JPMorgan View 12.09.2011

Undisclosed recipients

Attachments: The JPM View 12.09.2011.pdf
Inline-Images: image003.png

Category	Details
Economics	EMU is taking a step towards fiscal integration, but periphery funding is not yet resolved.
Portfolio Strategy	Modest upside for equities into January is expected due to EU Summit, US data, and fiscal compromise in the US, combined with falling EM inflation. Recommend a long position in US equities.
Fixed Income	Add shorts in the Euro area periphery and longs in EM local bonds.
Equities	Specific trades suggested: 1) S&P500 vs. MSCI AC World, 2) MSCI BRICs vs. MSCI EM, 3) DAX vs. Eurostoxx50. Monetize derivative market extremes by being short skew, short correlation, and short convexity bias.
Credit	Defensive stance recommended.
Foreign Exchange	Stay short EUR/JPY and USD/JPY as hedges.
Commodities	Forecast a 12% total return for 2012, with a weak first quarter offset by a Q2 rally.
EU Summit & Funding Crisis	Progress made on the October statement, but ESM forward by a year and €200bn IMF funding are insufficient to end the crisis. Commitment to balance budgets and 60% debt ratios improves credit quality, but does not guarantee bond investor return. ECB's potential QE is denied but expected if the euro's survival is at stake.
EU Policymaker Response	The current actions are steps towards resolution, with markets likely dictating a faster conclusion than the estimated 10 years by Angela Merkel.
Monetary Union Confidence	Markets need confidence in an eventual resolution, not a chaotic breakup. European policymakers cannot provide such guarantees, as breakup threats are part of the repair process.
EMU Core Problem	Worsening competitiveness in EMU South has led to a large balance of currency.
Analyst Certification	Indicated by an "A". See page 7 for details.
Key Entities	J.P.Morgan, EMU (European Monetary Union), ECB (European Central Bank), IMF (International Monetary Fund), Angela Merkel.
Date	December 9, 2011

This email is confidential and subject to important disclaimers and conditions including on offers for the purchase cc sale of securities, accuracy and completeness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://www.jemorgan.com/pagesidisclosurestemail.