Bad fundamental conditions: 1. Current account deficit larger than 3% of GDP 2. Fiscal deficit larger than 3.5% of GDP 3. Unemployment higher than 6% 4. US Manufacturing PMI below 45 5. Inflation higher than 4% 1 year S&P 500 returns, 1948-2012 Investment # of Bad Scenario Conditions Average Max Min Std #obs Going to hell > = 3 19% 59% -19% 16% 110 Life is fine None 15% 48% -16% 14% 231 Not so bad Only 1 7% 47% -40% 18% 258 Source: Bloomberg. J.P. Morgan Asset Management EFTA01187645