 31, 2023.

12
There are, to be sure, countervailing forces that may push The process of “nearshoring” and global supply chain adjustments
inflation rates higher over the medium term. Industrial policy and will also limit how much goods prices could fall. Fundamentally, it
the energy transition could lead to higher commodity prices. In fact, seems to us that many parts of the economy (labor markets, housing,
at least initially, the shift to clean energy sources could lead to bouts commodities) have insufficient supply to meet demand. This should place
of inflation. Consumer and investor inflation expectations could also more upward pressure on prices than occurred in the 2010s.
nudge inflation higher—becoming in effect a self-fulfilling prophecy.

INFLATION WILL LIKELY SETTLE AT A HIGHER

5.0%
LEVEL THAN THE PAST DECADE
4.5% Developed world inflation, CPI, YoY % average
4.0%
4.0%
3.5%
3.0%
2.5% 2.3% 2.3%
2.13%
2.0%
1.5%
1.5%
1.0%
0.5%
0.0%
Current Average ’03–’07 Average ’10–’19 LTCMAs Market
Expectation Expectation
Sources: J.P Morgan Asset Management, Bloomberg Finance L.P., Haver Analytics. Data as of October 2023.

13
INFLATION

How should investors grapple They might look first to equities. Since the end of 2019, U.S. consumer
prices have risen almost 19%. S&P 500 earnings are up over 35%.
with the prospect of more Crucially, profit margins for the core of the S&P 500 have stabilized at
~12%, in line with pre-pandemic peaks and only one percentage point
meaningful inflation in 2024 below the 2021 highs. We believe large public companies will be able
to continue to maintain both pricing power and their margins. This
and beyond? is not just a U.S. phenomenon. Look no further than the European
luxury goods sector, which commands pricing power while delivering
robust growth.

In fact, if inflation ranges between 2% and 3%, as we think it will, it

should be good for stocks. The average S&P 500 year-over-year return is
nearly 14% when inflation runs in that range.

STOCKS’ SWEET SPOT: EQUITIES TEND TO DO WELL WHEN

INFLATION RANGES BETWEEN 2% AND 3%
16% S&P 500 YoY returns in different inflation environments, %
14% 13.8%
Average S&P 500 Return

12%
10.7%
10%
8.5%
8%

6%

4%
2.4%
2%

0%
> 5% 3%–5% 2%–3% 0%–2%
YoY Inflation Rate
Source: Bloomberg Finance L.P. Data as of November 17, 2023.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.

14
In addition, equities may not provide the only defense against inflation. tend to appreciate because it becomes more expensive to replace
We think the current environment also argues for potential exposure them. Problems in the office sector and pockets of retail and hospitality
to real assets such as global real estate, infrastructure, transportation, are well known, but we believe sectors such as industrial and data
commodities and timber. centers offer robust growth prospects.

Take real estate, as an instructive example. Income growth for real In the last cycle, investors used bonds to insulate portfolios from slower
estate tends to outpace inflation, and most leases in commercial growth. In the cycle now emerging, we think investors can use real
properties contain inflation step-ups. What’s more, as commodities assets to insulate their portfolios from higher inflation.
(steel, say, or wood) and labor become more costly, existing buildings

OVER A 30­YEAR STRETCH, REAL ESTATE INCOME HAS ALMOST

ALWAYS OUTPACED INFLATION
270 U.S. real estate income & inflation (1991 = 100)
250
Real Estate Income
230
Inflation
210
190
170
150
130
110
90
’91 ’95 ’99 ’03 ’07 ’11 ’15 ’19 ’23

Sources: J.P. Morgan Asset Management GRA Research, NCREIF, Bureau of Labor Statistics. Data as of June 30, 2023.

15
CASH

02

The cash conundrum:

the benefits and risks
of holding too much.

16
It feels good to hold cash when rates Certainly, 5% yields on cash and low volatility have been a magnet for
our clients’ assets. This phenomenon is global, but it is particularly
are high and other markets are this powerful in the United States, where clients have over twice the
allocation to short-term Treasuries and money markets as their
volatile. Frankly, over the last two international peers.
years, it has paid to stay in cash.
Could this shift into cash cause problems? In the context of your own
financial planning, it may help to acknowledge that you may feel
differently about cash than you do about stocks, bonds or other assets.
But you should consider cash as you do any other asset—asking how it
fits into your goal-aligned wealth plan, and whether the timing of an
overallocation makes sense.

CASH COMFORT: OVER THE PAST TWO YEARS, IT HAS PAID TO STAY IN CASH
USD total return since December 2021, %
10%
USD Cash MSCI World Global Equities Global Bond Aggregate

0%

­10%

­20%

­30%
Dec ’21 Mar ’22 Jun ’22 Sep ’22 Dec ’22 Mar ’23 Jun ’23 Sep ’23

Sources: Bloomberg Finance L.P., MSCI. Data as of November 17, 2023.

Past performance is no guarantee of future results. It is not possible to invest directly in an index.

17
CASH

Cash works best relative to stocks and bonds in periods such as the
one we just saw: when interest rates are rising quickly, and investors We think 2024 will likely
question the durability of corporate earnings growth.
deliver a backdrop of
Cash works less well when interest rates are falling (you are reinvesting falling rates and improving
at lower and lower yields), or when earnings growth expectations are
improving and risk sentiment is recovering. We think 2024 will likely earnings, in which cash
deliver a backdrop of falling rates and improving earnings, in which will work less well.
cash will work less well.

Our expectation of lower cash rates reflects our view that inflation has
likely peaked, that central banks see their current policy positioning
as restrictive, and that the labor market is cooling relatively quickly.
Indeed, continuing jobless claims in the United States are 30% higher
year-over-year. Historically, we have only seen that rate of increase
when the economy was already in recession. Thus central banks should
be willing to lower interest rates if they feel that growth is threatened.
Indeed, markets think the Federal Reserve, European Central Bank and
Bank of England could lower interest rates as soon as March 2024.

18
 From a planning perspective, holding more cash today than you did
in 2021 or 2017 is probably fine. Cash yields after inflation are at some
of their highest levels of the last 20 years. But holding relatively more
cash probably isn’t the best use of your overall portfolio.

Here’s why. You can commit less capital to a goal today if you
are willing to invest it in a way that increases the expected return.
It’s a simple but profound principle of investing.

Look at it this way. Based on J.P. Morgan Asset Management’s Long-Term

Capital Market Assumptions (LTCMAs), we think a person could keep all
their assets in cash and still spend 3% of their wealth per year for 30
years and not run out of money.

That’s not a terrible scenario. But it leaves no room for error if an

unexpected setback occurs, or if other priorities (such as legacy
planning, philanthropic giving or health spending) become more
important. In this particular all-cash scenario, your wealth can support
your spending—but nothing more.

Now let’s think about the alternate approach. Allocating assets outside
of cash reduces the amount of capital that is required today to fund a
goal with a high degree of confidence. It could also allow your wealth
to fund more goals than you could with an all-cash approach.

As a first step, if you design a portfolio of only core, investment

grade bonds, you could need just ~85% of the all-cash portfolio
to maintain the same rate of spending.1 The other 15% is unencumbered,
and could be earmarked for anything: buying the next home, giving to
charity, funding your grandchildren’s education. Indeed, adding more
assets to the mix (including equities, high yield bonds and alternatives)
could further reduce the initial capital required, or could increase the
rate of spending that the portfolio can support.

Holding more cash in the near term may not be a poor decision,
but it likely isn’t the best one either. Cash may offer a viable path
to achieve some of your goals—but probably not many.

1
J.P. Morgan Asset Management's LTCMAs are the product of a deep, proprietary
research process that pools the quantitative and qualitative insights of more than
60 investment professionals.
BONDS

03

Bonds are more

competitive with
stocks—adjust the
mix according to
your ambitions.

20
4 out of 5
clients have not
Higher rates mean that bonds are as competitive with stocks as they
materially increased have been since before the GFC. Yet four out of every five of our clients

their allocation to have not materially increased their allocations to fixed income over the
last two years. The first question to ask is, do bonds deserve a larger
fixed income. share of your portfolio?

We rely on bonds to help provide stability in a multi-asset portfolio.

Coupon payments generate income, and bond prices tend to rise
when economic growth slows.

Given the recent increase in yields, we think bonds are now well
positioned to deliver on both fronts. What’s more, they could also
hold up much better against equities than they have over the past
decade. Consider that for the 10 years ended in Q3 2023, bonds have
posted annual returns of just ~1% versus nearly 15% for equities.

21
BONDS

STOCKS TYPICALLY OUTPERFORM BONDS,

BUT THE MAGNITUDE VARIES WIDELY
10­year rolling total return, % annualized
25%
U.S. Corporate Bonds U.S. Equities
20%

15%

10%

5%

0%
’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’15 ’20

Source: Bloomberg Finance L.P. Data as of October 31, 2023.

Past performance is no guarantee of future results. It is not possible to invest directly in an index.

Across many sectors, yields have reached highs not seen since 2007. We make this case with conviction because we believe the new rate
The yield on a 5-year Treasury bond is 300 basis points (bps) above regime represents a generational reset in bond market pricing. The
the dividend yield on the S&P 500. Tax-equivalent yields on benchmark rate reset means that core bonds may now be poised to deliver strong
AAA-rated 15-year municipal bonds are over 6%. Junk bond yields forward-looking returns.
are over 8%, and private credit yields are in the low teens. The only
negative yielding debt left in the world is in Japan. Over a 10-to-15-year investment horizon, J.P. Morgan Asset
Management’s LTCMAs project that core bonds, as proxied by the
Those higher yields—and thus lower bond prices—depressed core Global Aggregate and U.S. Aggregate Bond Indices, will deliver 5%
bond returns in 2022 and 2023. In fact, the current drawdown for plus annual returns.
the Barclays Aggregate Bond Index from its prior high is -14%. That’s
better than the recent trough of -17%, but still lower than at any We think strong performance will begin in 2024—with modest price
other point in the index’s history. Despite the drawdown, our clients’ appreciation as rates fall, combining with an attractive starting yield.
allocations to fixed income are flat relative to the end of 2021. In 2024, In our view, those returns will reflect a favorable economic backdrop
we think they should consider continuing to add to the asset class. for bonds in the coming year: Economic growth should slow, inflation

22
will continue to cool, and central banks could start to reverse their We don’t think investors should see this moment as a choice between
rate-hiking cycles. stocks or bonds. We think they should personalize the possibilities by
designing a portfolio of stocks and bonds suited to their particular
What’s more, higher starting yields mean that a decline in interest rates goals and risk tolerances. The rate reset also means that investors
would provide a gain that is proportionately larger than the loss created should assess existing holdings to make sure their current allocations
by a similarly sized rate increase. To illustrate, an investment in a U.S. still make sense.
10-year Treasury bond would lose approximately 2% if yields rose one
percentage point over the next year. If rates fall 1% over the next year, Imagine for a moment that you’re evaluating your current assets. Top of
an investment in a 10-year Treasury bond would gain over 12%. mind is likely the concern you’ve had with market volatility over the last
two years. Even though a balanced portfolio has underperformed our
Globally, we are focused on tax efficiency in fixed income allocations. expectations, you may now have an opportunity to reduce equity risk,
In the United States, the municipal bond market is the clear expression. add more fixed income exposure, and still reach your financial goals.
Municipals have an extremely low historical default rate (0.1%
cumulatively over 10-year periods since 1970 versus 2.2% for corporate If you’ve got new funds to invest, your perspective may be slightly
bonds). In addition, state and local debt loads have not expanded different. One sign of fixed income’s new appeal: J.P. Morgan Asset
relative to GDP since 2000, in stark contrast to the federal debt. Management’s long-term return assumptions for bonds today are
higher than our equity market return assumptions were at the end
Each jurisdiction globally has its own nuances, and we recommend of 2021. The rate reset gives investors the opportunity to add fixed
exploring this with your local advisor. income to portfolios, reduce the range of possible outcomes, and
sacrifice relatively little potential return to do so.
Across global markets, the rate reset offers the potential to lock in
strong returns in many parts of the yield curve. We believe bonds But remember that fixed income comes with its own risks as well.
within the 3–10 year maturity range offer attractive yield, and they A concentrated allocation to bonds could depress portfolio returns
are less exposed to longer-term risks regarding government deficits. if inflation is more persistent than expected.

It has been a brutal stretch for bond investors, no doubt about it. Ultimately, the thing to keep in mind is that the higher-rate regime
But we think the end of central bank tightening cycles and cooling gives you more options in crafting your goals-based financial plans.
inflation will offer more than a reprieve—they’ll bring stability back If you aim to limit the potential downside for your wealth, and reduce
to the asset class. the range of possible outcomes, it could make sense to swap equity
exposure for bond exposure. But if you aim to capture a significant
degree of potential upside, you’ll likely want to hold on to your equities,
In short: The rate reset has run its course, both public and private. In the end, the right move for most may to
and we think it is time to lock in yields. In keep their strategic asset allocations and look forward to the stronger
forward-looking returns that we expect.
light of this, the second question to ask is,
should you own more fixed income relative
to equity?

23
STOCKS

04

With AI
momentum,
equities seem to
be on the march
to new highs.

24
Equities offer
the potential for We rely on equities to help provide long-term capital appreciation in
portfolios. Though more volatile than bonds, equities have outperformed
meaningful gains bonds 85% of the time on a 10-year basis since 1950. Over the long term,
we think equities can continue to outperform bonds and generate capital
in 2024. appreciation for investors.

In 2024, equities offer the potential for meaningful gains. Even as

economic growth slows amid higher rates, we think large-cap equity
earnings growth should accelerate, and that could propel stock markets
higher over the next year.

Why do we anticipate improving corporate earnings? It’s partly because

we believe the U.S. large-cap corporate sector has gone through an
earnings recession already (nine of the 11 major sectors in the S&P 500
reported negative earnings growth for three consecutive quarters in
2022–2023). They have emerged with leaner cost structures, which should
help them face a still resilient (if slowing) demand environment in 2024.
Indeed, since 1950, earnings per share has been accelerating about 25% of
the time when GDP growth has been decelerating.

25
STOCKS

Higher rates may also make you skeptical of valuations. But we think they Some investors argue that U.S. stock valuations need to correct further
appear reasonable in the United States and inexpensive elsewhere. The to account for higher interest rates. But today’s 18x–20x forward P/E
S&P 500 trades at above-average valuations on a price-to-earnings basis, multiples appear reasonable to us, given that the index currently has
while U.S. mid-cap and small-cap stocks (and European, emerging market wider margins (free cash flow margins are 30% higher than they were 10
and Chinese stocks) all trade at a substantial discount. Indian stocks, years ago) and healthy interest coverage (11x EBITDA to interest expense).
meanwhile, trade with fair valuations, but we are optimistic about their We also see prospects for better corporate revenue growth over the
low leverage and high growth rates. medium term, given the tailwinds from fiscal spending and productivity
gains from artificial intelligence. In the end, an outlook for slightly higher
While we prefer the U.S. stock market in 2024, low valuations elsewhere inflation and better growth means that an equity risk premium (proxied
suggest that prices already anticipate bad news for corporate profits, in this case by the difference between 10-year Treasury yields and the
limiting the downside for stock performance. By the same token, better­ earnings yield of the S&P 500) between 0% and 2% makes more sense
than-expected news could spur greater-than-expected gains. than the post-GFC environment of 3%–5%.

DESPITE HIGHER INTEREST RATES, VALUATIONS SEEM REASONABLE

ACROSS GLOBAL MARKETS
35x 12­month forward P/E ratios relative to the last 25 years

30x Interquartile Range Current Value

25x

20x

15x

10x

5x
U.S. U.S. U.S. U.S. U.S. Europe Emerging CSI 300 MSCI MSCI
Large Tech Equal Mid Small Markets (Onshore) China India
Cap Weight Cap Cap (Offshore)

Source: Bloomberg Finance L.P. Data as of November 17, 2023.

Past performance is no guarantee of future results. It is not possible to invest directly in an index.

26
Finally, we see several trends in
public and private equities that
we think could generate long-term
outperformance.

The promise of artificial intelligence (AI) is hardly a secret. But we do

think it could have profound implications for corporate productivity
and profitability.

AI has already seemingly started a new technology research and

development cycle. In fact, the R&D budgets for the top-five tech
companies alone have eclipsed $200 billion per year and are rapidly
approaching the U.S. government’s own R&D spending (~$250 billion).
The use cases are also broadening. For example, a recent study
suggested that an AI model can outperform expert radiologists at
spotting malignant pancreatic cancers, and AI has helped reduce
airline contrails that contribute to global warming.

At JPMorgan Chase, we expect that incorporating AI and machine

learning into our processes could deliver more than $1 billion
in impact this year. As investors, we are focused on accessing
AI’s potential through both the software and hardware leaders that
are set to benefit. On the private side, consider looking to growth
equity managers to identify new AI-connected businesses that could
prove to be effective disruptors.

GLP-1 weight-loss drugs could continue to drive divergences

within and outside the healthcare sector. We believe that around
2 million people in the United States are currently taking GLP-1
drugs for weight management. Nearly 100 million obese Americans
could potentially benefit from the drug, but cost is a real hurdle. For
example, the list price for Mounjaro is over $1,000 per month, which
is higher than the $650 per month cost of shelter per capita for the
top 20% of earners. Nonetheless, sales for these types of drugs could
reach $100 billion by 2030 (up from $6 billion today), using relatively
conservative assumptions regarding total market penetration.

27
STOCKS

At the same time, we think some consumer staples and medical device
company stocks have been unduly punished by investors exclusively
focused on the impact of GLP-1s. We see selective opportunities here.
From an investor’s Finally, companies across sectors should benefit from a renewed focus
perspective, we see on infrastructure, construction and defense spending. Real private
spending on manufacturing structures has doubled since 2021, largely
potential upside driven by semiconductor factories. Earnings estimates have doubled
for companies whose businesses are tied to electrification.
in the stocks of
drug makers with a
growing share of the
weight-loss market.

28
How can you best evaluate these different stock scenarios? Bear
in mind that you’re investing in a higher rate environment, which
could be useful if you want to structure your equity holdings to limit
downside exposure, extract yield or increase potential upside based
on our expectations for next year.

In private markets, we continue to see opportunity in secondary

private equity funds, as the lack of distributions (the lowest since
2009) creates a catalyst for institutional investors to monetize their
current holdings. Further, we are focusing on offsetting higher
cost of debt by concentrating on buyout managers who operate in
higher-growth sectors such as technology, healthcare and security.

We expect the equity market rally of 2023 to carry on into 2024.

And when it comes to capital appreciation, a critical element of any
financial plan, stocks can continue to provide long-term compound
growth to investment portfolios.

We see opportunity
in secondary private
equity funds.
CREDIT

05

Pockets of credit
stress loom, but they
will likely be limited.

30
We expect the
coming year to
see more stress in
certain sectors of An inescapable fact of the business cycle is that higher interest rates make
credit harder to come by. Of course, companies and households can still
the credit complex. borrow money when credit is tight, but not as easily, and not in the ways
they are used to.

Not surprisingly, we expect the coming year to see more stress in certain
sectors of the credit complex. Vulnerable sectors include: commercial real
estate loans, leveraged loans, and some areas of consumer credit (e.g.,
autos and credit card) and high yield corporate credit. Small-cap equities
may be similarly affected by higher rates, given the levels of debt on their
balance sheets.

31
CREDIT

But we think these stresses of higher rates will be manageable—and more Corporate credit has also held up well across a number of global markets,
importantly—not enough to cause a recession in 2024. as U.S. and European corporates (both investment grade and high
yield) took advantage of the low interest rates of prior years to “term
Indeed, some sectors of the economy have fared better than some might out” (extend the maturities) of their debts. It is also notable that to take
have expected in the face of rising rates. advantage of higher rates in their own fixed income portfolios, companies
increased their holdings of shorter-duration cash equivalents, which are
For example, U.S. residential home values have accommodated the recent now yielding higher coupon payments.2 All of this means that non-financial
and substantial jump in mortgage rates. Even though financing activity corporate interest payments as a share of after-tax profits are at their
has collapsed (J.P. Morgan Private Bank and Wealth Management is on lowest levels since 1980.
pace to underwrite just one-third of the mortgages that we did in 2021),
home prices have been supported by the lowest supply on record.

ALL CLEANED UP: CORPORATE BALANCE SHEETS SHOW

INTEREST BURDENS AT HISTORIC LOWS
Net interest payments as a share of after­tax profits
120%

100%

80%

60%

40%

20%

0%
’80 ’83 ’86 ’89 ’92 ’95 ’98 ’01 ’04 ’07 ’10 ’13 ’16 ’19 ’22
Sources: Haver Analytics, U.S Department of Commerce. Data as of June 30, 2023.

2
According to the Flow of Funds data, the share of assets in the nonfinancial corporate sector that
are cash equivalents (checkable deposits + savings deposits + money market fund shares) is
currently around 5.5%, which is up from 4% in the 2010s and 2–3.5% in the 1990s and 2000s.

32
Still, we believe higher interest rates are limiting the flow of credit. U.S. estate loans are at a floating rate, and nearly $2 trillion of commercial
corporate and household borrowing is roughly comparable to most of real estate debt matures by 2025. Indeed, BBB-rated commercial
the 2010s, a time when the economy was still deleveraging from the mortgage-backed securities spreads are nearing 1,000 bps (which is
GFC. In the Euro Area, bank lending both to households and corporates higher than their COVID crisis peaks), while high yield spreads remain
is barely growing, and at the slowest pace since 2015. Indeed, higher well anchored.
interest rates look to be much more onerous for the European
economy than the American economy. In corporate credit, the healthcare sector is under particular stress,
accounting for more than a quarter of all corporate credit defaults YTD.
We are also starting to see cracks in pockets of the credit complex, The sector faces regulatory headwinds, labor inflation (which crimps
specifically those that are either most exposed to floating interest margins) and liability payments (e.g., from opioid lawsuits).3 The longer
rates or facing near-term maturities. Over 50% of commercial real that interest rates stay elevated, the faster interest coverage metrics
will deteriorate, especially for smaller companies.

TODAY’S CREDIT GROWTH RECALLS THE 2010 S , A DECADE

0F POST­GFC DELEVERAGING
30% Nonfinancial corporate and household new borrowing as a % of GVA
25%
20%
15%
10%
5%
0%
­5%
­10%
­15%
’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’15 ’20

Source: Haver Analytics. Data as of April 2023.

3
Nelson Jantzen & Tony Linares, “Default Monitor: High Yield and Leveraged Loan Research,”
J.P.Morgan Corporate Investment Bank Global Research, October 2, 2023.

33
CREDIT

U.S. leveraged loan markets have already felt the sting of higher rates.
As a result, default rates are now higher than they are for high yield
bonds (a historical anomaly). And, of course, many U.S. regional banks
are under the strain of earning low rates on old loans while having to
pay higher and higher rates on cash to attract deposits. Commercial
real estate debt on regional bank balance sheets only exacerbates
those strains.

OVERLEVERAGED SECTORS ALREADY SHOW SIGNS OF STRESS

Commercial mor tgage­backed security & high yield spreads, %
12% High Yield Spread Commercial Mortgage­Backed Security Spread

10%

8%

6%

4%

2%

0%
’13 ’15 ’17 ’19 ’21 ’23

Sources: Haver Analytics, Bloomberg Finance L.P. Data as of November 19, 2023.

34
Ultimately, though, we think
these problems will be contained.
We do not see tighter credit
conditions leading to a full-blown
credit crunch.

For investors, stresses in the credit complex can create a wide range of
investment opportunities.

We think relative value strategies, with a focus on fund managers who

can identify stress and dislocations at the sector, or even subsector, level,
are positioned to take advantage of the coming credit cycle.

Moreover, U.S. private credit funds could continue to take market share
from high yield and leveraged loan markets. Currently, direct loans by
private lenders are yielding upwards of 12%, even though risk metrics,
such as net debt to EBITDA for borrowers, have improved. In addition,
covenants for lenders are stronger than they are in leveraged loan
markets. In our view, private credit is competitive with private equity
for a place in investors’ portfolios.

Finally, stress in commercial real estate markets could create

opportunities for investors who have the capital to provide as regional
banks look to offload loans, or existing borrowers may need to bring in
partners to help refinance.

Inevitably, perhaps, the rate reset has had a material impact on

interest-rate-sensitive sectors of the economy. But we think the fallout
will be contained. The combination of strong household and corporate
cash flows and a more benign inflation environment should allow
central banks to lower interest rates before these pockets of credit
stress do serious damage to portfolios.
CONCLUSION

Conclusion

An investment
landscape
reconfigured

36
As we head into 2024, investors find more
options for their portfolios than at any
time since before the GFC. Bond yields are
high. Equity valuations are fair. Private
markets continue to offer premiums over
their public counterparts, while also
becoming more accessible to investors.
Even cash doesn’t look so bad.

Almost certainly, new or resurgent risks

will emerge. A presidential election cycle
looms in the United States. Growth in
Europe appears to be quickly succumbing
to higher interest rates. China may
continue to balance the competing
interests of alleviating leverage in the
property sector while supporting domestic
consumption. War in Ukraine and the
conflict in Israel and Gaza are ongoing,
and new geopolitical flashpoints may
well appear.

Consider those risks as you weigh

your investment options. Evaluate the
implications, for 2024 and beyond.
Personalize the possibilities. And finally,
harness the power of markets to help
realize your long-term financial goals.

37
GLOBAL

Global Perspectives
In our Global Perspectives, we highlight three
areas of opportunity for global investors:

Indian equity, one of the few emerging markets

01 where equity investors have been rewarded for
underlying economic growth

Europe’s luxury goods sector—global brands

02 with enduring pricing power, renewed by digital
innovation

03 Latin American beneficiaries of nearshoring,

especially in Mexico

The rate reset could create more dispersion between corporate

winners and losers—and thus more opportunity for active
management. In our view, equity markets outside the
United States offer especially fertile ground for active managers.

38
India
Investors have turned to emerging markets for the promise of
stronger economic growth, and many of these economies have indeed
expanded at a faster pace than their developed market counterparts.
But there’s a twist, which many investors don’t fully appreciate: In most
emerging market (EM) economies, corporate earnings have failed to
keep pace with GDP growth.

India is a striking exception. It is one of the few emerging markets

Emerging market exception: where equity investors can benefit from underlying economic
growth. Indian company profits, and thus stock returns, have tended
India investors have been to grow in line with nominal GDP. Data over the past 20 years show
that India has one of the closest relationships between economic
rewarded for economic growth growth and market returns.

INDIAN CORPORATE EARNINGS KEEP PACE WITH GDP GROWTH.

THAT’S A RARITY IN EMERGING ECONOMIES
Annualized nominal GDP growth vs. local equity index price returns since 2009, %

12%
Nominal GDP Equity Returns (Domestic Index)
10%

8%

6%

4%

2%

0%

-2%
Brazil China Hong India Indonesia Malaysia Mexico Singapore South South Taiwan
Onshore Kong Africa Korea

Source: Haver Analytics. Data as of December 2022.

Past performance is no guarantee of future results. It is not possible to invest directly in an index.
39
GLOBAL

J.P. Morgan Asset Management’s LTCMAs project that India’s economy India’s prospects look especially appealing at a time when China’s
will deliver nominal growth of around 10% annually over the next 10 long-term growth potential has declined, with far-reaching effects
to 15 years. In our view, this makes India one of the most compelling for the global economy broadly and emerging markets in particular.
investment destinations in emerging markets. To the extent that For example, China represents the largest source of trade demand
growth prospects become tougher to source in a world of tighter for Korea and Taiwan, due to its large appetite for semiconductors.
credit, Indian markets may look especially attractive to global It also ranks as the largest importer and consumer of many major
investors. commodities, directly impacting leading commodity exporters such
as Brazil and South Africa.
FAVORABLE DEMOGRAPHICS, LOW CORRELATION WITH CHINA
India’s growth potential reflects an expanding middle class, digitization In many ways, EM economies are highly correlated with China’s
and, especially, favorable demographics. India’s labor supply will likely economic cycle, especially major emerging markets. Indeed, given
increase steadily until the 2030s, and because labor supply is strongly the market capitalization of Chinese companies, the country effectively
linked to output, this gives it a long runway to deliver sustained high dominates the broad EM complex. For precisely that reason, India’s
rates of economic growth. lack of correlation appeals to many investors. The lack of correlation
applies to equity market performance as well. Indian equity markets
are among the least correlated to China.

INDIAN EQUITY MARKETS ARE AMONG THE LEAST CORRELATED TO CHINA

EM equity market correlations, Sept. 2009–2023, quarterly

MSCI China MSCI Taiwan MSCI India MSCI Korea MSCI Brazil

MSCI China 1.00

MSCI Taiwan 0.63 1.00

MSCI India 0.37 0.64 1.00

MSCI Korea 0.68 0.86 0.61 1.00

MSCI Brazil 0.40 0.56 0.52 0.58 1.00

Source: Bloomberg Finance L.P. Data as of November 2023.

40
READING VALUATIONS AGAINST A BRIGHTENING LONG-TERM OUTLOOK
Indian equities are not undervalued. Stocks now trade at forward
price-to-earnings (P/E) multiples that are higher than their
historical averages.

But the long-term outlook for India’s economy and equity markets
appears better than it has in years. We’d point to several reasons:

— A likely sustained increase in foreign direct investment,

due to U.S.-China tensions and a redirection of supply chains
benefiting India

— Companies have steadily reduced debt levels over the past

10 years, leaving room for a new credit cycle to emerge

— Structural reforms in the banking sector—a dominant component

of the equity market—are designed to improve profitability and
reduce risk

— India’s business-friendly policies (including lower corporate tax

rates) and preferential credit terms to set up manufacturing
facilities in the country

We think that collectively these factors could spur profits to grow

at compound annual growth rates (CAGR) in the low- to mid-teens
over the next few years. That would justify Indian equity’s current
valuation premium versus history. In short, we expect earnings
growth—closely linked to the fast-growing Indian economy—to drive
Indian equities higher over time.

41
GLOBAL

Europe
Digital reinvention fuels a
fast-growing luxury sector
Luxury goods have long evoked craftsmanship and exclusivity.
Now digital transformation and shifting demographics are changing
the way luxury good companies interact with their customers.

It’s a particular boon for Europe, home to around 90% of globally

listed luxury goods companies.

What’s changed? Curated digital experiences, in which polished

retail theater adapts to the online world (think high production
value live-streaming and digital salespeople with one-on-one client
relationships).
Fundamentals for Europe's leading luxury goods businesses are strong.
The strategy has proved to be a big success, drawing in new We believe demand will remain robust. And in an environment of
consumers increasingly comfortable paying for big ticket items online. broadly higher inflation, the sector could sustain the pricing power it
Bain & Co. consultants recently predicted4 that websites could become has commanded for decades.
the leading channel for luxury purchases, with an estimated 32%–34%
market share by 2030. THE POWER OF THE WEALTH EFFECT
The luxury market’s growing consumer base is increasingly
Beyond the digital innovations, growth drivers include: concentrated among the wealthy, whose spending is less sensitive
to economic downturns. The wealthiest 2% of global consumers
— An expanding customer base (from around 400 million people accounted for 40% of luxury spending in 2022, up from 35% in 2009,
in 2022 to an estimated 500 million by 2030), increasingly according to analysts at Bain & Co. Bain projects that the global luxury
dominated by the wealthy market will reach €1.5 trillion in 2023, an 8%–10% increase over 2022.

— A rising EM consumer Competition to win those customers may intensify if economic growth
slows in 2024 (as we expect it will) and aspirational luxury consumers
— Pent-up demand, including from European consumers reduce their spending. The likely outcome: The strongest luxury brands
with still-ample excess savings will get even stronger.
4
Bain & Company, Renaissance in Uncertainty: Luxury Builds on Its Rebound
Data as of December 2022.
42
 THE HIGHEST­QUALITY BRANDS COMMAND EXCEPTIONAL
PRICING POWER OVER MULTIPLE CYCLES
Luxury goods pricing since 1950
11,000
Hermès Kelly 25
Hermès Birkin 25
Chanel Flap
8,250 Cartier Love Bracelet
Rolex Submariner

5,500

2,750

0
’54 ’59 ’64 ’69 ’75 ’80 ’85 ’90 ’96 ’01 ’06 ’11 ’17 ’22 ’27

Source: BlackRock. Data as of August 30, 2023. All companies referenced are shown for illustrative purposes
only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

GENERATIONAL SHIFT, RISING EM CONSUMER Newer luxury markets, such as India and EM Southeast Asia and Africa,
As the industry’s digital shift helps spur new customer engagement, a look promising. Among the rising stars, India stands out. It could see
generational shift is underway, as well: Post-pandemic, we see more 35–40 million new mid- and high-income consumers between 2022 and
younger consumers with a growing interest in sustainable lifestyles. This 2030, implying that its luxury market could expand to 3.5 times today’s
sensibility plays well to the luxury sector’s appeal—“buy less, buy better.” size by 2030.

Across generations, EM consumers are gathering strength. Emerging

economy countries could gain around 70 million middle- and high-
income consumers by 2030, Bain estimates. Although China’s stalling
recovery (and especially its struggling property market) has recently
depressed consumer sentiment, Chinese consumers’ luxury spending
will likely recover through 2024.

43
GLOBAL

EMERGING ECONOMY COUNTRIES COULD GAIN AROUND

70 MILLION MIDDLE­ AND HIGH­INCOME CONSUMERS BY 2030
Emerging market luxury goods consumers

India Southeast Asia Emerging Africa

+34MM–40MM +20MM–25MM +10MM

2022 2030F 2022 2030F 2022 2030F

Source: Bain & Company. Data as of November 10, 2022.

PENT-UP DEMAND, DRAWNDOWN SAVINGS ATTRACTIVE INVESTOR ENTRY POINT

In Europe, consumers appear set to spend some of the excess savings Amid uncertainty about the European economy and concerns about
they have accumulated since the outbreak of COVID. Between the end of China’s growth outlook, luxury stocks sold off in recent months. The
2019 and the second quarter of 2023, Euro Area households accumulated top 10 names lost $190 billion in market value, or roughly 17%, since
savings of around €1 trillion more than they would have otherwise. The the end of March. Investors looking to benefit from the industry’s
European Central Bank estimates that this is approximately 12% of their long-term growth prospects may find an attractive entry point.
average disposable incomes. So far, the overall amount of excess savings
has not declined; indeed, households in the highest-income quintile own
about half of those excess savings. We do not believe money put aside
during the pandemic will support a broad surge in consumption. But
even allowing for a considerable degree of consumer caution, some of
the savings will likely be spent, supporting continued spending on high-
end goods.

44
Latin
By August 2023, that share had nearly halved, to 13.5%. During that
seven-year stretch, ASEAN (Association of Southeast Asian Nations)
countries boosted their share of U.S. imports from 13% to 17%, and

America
European Union countries from 15% to 19%. When we assess the
potential impact of nearshoring on countries’ GDPs, Central American
countries and Mexico stand to reap the greatest benefits. On an
individual country basis, Mexico’s share increased the most, rising from
13% to 16% as it became the main trading partner of the United States.
Its success could open the door for other countries in the region to
benefit from Mexico’s geographical proximity to the continent’s largest
economy.

Nearshoring creates
new openings for Latin
American markets

Globalization has been on the wane since the GFC. The latest chapter
in this historic change: International trade shifted significantly in the
wake of pandemic-induced supply chain bottlenecks and amid growing
geopolitical tensions. One trend has firmly taken hold: nearshoring,
in which companies move production closer to their main markets.
Companies’ larger goals—making supply chains more resilient—are
even more important now, as management teams focus on sustaining
profit margins and diversifying their supply chains in an increasingly
polarized world.

GEOGRAPHY AND HISTORY MAKE MEXICO A CLEAR WINNER

Mexico is a clear beneficiary of the nearshoring trend, given its
geographical position and long-held ties to the United States. But many
countries in Central America and South America could also increase their
exports to the United States. The Inter-American Development Bank
estimates that nearshoring could lead to an additional $800 billion of
goods and services being sourced from Latin America and Caribbean
countries in the next few years. As Latin American companies boost their
trade with the United States, Chinese exporters have been in retreat.
At its peak in 2016, China’s share of U.S. imports stood at 21.6%.

45
GLOBAL

CENTRAL AMERICA CAN FIND MANY OPPORTUNITIES TO

INCREASE MARKET SHARE
Potential opportunities for increased exports as % of 2022 nominal GDP
Quick Wins—United States Total INTRA­LAC Quick Wins Medium­Term Opportunities

Top Five Selected Major Economies

3.9%
3.6%
3.2%
2.6% 2.5%

0.7% 0.6% 0.6% 0.4%

Honduras Nicaragua El Salvador Guyana Mexico Colombia Chile Peru Brazil

Sources: IADB, Bloomberg Finance L.P. Data as of December 2022.

Investors may be hard pressed to access the benefits of higher growth When we examine the potential impact of nearshoring on specific
in Central America through equity markets. On the other hand, Mexico’s product categories, industrial goods (electrical, machinery, vehicles)
stock market broadly captures the GDP growth that nearshoring has and consumer goods (footwear, toys, optical) are among the U.S.
helped to spur, given the index’s exposure to domestic consumption, imports that could be subject to Latin American and Central American
as nearshoring-related manufacturing creates jobs, drives disposable gains in market share.
income and thus domestic economic activity.
REGIONAL INTEGRATION AND POLICY CHALLENGES
Notably, even after Mexican stocks have outperformed EM and global But market share gains are far from guaranteed. On one end, public
peers over the last two years, valuations are still trading below their spending and private investments will be needed to spur the necessary
10-year average. On a sector basis, we think industrial real estate in improvements in infrastructure and energy availability (especially “green”
Mexico should continue to outperform. Investors can uncover industrial energy). For the entire region to reap the benefits of nearshoring,
real estate opportunities in both public markets and private markets. regional integration will be required as well, especially as it relates to

46
infrastructure, logistics and business regulations. For example, textile Challenges abound, and the path won’t be smooth. But nearshoring
exports from Central America might move through the Mexican border and supply chain diversification could spur meaningful GDP gains in
without incurring hefty logistical costs. Latin America. We see this as a multi-year investment opportunity,
benefiting the region overall—but with Mexico as the clear big
Finally, public policy will be of paramount importance, as the strains of winner. We think current market pricing does not yet reflect the
extreme income inequality, and left-leaning politics more broadly, may full potential. Latin American equities, trading below historical
limit the structural investment needed to fully capitalize on the export multiples, offer investors access to the potential long-term benefits
opportunity. nearshoring may deliver through private and public investment,
improved infrastructure and rising commodity prices. For global
investors, we believe this is a compelling combination.

MEXICO BENEFITS FROM ITS LONG­HELD TIES TO THE UNITED STATES

Source of U.S. imports, per region & main trading partners

100%
Other

Canada
74% India
Japan
China

50%
Mexico

EU
25%
LatAm ex. Mexico

Asia ex. Japan,

India & China
0%
’92 ’95 ’98 ’01 ’04 ’07 ’10 ’13 ’16 ’19 ’22
Source: DataWeb. Data as of August 31, 2023.

47
APPENDIX

Our mission
EXECUTIVE SPONSOR

Clay Erwin
Global Head of Investments Sales & Trading

GLOBAL INVESTMENT STRATEGY GROUP

The Global Investment Strategy Group

Elyse Ausenbaugh
provides industry-leading insights and Global Investment Strategist
investment advice to help our clients Christopher Baggini
achieve their long-term goals. They Global Head of Equity Strategy
draw on the extensive knowledge and Nur Cristiani
experience of the Group’s economists, Head of LatAm Investment Strategy

investment strategists and asset-class Madison Faller

Head of Market Intelligence
strategists to provide a unique perspective
Kristin Kallergis Rowland
across the global financial markets. Global Head of Alternative Investments
Tom Kennedy
Chief Investment Strategist
Jacob Manoukian
Head of U.S. Investment Strategy
Grace Peters
Global Head of Investment Strategy
Xavier Vegas
Global Head of Credit Strategy
Alex Wolf
Head of Asia Investment Strategy

There can be no assurance that the professionals currently

employed by JPMorgan Chase Bank, N.A. will continue to be
employed by JPMorgan Chase Bank, N.A., or that the past
performance or success of any such professional serves as an
indicator of such professional’s future performance or success.

48
ABBREVIATIONS

Bps—Basis points
COVID-19—Coronavirus disease 2019
CPI—Consumer Price Index
DM—Developed Markets
EM—Emerging Markets
EMEA—Europe, Middle East and Africa
EUR—Euro
Fed—Federal Reserve
GDP—Gross Domestic Product
GFC—Global Financial Crisis
LATAM—Latin America
U.K.—United Kingdom
U.S.—United States
USD—U.S. dollar
YOY—Year-over-year
YTD—Year-to-date

49
APPENDIX

IMPORTANT INFORMATION Standard and Poor's Midcap 400 Index is a capitalization-weighted index that
measures the performance of the mid-range sector of the U.S. stock market.
Past performance is no guarantee of future results. It is not possible to invest
directly in an index. All companies referenced are shown for illustrative purposes The Russell 2000 Index is composed of the smallest 2,000 companies in the
only, and are not intended as a recommendation or endorsement by J.P. Morgan in Russell 3000 Index, representing approximately 8% of the Russell 3000 total
this context. All market and economic data as of December 2023 and sourced from market capitalization.
Bloomberg Finance L.P. and FactSet unless otherwise stated.
The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the
widely used S&P 500. The index includes the same constituents as the
INDEX DEFINITIONS capitalization-weighted S&P 500, but each company in the S&P 500 EWI is
Note: Indices are for illustrative purposes only, are not investment products, and allocated a fixed weight—or 0.2% of the index total at each quarterly rebalance.
may not be considered for direct investment. Indices are an inherently weak
predictive or comparative tool. All indices denominated in U.S. dollars unless noted The STOXX Europe 600 Index is derived from the STOXX Europe Total Market
otherwise. Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number
of 600 components, the STOXX Europe 600 Index represents large, mid and small
The Bloomberg Barclays Global Aggregate Bond Index provides a broad- capitalization companies across 17 countries of the European region.
based measure of the global investment grade fixed-rate debt markets. The
Global Aggregate Index contains three major components: the U.S. Aggregate The MSCI EM (Emerging Markets) Index is a free-float weighted equity index
(USD 300mn), the Pan-European Aggregate (EUR 300mn), and the Asian-Pacific that captures large- and mid-cap representation across Emerging Markets (EM)
Aggregate Index (JPY 35bn). In addition to securities from these three benchmarks countries. The index covers approximately 85% of the free-float adjusted market
(94.1% of the overall Global Aggregate market value as of December 31, 2009), the capitalization in each country.
Global Aggregate Index includes Global Treasury, Eurodollar (USD 300mn), Euro-Yen
(JPY 25bn), Canadian (USD 300mn equivalent), and Investment Grade 144A (USD The CSI 300 Index is a free-float weighted index that consists of 300 A-share
300mn) index-eligible securities not already in the three regional aggregate indices. stocks listed on the Shanghai or Shenzhen Stock Exchanges.
The Global Aggregate Index family includes a wide range of standard and customized
subindices by liquidity constraint, sector, quality, and maturity. A component of The MSCI India Index is designed to measure the performance of the large- and
the Multiverse Index, the Global Aggregate Index was created in 1999, with index mid-cap segments of the Indian market.
history backfilled to January 1, 1990. All indices are denominated in U.S. dollars.
The MSCI World Index is a free-float adjusted SPX market capitalization-weighted
The Bloomberg U.S. Corporate Bond Index measures the investment grade, index that is designed to measure the equity market performance of developed
fixed-rate, taxable corporate bond market. It includes USD-denominated securities markets. The index consists of 23 Developed Market country indexes.
publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.
The STOXX Europe 600 Index (SXXP Index): An index tracking 600 publicly traded
NCREIF Real Estate is a quarterly time series composite total rate of return companies based in one of 18 EU countries. The index includes small-cap, medium-
measure of investment performance of a very large pool of individual commercial cap and large-cap companies. The countries represented in the index are Austria,
real estate properties acquired in the private market for investment purposes only. Belgium, Denmark, Finland, France, Germany, Greece, Holland, Iceland, Ireland,
All properties in the NPI have been acquired, at least in part, on behalf of tax- Italy, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland and the United
exempt institutional investors—the great majority being pension funds. As such, all Kingdom.
properties are held in a fiduciary environment.
The IBOV Index is a gross total return index weighted by free float market cap and
The MSCI China Index captures large- and mid-cap representation across China is composed of the most liquid stocks traded on the São Paulo Stock Exchange.
A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g., ADRs).
The Hang Seng Index is a free-float capitalization-weighted index of a selection of
The S&P 500® is widely regarded as the best single gauge of large-cap U.S.
companies from the Stock Exchange of Hong Kong. The components of the index
equities and serves as the foundation for a wide range of investment products. The
are divided into four subindices: Commerce and Industry, Finance, Utilities, and
index includes 500 leading companies and captures approximately 80% coverage
Properties.
of available market capitalization.

The NASDAQ-100 Index is a modified capitalization-weighted index of the 100 The S&P BSE Sensex Index is a cap-weighted index. The index members have
largest and most active non-financial domestic and international issues listed on been selected on the basis of liquidity, depth, and floating-stock-adjustment depth
the NASDAQ. No security can have more than a 24% weighting. Prior to December and industry representation.
21, 1998 the Nasdaq 100 was a cap-weighted index.

50
The Jakarta Stock Price Index is a modified capitalization-weighted index of all Bonds are subject to interest rate risk, credit and default risk of the issuer. Bond
stocks listed on the regular board of the Indonesia Stock Exchange. prices generally fall when interest rates rise.

The FTSE Bursa Malaysia KLCI Index comprises the largest 30 companies by full Investors should understand the potential tax liabilities surrounding a municipal
market capitalization on Bursa Malaysia's Main Board. bond purchase. Certain municipal bonds are federally taxed if the holder is subject
to alternative minimum tax. Capital gains, if any, are federally taxable. The investor
The S&P/BMV IPC seeks to measure the performance of the largest and most should note that the income from tax-free municipal bond funds may be subject to
liquid stocks listed on the Bolsa Mexicana de Valores. The index is designed to state and local taxation and the Alternative Minimum Tax (AMT).
provide a broad, representative, yet easily replicable index covering the Mexican
equities market. The constituents are weighted by modified market cap subject to International investments may not be suitable for all investors. International
diversification requirements. investing involves a greater degree of risk and increased volatility. Changes in
currency exchange rates and differences in accounting and taxation policies
The Straits Times Index (STI), maintained and calculated by FTSE, is the most outside the United States can raise or lower returns. Some overseas markets
globally recognized benchmark index and market barometer for Singapore. Dating may not be as politically and economically stable as the United States and other
back to 1966, it tracks the performance of the top 30 largest and most liquid nations. Investments in international markets can be more volatile.
companies listed on the Singapore Exchange.
Small capitalization companies typically carry more risk than well-established
The FTSE/JSE Top 40 Index is a capitalization-weighted index. Companies included "blue-chip" companies since smaller companies can carry a higher degree of
in this index are the 40 largest companies by market capitalization included in the market volatility than most large cap and/or blue-chip companies.
FTSE/JSE All Shares Index.
This material is for informational purposes only, and may inform you of certain
The KOSPI Index is a capitalization-weighted index of all common shares on the products and services offered by private banking businesses, part of JPMorgan
KRX main board. Chase & Co. (“JPM”). Products and services described, as well as associated fees,
charges and interest rates, are subject to change in accordance with the applicable
The TWSE, or TAIEX, Index is capitalization-weighted index of all listed common account agreements and may differ among geographic locations. Not all products
shares traded on the Taiwan Stock Exchange. and services are offered at all locations. If you are a person with a disability and
need additional support accessing this material, please contact your J.P. Morgan
team or email us at accessibility.support@jpmorgan.com for assistance. Please
The MSCI Taiwan Index is designed to measure the performance of the large- and
read all Important Information.
mid-cap segments of the Taiwan market.

The MSCI Korea Index is designed to measure the performance of the large- and JPMAM LONG-TERM CAPITAL MARKET ASSUMPTIONS
mid-cap segments of the South Korean market. Given the complex risk-reward trade-offs involved, we advise clients to rely on
judgment as well as quantitative optimization approaches in setting strategic
The MSCI Brazil Index is designed to measure the performance of the large- and allocations. Please note that all information shown is based on qualitative analysis.
mid-cap segments of the Brazilian market. Exclusive reliance on the above is not advised. This information is not intended as a
recommendation to invest in any particular asset class or strategy or as a promise
The Consumer Price Index (CPI) is a measure of the average change over time in of future performance. Note that these asset class and strategy assumptions are
the prices paid by urban consumers for a market basket of consumer goods and passive only—they do not consider the impact of active management. References
services. to future returns are not promises or even estimates of actual returns a client
portfolio may achieve. Assumptions, opinions and estimates are provided for
KEY RISKS illustrative purposes only. They should not be relied upon as recommendations
Investing in alternative assets involves higher risks than traditional investments to buy or sell securities. Forecasts of financial market trends that are based on
and is suitable only for sophisticated investors. Alternative investments involve current market conditions constitute our judgment and are subject to change
greater risks than traditional investments and should not be deemed a complete without notice. We believe the information provided here is reliable, but do
investment program. They are not tax–efficient and an investor should consult with not warrant its accuracy or completeness. This material has been prepared for
his/her tax advisor prior to investing. Alternative investments have higher fees information purposes only and is not intended to provide, and should not be relied
than traditional investments and they may also be highly leveraged and engage in on for, accounting, legal or tax advice. The outputs of the assumptions are provided
speculative investment techniques, which can magnify the potential for investment for illustration/discussion purposes only and are subject to significant limitations.
loss or gain. The value of the investment may fall as well as rise and investors may
get back less than they invested. “Expected” or “alpha” return estimates are subject to uncertainty and error. For
example, changes in the historical data from which it is estimated will result in

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APPENDIX

different implications for asset class returns. Expected returns for each asset class You must also consider the objectives, risks, charges, and expenses associated
are conditional on an economic scenario; actual returns in the event the scenario with an investment service, product or strategy prior to making an investment
comes to pass could be higher or lower, as they have been in the past, so an decision. For this and more complete information, including discussion of your
investor should not expect to achieve returns similar to the outputs shown herein. goals/situation, contact your J.P. Morgan team.
References to future returns for either asset allocation strategies or asset classes
are not promises of actual returns a client portfolio may achieve. Because of the NON-RELIANCE
inherent limitations of all models, potential investors should not rely exclusively Certain information contained in this material is believed to be reliable; however,
on the model when making a decision. The model cannot account for the impact JPM does not represent or warrant its accuracy, reliability or completeness, or
that economic, market, and other factors may have on the implementation and accept any liability for any loss or damage (whether direct or indirect) arising
ongoing management of an actual investment portfolio. Unlike actual portfolio out of the use of all or any part of this material. No representation or warranty
outcomes, the model outcomes do not reflect actual trading, liquidity constraints, should be made with regard to any computations, graphs, tables, diagrams
fees, expenses, taxes and other factors that could impact the future returns. The or commentary in this material, which are provided for illustration/reference
model assumptions are passive only—they do not consider the impact of active purposes only. The views, opinions, estimates and strategies expressed in this
management. A manager’s ability to achieve similar outcomes is subject to risk material constitute our judgment based on current market conditions and are
factors over which the manager may have no or limited control. subject to change without notice. JPM assumes no duty to update any information
in this material in the event that such information changes. Views, opinions,
The views contained herein are not to be taken as advice or a recommendation estimates and strategies expressed herein may differ from those expressed by
to buy or sell any investment in any jurisdiction, nor is it a commitment from other areas of JPM, views expressed for other purposes or in other contexts,
J.P. Morgan Asset Management or any of its subsidiaries to participate in any of and this material should not be regarded as a research report. Any projected
the transactions mentioned herein. Any forecasts, figures, opinions or investment results and risks are based solely on hypothetical examples cited, and actual
techniques and strategies set out are for information purposes only, based on results and risks will vary depending on specific circumstances. Forward-looking
certain assumptions and current market conditions and are subject to change statements should not be considered as guarantees or predictions of future events.
without prior notice. All information presented herein is considered to be accurate
at the time of production. This material does not contain sufficient information to Nothing in this document shall be construed as giving rise to any duty of care owed
support an investment decision and it should not be relied upon by you in evaluating to, or advisory relationship with, you or any third party. Nothing in this document
the merits of investing in any securities or products. In addition, users should make shall be regarded as an offer, solicitation, recommendation or advice (whether
an independent assessment of the legal, regulatory, tax, credit and accounting financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or
implications and determine, together with their own financial professional, if any employees, irrespective of whether or not such communication was given at your
investment mentioned herein is believed to be appropriate to their personal goals. request. J.P. Morgan and its affiliates and employees do not provide tax, legal or
Investors should ensure that they obtain all available relevant information before accounting advice. You should consult your own tax, legal and accounting advisors
making any investment. It should be noted that investment involves risks, the before engaging in any financial transactions.
value of investments and the income from them may fluctuate in accordance with
market conditions and taxation agreements and investors may not get back the LEGAL, ENTITY, BRAND & REGULATORY INFORMATION
full amount invested. Both past performance and yield are not a reliable indicator In the United States, bank deposit accounts and related services, such as checking,
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creates the possibility for greater loss. insurance agency, doing business as Chase Insurance Agency Services, Inc. in
Florida. JPMCB, JPMS and CIA are affiliated companies under the common control
GENERAL RISKS & CONSIDERATIONS of JPM. Products not available in all states.
Any views, strategies or products discussed in this material may not be appropriate
for all individuals and are subject to risks. Investors may get back less than they In Germany, this material is issued by J.P. Morgan SE, with its registered office
invested, and past performance is not a reliable indicator of future results. at Taunustor 1 (TaunusTurm), 60310 Frankfurt am Main, Germany, authorized by
Asset allocation/diversification does not guarantee a profit or protect against the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised
loss. Nothing in this material should be relied upon in isolation for the purpose by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European
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the services, products, asset classes (e.g., equities, fixed income, alternative Luxembourg Branch, with registered office at European Bank and Business
investments, commodities, etc.) or strategies discussed are suitable to your needs. Centre, 6 route de Treves, L-2633, Senningerberg, Luxembourg, authorized by the

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Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by Services and Markets Authority (FSMA) in Belgium; registered with the NBB under
the BaFin, the German Central Bank (Deutsche Bundesbank) and the European registration number 0715.622.844. In Greece, this material is distributed by
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APPENDIX

to you on a private basis only. Any communication by us to you regarding such

securities or instruments, including without limitation the delivery of a prospectus,
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