2 LondonManuel Arroyo Ozores, CFA Melbourne Taipei New York

(1)

(2)

2

Vincent Juvyns Luxembourg Tilmann Galler, CFA Frankfurt

Maria Paola Toschi Milan

Shogo Maekawa Tokyo

Lucia Gutierrez Mellado Madrid

Tai Hui Hong Kong

Marcella Chow Hong Kong

Max McKechnie London

Kerry Craig, CFA Melbourne

Dr. Jasslyn Yeo, CFA Singapore

Karen Ward London

Ambrose Crofton, CFA London

Chaoping Zhu, CFA Shanghai

Jai Malhi, CFA London

Manuel Arroyo Ozores, CFA Madrid

Agnes Lin Taipei Michael Bell, CFA

London Samantha Azzarello

New York

Dr. David Kelly, CFA New York

Dr. Cecelia Mundt New York

Meera Pandit, CFA New York

John Manley New York Gabriela Santos New York David Lebovitz New York

Jordan Jackson New York

Jennie Li, CFA New York

Hugh Gimber, CFA

London Ian Hui

Hong Kong

(3)



(4)

4

Source: Compustat, FactSet, Federal Reserve, Standard & Poor’s, J.P. Morgan Asset Management.

Dividend yield is calculated as consensus estimates of dividends for the next 12 months, divided by most recent price, as provided by Compustat.

Forward price-to-earnings ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future returns.

Guide to the Markets – U.S. Data are as of December 31, 2020.

S&P 500 Price Index S&P 500 Price Index

Characteristic 3/24/2000 10/9/2007 2/19/2020 12/31/2020

Index Level 1,527 1,565 3,386 3,756

P/E Ratio (fwd.) 27.2x 15.7x 19.0x 22.3x

Dividend Yield 1.4% 1.9% 1.9% 1.6%

10-yr. Treasury 6.2% 4.7% 1.6% 0.9%

600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000 3,300 3,600

'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

+106%

-49%

+101%

-57%

+401%

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

741

Mar. 24, 2000 P/E (fw d.) = 27.2x

1,527

Oct. 9, 2002 P/E (fw d.) = 14.1x

777

Oct. 9, 2007 P/E (fw d.) = 15.7x

1,565

Mar. 9, 2009 P/E (fw d.) = 10.3x

677

Dec. 31, 2020 P/E (fw d.) = 22.3x

3,756 Feb. 19, 2020

P/E (fw d.) = 19.0x 3,386

-34%

Mar 23, 2020 P/E (fw d.) = 13.1x

2,237

+68%

(5)

Source: FactSet, FRB, Robert Shiller, Standard & Poor’s, Thomson Reuters, J.P. Morgan Asset Management.

Price-to-earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months as provided by IBES since December 1995, and FactSet for December 31, 2020. Current next 12-months consensus earnings estimates are $167. Average P/E and standard deviations are calculated using 25 years of IBES history. Shiller’s P/E uses trailing 10-years of inflation-adjusted earnings as reported by companies. Dividend yield is calculated as the next 12-months consensus dividend divided by most recent price. Price-to-book ratio is the price divided by book value per share. Price-to-cash flow is price divided by NTM cash flow. EY minus Baa yield is the forward earnings yield (consensus analyst estimates of EPS

S&P 500 Index: Forward P/E ratio S&P 500 Index: Forward P/E ratio

Valuation

m easure Description Latest

25-year avg.*

Std. dev.

Over-/under- Valued

P/E Forw ard P/E 22.33x 16.56x 1.79

CAPE Shiller's P/E 34.24 27.47 1.10

Div. Yield Dividend yield 1.59% 2.05% 1.37

P/B Price to book 3.84 2.99 1.16

P/CF Price to cash flow 15.93 10.79 2.54

EY Spread EY minus Baa yield 1.35% 0.06% -0.65

Dec. 31, 2020:

22.33x

8x 10x 12x 14x 16x 18x 20x 22x 24x 26x

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19

25-year average: 16.56x

-1 Std. dev.: 13.34x

+1 Std. dev.: 19.79x

(6)

6

Source: FactSet, Standard & Poor’s, Thomson Reuters, J.P. Morgan Asset Management.

Returns are 12-month and 60-month annualized total returns, measured monthly, beginning November 30, 1995. R² represents the percent of total variation in total returns that can be explained by forward P/E ratios.

Forward P/E and subsequent 1-yr. returns

S&P 500 Total Return Index

Forward P/E and subsequent 5-yr. annualized returns

S&P 500 Total Return Index

Forward P/E and subsequent 1-yr. returns Forward P/E and subsequent 5-yr. annualized returns

S&P 500 Total Return Index S&P 500 Total Return Index

R² = 8% R² = 44%

Dec. 31, 2020: 22.3x

-60%

-40%

-20%

0%

20%

40%

60%

8.0x 11.0x 14.0x 17.0x 20.0x 23.0x

Dec. 31, 2020: 22.3x

-60%

-40%

-20%

0%

20%

40%

60%

8.0x 11.0x 14.0x 17.0x 20.0x 23.0x

(7)

Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

Historical EPS levels are based on annual operating earnings per share. Earnings estimates are based on estimates from FactSet Market Aggregates. Past performance is not indicative of future returns.

S&P 500 earnings per share

Index annual operating earnings

S&P 500 earnings per share

Index annual operating earnings

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

'88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21

Consensus analyst estimates Earnings recessions

(8)

8

Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

EPS levels are based on annual operating earnings per share. Percentages may not sum due to rounding. Past performance is not indicative of future returns. *3Q20 earnings are calculated using actual earnings for 97.7% of S&P 500 market cap and earnings estimates for the remaining companies.

S&P 500 year-over-year operating EPS growth

Annual growth broken into revenue, changes in profit margin & changes in share count

S&P 500 year-over-year operating EPS growth

Annual growth broken into revenue, changes in profit margin & changes in share count

Share of EPS growth 3Q20* Avg. '01-19

Margin -2.5% 3.9%

Revenue -2.5% 3.3%

Share Count 0.2% 0.4%

Total EPS -4.8% 7.5%

-31%

19% 19%

24%

13% 15%

-6%

-40%

15%

47%

15%

0%

11%

5%

-11%

6%

17%

22%

4%

-49%

-33%

-5%

-60%

-40%

-20%

0%

20%

40%

60%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1Q20 2Q20 3Q20*

3Q20*

(9)

S&P 500 2021 dividend growth Total shareholder yield by sector

Year-over-year % change Last 12-months dividends and buybacks minus iss. divided by mkt. cap

6.5%

2.4%

1.1%

1.6% 1.8% 2.1%

0.7%

1.6% 1.7%

3.2% 3.2%

0.6%

1.0%

3.1%

2.1% 1.4% 0.9% 0.7%

1.9%

1.0% 0.8%

-1.1% -1.1%

0.4%

7.4%

5.5%

3.2% 3.0%

2.8% 2.8%

2.6% 2.5% 2.5%

2.1% 2.1%

1.1%

-2%

0%

2%

4%

6%

8%

Buyback yield Dividend yield 8.4%

7.7%

5.7%

4.9% 4.8%

3.2% 2.7%

2.3% 1.9%

1.6%

-0.8%

-5.1%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

Buyback yield is net of share issuance and is based on last 12-months net issuance divided by market capitalization. Dividend yield is calculated as the last 12-months dividend divided by market capitalization.

(10)

10

Source: FactSet, FTSE Russell, NBER, J.P. Morgan Asset Management.

Growth is represented by the Russell 1000 Growth Index and Value is represented by the Russell 1000 Value Index. Beta is calculated relative to the Russell 1000 Index.

Value vs. Growth relative valuations

Relative fwd. P/E ratio of Value vs. Growth, z-score, Dec. 1997-present

Share of Value index with beta greater than 1

Beta is based on weekly returns over a 52-week rolling period

Value vs. Growth relative valuations Share of Value index with beta greater than 1

Relative fwd. P/E ratio of Value vs. Growth, z-score, Dec. 1997 - present Beta is based on weekly returns over a 52-week rolling period

-4 -3 -2 -1 0 1 2 3

'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 Dec. 31, 2020:

-1.22

Recession

Growth cheap/value expensive

Value cheap/Growth expensive

10%

20%

30%

40%

50%

60%

70%

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 Dec. 31, 2020:

59.9%

(11)

The top 10 S&P 500 companies are based on the 10 largest index constituents at the beginning of each month. The weight of each of these companies is revised monthly. As of December 31, 2020, the top ten companies in the index were: AAPL (6.8%), MSFT (5.3%), AMZN (4.5%), FB (2.1%), TSLA (1.7%), GOOGL (1.7%), GOOG (1.6%), BRK.B (1.4%), JNJ (1.3%), JPM (1.2%) and V(1.2%).

P/E ratio of the top 10 and remaining stocks in the S&P 500 Weight of the top 10 stocks in the S&P 500

Next 12 months % of market capitalization of the S&P 500

Current Average % of avg.

Top 10 33.3x 19.4x 172%

Remaining stocks 19.7x 15.5x 127%

S&P 500 22.3x 16.2x 138%

Earnings contribution of the top 10 in the S&P 500 Based on last 12 months' earnings

12%

16%

20%

24%

28%

32%

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

Dec. 31, 2020: 28.6%

9x 14x 19x 24x 29x 34x 39x 44x 49x

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 12%

16%

20%

24%

28%

32%

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

Dec. 31, 2020: 23.7%

(12)

12

Sources: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

S&P 500 valuation dispersion

Valuation dispersion between the 20th and 80th percentile of S&P 500 stocks

25-yr. average Current Median S&P 500 P/E 15.7 20.8

Valuation spread 10.8 21.6

5 10 15 20 25 30 35

'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

(13)

Source: FactSet, FTSE Russell, NBER, J.P. Morgan Asset Management.

The S&P 500 is used for large cap and the Russell 2000 is used for small cap. Market drawdowns during the Tech Bubble, Great Financial Crisis and COVID-19 were calculated for the periods 3/24/00 – 10/9/02, 10/9/07 – 3/9/09 and 2/19/20 – 3/23/20, respectively.

Sector composition

% of index market capitalization

Historical earnings drawdown

Change in LTM EPS during NBER-designated recessions

Historical markets drawdown and next 12-month rebound

Price return

Sector composition Historical earnings drawdown

% of index market capitalization Change in LTM EPS during NBER-designated recessions

Historical markets drawdown and next 12-month rebound Price return

2.1%

6.2%

4.3%

3.0%

3.2%

15.2%

15.3%

2.3%

13.0%

20.9%

14.1%

2.3%

2.4%

2.6%

2.8%

6.5%

8.4%

10.4%

10.8%

12.7%

13.5%

27.6%

Energy Real Estate Materials Utilities Cons. Staples Industrials Financials Comm. Services Cons. Discretionary Health Care Info. Tech.

Large cap Small cap

-23%

-41%

-131%

-145%

-160%

-120%

-80%

-40%

0%

Tech Bubble Global Financial Crisis

-49.1% -43.1%

-56.8% -59.4%

-33.9%

-40.8%

35.3%

61.5% 72.9%

97.7%

-80%

-40%

0%

40%

80%

120%

Tech Bubble Global Financial Crisis COVID-19

(14)

14

Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management.

All calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Peak represents period from February 19, 2020 to December 31, 2020. Since Market Low represents period from March 23, 2020 to December 31, 2020. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell style indices with the exception of the large blend category, which is based on the S&P 500 Index. Past performance is not indicative of future returns. The price-to-earnings is a bottom-up calculation based on the most recent index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates.

Value Blend Growth Value Blend Growth

17.9 22.3 31.2

13.7 15.4 18.5

18.2 22.6 39.3

14.3 16.2 20.2

18.0 30.1 76.2

16.8 20.9 38.4

Since market peak (February 2020) Since market low (March 2020) Current P/E as % of 20-year avg. P/E

Value Blend Growth Value Blend Growth

Large

1.6% 12.7% 26.8%

Large

64.2% 70.2% 84.9%

Large

Mid

3.2% 12.8% 26.8%

_Mi^d

82.4% 88.8% 97.1%

_Mi^d

Small

6.9% 18.1% 28.1%

Small

87.9% 99.0% 108.2%

Small

168.5%

198.5%

130.6%

127.1%

107.2%

144.8%

139.4%

143.6%

Large

10.5% 13.9% 17.2%

194.6%

Small

8.7% 11.2% 13.5%

Small

4.6%

Growth Blend

Large

Value

20.0%

10-year annualized

18.4%

35.6%

_Mi^d

2.8% 38.5%

Large

Mid

5.0%

10.5% 12.4% 15.0%

_Mi^d

34.6%

Small

17.1%

YTD

Value

Current P/E vs. 20-year avg. P/E

Blend Growth

(15)

Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management. All calculations are cumulative total return, not annualized, including dividends for the stated period. Since market peak represents period from February 19, 2020 to December 31, 2020. Since market low represents period from March 23, 2020 to December 31, 2020. Correlation to Treasury yields are trailing 2-year monthly correlations between S&P 500 sector price returns and 10-year Treasury yield movements. Foreign percent of sales is from Standard & Poor’s, S&P 500 2018:

Global Sales report as of August 2019. Real Estate and Comm. Services foreign sales are not included due to lack of availability. Next 12 months (NTM) earnings growth is the percent change in next 12-months earnings estimates compared to last 12-months earnings provided by brokers.

Forward P/E ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Buyback yield is net of share issuance and is calculated as last 12-months net buybacks divided by market cap. Dividend yield is calculated as the next 12-months consensus dividend divided by most recent price. Beta calculations are based on 10-years of monthly price returns for the S&P 500 and its sub-indices. *Communication Services (formerly Telecom)

Energy

Materials

Financials Ind

ustrials

Cons. Discr. Techn

ology Com

m. Services*

Real Estate Health

Care

Cons. Staples Utilities

S&P 500 Ind ex

S&P weight 2.3% 2.6% 10.4% 8.4% 12.7% 27.6% 10.8% 2.4% 13.5% 6.5% 2.8% 100.0%

Russell Growth weight 0.1% 0.8% 1.9% 4.5% 16.8% 45.1% 11.1% 1.6% 13.6% 4.6% 0.0% 100.0%

Russell Value weight 4.4% 4.8% 19.6% 13.4% 7.7% 9.7% 9.6% 4.4% 13.4% 7.6% 5.5% 100.0%

QTD 27.8 14.5 23.2 15.7 8.0 11.8 13.8 4.9 8.0 6.4 6.5 12.1

YTD -33.7 20.7 -1.7 11.1 33.3 43.9 23.6 -2.2 13.4 10.7 0.5 18.4

Since market peak

(February 2020) -27.2 22.6 -2.8 7.6 25.3 28.4 16.1 -8.2 11.1 8.0 -7.5 12.7

Since market low

(March 2020) 65.2 91.8 70.3 84.5 83.5 86.5 62.5 47.3 54.1 42.1 43.8 70.2

Beta to S&P 500 1.55 1.18 1.23 1.15 1.10 1.06 0.95* 0.74 0.78 0.60 0.29 1.00 β

Correl. to Treas. yields 0.47 0.56 0.64 0.59 0.41 0.47 0.50 0.17 0.31 0.35 0.21 0.52 ρ

Foreign % of sales 51.3 56.8 30.1 43.8 34.0 58.2 44.7 - 38.5 32.7 - 42.9 %

NTM earnings growth -802.8% 28.0% 21.3% 81.2% 54.9% 14.4% 13.3% 4.8% 10.3% 6.5% 4.6% 21.9%

20-yr avg. 16.1% 18.4% 21.8% 11.2% 15.3% 13.5% 9.5%* 7.4%** 9.2% 8.2% 4.4% 11.1%

Forward P/E ratio 30.8x 21.2x 14.7x 23.8x 36.6x 27.6x 23.1x 20.3x 16.3x 20.8x 18.5x 22.3x

20-yr avg. 13.7x 14.5x 12.4x 16.0x 18.4x 18.9x 18.8x* 15.8x 15.7x 16.9x 14.6x 15.4x

Buyback yield 1.0% 0.9% 3.1% 0.8% 0.4% 2.1% 1.9% -1.1% 1.0% 0.7% -1.1% 1.4%

20-yr avg. 1.6% 0.7% 0.1% 2.1% 2.4% 2.8% 1.2% -1.1% 1.9% 1.8% -1.0% 1.6%

Dividend yield 5.6% 1.9% 2.1% 1.6% 0.7% 1.0% 1.0% 3.1% 1.7% 2.7% 3.4% 1.6%

20-yr avg. 2.6% 2.6% 2.3% 2.2% 1.4% 1.1% 1.5%* 4.2% 1.8% 2.8% 3.9% 2.1%

WeightDivReturn (%)EPSP/EBbk

(16)

16 Year-to-date returns

Total returns by sector and industry

Returns since December 31, 2019

Total returns by sector and industry

69%

44%

28% 27%

24% 21% 20% 18% 18%

15% 13%

11% 11%

0%

-14% -16% -17%

-26% -28%

-31% -34%

-40%

-20%

0%

20%

40%

60%

80%

(17)

Source: FactSet, MSCI, Russell, Standard & Poor’s, J.P. Morgan Asset Management. The MSCI High Dividend Yield Index aims to offer a higher than average dividend yield relative to the parent index that passes dividend sustainability and persistence screens. The MSCI Minimum Volatility Index optimizes the MSCI USA Index using an estimated security co-variance matrix to produce low absolute volatility for a given set of constraints.

The MSCI Defensive Sectors Index includes: Consumer Staples, Energy, Health Care and Utilities. The MSCI Cyclical Sectors Index contains:

Consumer Discretionary, Communication Services, Financials, Industrials, Information Technology and Materials. Securities in the MSCI Momentum Index are selected based on a momentum value of 12-month and 6-month price performance. Constituents of the MSCI Sector Neutral Quality Index are selected based on stronger quality characteristics to their peers within the same GICS sector by using three main variables: high return-on-equity, low leverage and low earnings variability. Constituents of the MSCI Enhanced Value Index are based on three variables: price-to-book value, price-

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ann. Vol.

High

Div. Momen. Min. Vol. Value Small Cap

High

Div. Cyclical Value Value Momen. Small

Cap Momen. Min. Vol. Cyclical Momen. Momen. Small Cap

21.1% 17.8% -25.7% 38.8% 26.9% 14.3% 20.1% 43.2% 17.7% 9.3% 21.3% 37.8% 1.5% 36.3% 29.6% 11.7% 22.6%

Value Defens. Defens. Cyclical Multi-

Factor Min. Vol. Value Small

Cap Min. Vol. Min. Vol. High

Div. Cyclical Momen. Quality Cyclical Quality Value

19.7% 17.7% -26.7% 36.9% 18.3% 12.9% 16.8% 38.8% 16.5% 5.6% 16.3% 27.3% -1.6% 34.4% 27.8% 10.7% 20.3%

Small

Cap Quality High Div.

Multi-

Factor Momen. Defens. Small Cap

Multi- Factor

High

Div. Quality Value Quality High

Div. Momen. Small

Cap Cyclical Cyclical

18.4% 10.1% -27.6% 29.8% 18.2% 10.1% 16.3% 37.4% 14.9% 4.6% 15.9% 22.5% -2.3% 28.1% 20.0% 10.4% 19.8%

Multi-

Factor Quality Small

Cap Cyclical Quality Multi-

Factor Cyclical Multi-

Factor Cyclical Cyclical Value Defens. Min. Vol. Quality Min. Vol. Momen.

16.6% 5.5% -31.2% 27.2% 17.9% 7.5% 15.7% 35.0% 14.8% 2.6% 14.0% 22.2% -2.9% 28.0% 17.1% 10.1% 17.9%

Defens. Min. Vol. Small

Cap Quality High Div.

Multi-

Factor Momen. Momen. Momen. High

Div.

Multi-

Factor Cyclical Value Multi- Factor

15.9% 4.3% -33.8% 24.9% 15.9% 7.3% 15.1% 34.8% 14.7% 0.7% 13.7% 21.5% -5.3% 27.7% 11.4% 9.6% 17.5%

Cyclical Value Value High

Div. Min. Vol. Momen. Quality Quality Cyclical Multi-

Factor Min. Vol. High

Div. Quality Multi-

Factor Min. Vol. High

Div. Quality

15.0% 1.1% -36.9% 18.4% 14.7% 6.1% 12.8% 34.3% 13.6% 0.4% 10.7% 19.5% -5.6% 26.6% 5.8% 9.4% 15.6%

Min. Vol. High Div.

Multi-

Factor Min. Vol. Quality Value Min. Vol. High

Div. Defens. Defens. Quality Min. Vol. Multi- Factor

Small

Cap Defens. Small Cap

High Div.

15.0% 0.0% -39.3% 18.4% 14.2% -2.7% 11.2% 28.9% 13.0% -0.9% 9.4% 19.2% -9.7% 25.5% 5.2% 8.9% 15.0%

Quality Cyclical Momen. Momen. Value Cyclical Defens. Defens. Quality Small

Cap Defens. Small Cap

Small Cap

High Div.

High

Div. Defens. Defens.

12.8% -0.8% -40.9% 17.6% 12.7% -3.4% 10.7% 28.9% 10.7% -4.4% 7.7% 14.6% -11.0% 22.5% 1.7% 8.6% 13.7%

Momen. Small

Cap Cyclical Defens. Defens. Small Cap

High

Div. Min. Vol. Small

Cap Value Momen. Defens. Value Defens. Value Value Min. Vol.

10.7% -1.6% -44.8% 16.5% 12.0% -4.2% 10.6% 25.3% 4.9% -6.4% 5.1% 12.3% -11.1% 21.4% -0.2% 8.6% 13.1%

2006 - 2020

(18)

18

Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2020, over which time period the average annual return was 9.0%.

S&P 500 intra-year declines vs. calendar year returns

Despite average intra-year drops of 13.8%, annual returns positive in 30 of 40 years

S&P 500 intra-year declines vs. calendar year returns

Despite average intra-year drops of 14.3%, annual returns positive in 31 of 41 years

26

-10 15 17

1 26

15

2 12

27

-7 26

4 7

-2 34

20 31

27 20

-10 -13

-23 26

9 3

14

4

-38 23

13

0 13

30

11

-1 10

19

-6 29

16

-17 -18 -17 -7

-13 -8 -9

-34 -8 -8

-20

-6 -6 -5 -9

-3 -8

-11

-19 -12

-17

-30 -34

-14

-8 -7 -8 -10

-49 -28

-16 -19

-10 -6 -7

-12-11 -3

-20 -7

-34 YTD

-60%

-40%

-20%

0%

20%

40%

'80 '85 '90 '95 '00 '05 '10 '15 '20

(19)

Source: CBOE, FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

Drawdowns are calculated as the prior peak to the lowest point.

Major market pullbacks

S&P 500 Price index

Volatility

VIX Level

VIX Index

'08 Peak 80.9

Average 19.5 Latest 22.8 200

600 1,000 1,400 1,800 2,200 2,600 3,000 3,400 3,800

'94 '95 '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 '21

8 18 28 38 48 58 68 78 88

'94 '95 '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 '21 Feb. 11, 2016:

-13.3%

Dec. 24, 2018:

-19.8%

Mar. 23, 2020:

-33.9%

Feb. ’20:

Global slow down, COVID-19, oil price collapse Aug. '98:

Asian Financial Crisis, LTCM Bailout

Oct. '02:

Collapse of tech bubble, post-9/11 fears

Oct. '08:

Global Financial Crisis

Jun. ’12:

Eurozone double dip

Feb. ’16:

Oil, USD strength fears, China

Dec. ’18:

'Volm ageddon,' holiday crash Jul. '10:

European sovereign debt crisis Aug. 31, 1998:

-19.3% Oct. 9, 2002:

-49.1%

Mar. 9, 2009:

-56.8% Jun. 1, 2012:

-9.9%

Jul. 2, 2010:

-18.8%

(20)

20

Source: FactSet, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management.

*A bear market is defined as a 20% or more decline from the previous market high. The related market return is the peak to trough return over the cycle. Periods of “Recession” are defined using NBER business cycle dates. “Commodity spikes” are defined as movement in oil prices of over 100%

over an 18-month period. Periods of “Extreme Valuations” are those where S&P 500 last 12-months P/E levels were approximately two standard deviations above long-run averages, or time periods where equity market valuations appeared expensive given the broader macroeconomic environment. “Aggressive Fed Tightening” is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude.

Bear and bull returns are price returns.

U.S. recessions and S&P 500 composite declines from all-time highs

Characteristics of bull and bear markets

1 Crash o f 1929 - Excessive leverage, irratio nal exuberance Sep 1929 -86% 32 Jul 1926 152% 37

2 1937 Fed Tightening - P remature po licy tightening M ar 1937 -60% 61 M ar 1935 129% 23

3 P o st WWII Crash - P o st-war demo bilizatio n, recessio n fears M ay 1946 -30% 36 A pr 1942 158% 49

4 Eisenho wer Recessio n - Wo rldwide recessio n A ug 1956 -22% 14 Jun 1949 267% 85

5 Flash Crash o f 1962 - Flash crash, Cuban M issile Crisis Dec 1961 -28% 6 Oct 1960 39% 13

6 1966 Financial Crisis - Credit crunch Feb 1966 -22% 7 Oct 1962 76% 39

7 Tech Crash o f 1970 - Eco no mic o verheating, civil unrest No v 1968 -36% 17 Oct 1966 48% 25

8 Stagflatio n - OP EC o il embargo Jan 1973 -48% 20 M ay 1970 74% 31

9 Vo lcker Tightening - Whip Inflatio n No w No v 1980 -27% 20 M ar 1978 62% 32

10 1987 Crash - P ro gram trading, o verheating markets A ug 1987 -34% 3 A ug 1982 229% 60

11 Tech B ubble - Extreme valuatio ns, .co m bo o m/bust M ar 2000 -49% 30 Oct 1990 417% 113

12 Glo bal Financial Crisis - Leverage/ho using, Lehman co llapse Oct 2007 -57% 17 Oct 2002 101% 60

13 Glo bal Slo wdo wn - COVID-19, o il price war Feb 2020 -34% 1 M ar 2009 401% 141

- - 4 2 % 2 2 - 16 6 % 5 4

B ull re t urn

D ura t io n ( m o nt hs ) M a rk e t c o rre c t io n

A v e ra ge s

M a rk e t pe a k

B e a r re t urn*

D ura t io n

( m o nt hs ) * R e c e s s io n C o m m o dit y S pik e

A ggre s s iv e F e d

E xt re m e V a lua t io n

B ull be gin da t e

B e a r M a rk e t M a c ro e nv iro nm e nt B ull m a rk e t s

1 2

3

4 5 6

7 8

9 10

11 12

13

-100%

-80%

-60%

-40%

-20%

0%

1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 Recession

20% Market decline*

(21)

Source: FactSet, NBER, Robert Shiller, J.P. Morgan Asset Management.

Data shown in log scale to best illustrate long-term index patterns. Past performance is not indicative of future returns. Chart is for illustrative purposes only.

S&P Composite Index

Log scale, annual

1 10 100 1,000

1900 1909 1918 1927 1936 1945 1955 1964 1973 1982 1991 2000 2010 2019

Recessions

Tech boom (1997-2000)

End of Cold War

(1991) Reagan era

(1981-1989)

Post-War boom

New Deal (1933-1940) Roaring 20s

Progressive era (1890-1920)

World War I

(1914-1918) Great

Depression (1929-1939)

World War II (1939-1945)

Korean War (1950-1953)

Vietnam War (1969-1972) Oil shocks (1973 & 1979) Stagflation (1973-1975)

Global financial crisis (2008)

Black Monday

(1987)

(22)

22

Source: BEA, FactSet, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding.

Real GDP Components of GDP

Billions of chained (2012) dollars, seasonally adjusted at annual rates 3Q20 nominal GDP, USD trillions

GDP (%) 4Q19 1Q20 2Q20 3Q20 Q/Q saar

2.4 -5.0 -31.4 33.4

Y/Y

2.3 0.3 -9.0 -2.8

68.0% Consumption 18.0% Gov't spending 13.2% Investment ex-housing

4.3% Housing

-3.5% Net exports -$2

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$22

$24

$17,000

$17,500

$18,000

$18,500

$19,000

$19,500

$20,000

Trend growth:

2.5%

(23)

Source: Centers for Disease Control and Prevention, Johns Hopkins CSSE, J.P. Morgan Asset Management.

Change in confirmed cases and fatalities in the U.S.

7-day moving average, as of December 31, 2020

COVID-19 Fatalities by age, 2020 Age % of Population % of Fatalities

Under 25 31.5% 0.2%

25-64 52.1% 19.2%

65+ 16.5% 80.6%

0 500 1,000 1,500 2,000 2,500 3,000

0 50,000 100,000 150,000 200,000 250,000

Mar '20 Apr '20 May '20 Jun '20 Jul '20 Aug '20 Sep '20 Oct '20 Nov '20 Dec '20

Confirmed cases Fatalities

(24)

24

Source: App Annie, Chase, Mortgage Bankers Association (MBA), OpenTable, STR, Transportation Security Administration (TSA), J.P. Morgan Asset Management. *Consumer debit/credit transactions, U.S. seated diners, and TSA traveler traffic are 7-day moving averages. App Annie data is compared to 2019 average and includes over 600 travel and navigation apps globally, including Google Maps, Uber, Airbnb and Booking.com.

Consumer spending: This report uses rigorous security protocols for selected data sourced from Chase credit and debit card transactions to ensure all information is kept confidential and secure. All selected data is highly aggregated and all unique identifiable information—including names, account numbers, addresses, dates of birth, and Social Security Numbers—is removed from the data before the report’s author receives it.

High-frequency data

Year-over-year % change*

Min. Current

Purchase mortgage applications -35% 26%

Consumer debit/credit transactions -35% -9%

Hotel occupancy -69% -33%

Travel and navigation app usage -82% -54%

U.S. seated diners -100% -64%

TSA traveler traffic -96% -56%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Feb '20 Mar '20 Apr '20 May '20 Jun '20 Jul '20 Aug '20 Sep '20 Oct '20 Nov '20 Dec '20

(25)

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Standard & Poor’s, J.P. Morgan Asset Management. Sector share of S&P 500 based on market cap weighting. Technology: information (economy, employment), technology and communication services (S&P 500). Financial services includes real estate (S&P 500). Consumer discretionary: Arts, entertainment, recreation, accommodation, and food services (economy), leisure and hospitality (employment). Consumer staples: wholesale trade and retail trade (economy, employment). Industrials and materials:

construction, manufacturing, transportation and warehousing (economy, employment). Energy: mining (economy), mining and logging (employment).

Sector share of GDP, employment, S&P 500

Technology 6%

Technology 2%

Technology 38%

Health care 8% Health care 14%

Health care 13%

Financial svcs. 22%

Cons. Discretionary 3%

Cons. Staples 12%

Industrials & Materials 18%

Industrials & Materials 11%

Energy 1%

Energy 0%

Energy 2%

Utilities 2%

Utilities 0%

Utilities 3%

Government, agriculture &

misc. services 29% Government, agriculture &

misc. services 36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3Q20 Nominal GDP Nov. 2020 Employment Dec. 2020 S&P 500

(26)

26

Source: FactSet, FRB, J.P. Morgan Asset Management; (Top and bottom right) BEA.

Data include households and nonprofit organizations. SA – seasonally adjusted. *Revolving includes credit cards. Values may not sum to 100% due to rounding. **4Q20 figures for debt service ratio and household net worth are J.P. Morgan Asset Management estimates.

Consumer balance sheet Household debt service ratio

3Q20, trillions of dollars outstanding, not seasonally adjusted Debt payments as % of disposable personal income, SA

3Q07 Peak $85.7tn 1Q09 Low $74.7tn

Household net worth

Not seasonally adjusted, USD billions

Other non-revolving: 2%

Revolving*: 6%

Auto loans: 7%

Other liabilities: 9%

Student debt: 10%

Other financial assets: 41%

Mortgages: 66%

Pension funds: 20%

Deposits: 10%

Other tangible: 5%

Homes: 25%

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

1Q80:

10.6%

4Q07: 13.2%

4Q20**:

9.1%

8%

9%

10%

11%

12%

13%

14%

'80 '85 '90 '95 '00 '05 '10 '15 '20

3Q07:

$71,367

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Total liabilities: $16.8tn

Total assets: $140.3tn

4Q20**:

$128,151

Assets Liabilities

(27)

Source: Bureau of Labor Statistics, Piketty, Saez, J.P. Morgan Asset Management; (Left) “Income Inequality in the United States, 1913-1998” by Thomas Piketty and Emmanuel Saez, updated to 2018. Income is defined as market income and excludes government transfers but includes capital gains. In 2018, top decile includes all families with annual income above $135,000; (Right) Consumer Expenditure Survey 2019.

Top 10% share of pre-tax national income Spending as a share of income after tax

Consumer expenditure survey, 2019

64%

99%

0%

20%

40%

60%

80%

100%

120%

Top 10% Bottom 90%

30%

35%

40%

45%

50%

55%

'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 Income share:

50.5%

(28)

28

Source: J.P. Morgan Asset Management; (Top left) Census Bureau, DOD, DOJ; (Top left and right) BLS; (Right and bottom left) BEA.

GDP drivers are calculated as the average annualized growth in the 10 years ending in 4Q19. Future working-age population is calculated as the total estimated number of Americans from the Census Bureau, per the February 2020 report, controlled for military enrollment, growth in

institutionalized population and demographic trends. Growth in working-age population does not include illegal immigration; DOD Troop Readiness reports used to estimate percent of population enlisted. Numbers may not sum due to rounding.

Growth in working-age population Drivers of GDP growth

Percent increase in civilian non-institutional population ages 16-64 Average year-over-year % change

Growth in workers + Growth in real output per worker Growth in real GDP

Growth in private non-residential capital stock

Non-residential fixed assets, year-over-year % change

3.1% 2.5% 0.9% 1.4% 2.0% 1.5% 0.9%

1.2%

1.9%

2.4%

1.7%

1.3%

0.3%

1.4%

4.3% 4.4%

3.3%

3.1%

3.4%

1.8%

2.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

'50-'59 '60-'69 '70-'79 '80-'89 '90-'99 '00-'09 '10-'19 0%

1%

2%

3%

4%

5%

6%

'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15

0.8% 0.6% 0.7%

0.2%

0.05%

0.3% 0.5% 0.6%

0.2%

0.14%

1.1% 1.1%

1.2%

0.4%

0.2%

0.0%

0.3%

0.6%

0.9%

1.2%

1.5%

1.8%

'80-'89 '90-'99 '00-'09 '10-'19 '20-'29

Census forecast Immigrant Native born

2019: 2.2%

(29)

Source: CBO, J.P. Morgan Asset Management; (Top and bottom right) BEA, Treasury Department.

2021 Federal Budget is based on the Congressional Budget Office (CBO) September 2020 Baseline Budget Forecast. CBO Baseline economic assumptions are based on the Congressional Budget Office (CBO) July 2020 Update to Economic Outlook. Other spending includes, but is not limited to, health insurance subsidies, income security and federal civilian and military retirement. Note: Years shown are fiscal years (Oct. 1 through Sep. 30).

The 2021 federal budget Federal budget surplus/deficit

CBO Baseline forecast, USD trillions % of GDP, 1990 – 2030, 2020 CBO Baseline

Federal net debt (accumulated deficits)

% of GDP, 1940 – 2030, 2020 CBO Baseline, end of fiscal year

CBO’s Baseline economic assumptions

2021 '22-'23 '24-'25 '26-'30

Real GDP grow th 1.1% 2.9% 2.3% 2.1%

10-year Treasury 0.8% 1.2% 1.7% 2.7%

Headline inflation (CPI) 0.9% 1.9% 2.3% 2.2%

Unem ploym ent 9.1% 7.0% 5.9% 4.7% 20%

40%

60%

80%

100%

120%

'40 '48 '56 '64 '72 '80 '88 '96 '04 '12 '20 '28

Medicare &

Medicaid:

$1,347bn (27%)

Incom e:

$1,571bn (31%) Social

Security:

$1,142bn (23%) Corporate: $123bn (2%) Defense:

$733bn (14%)

Social insurance:

$1,246bn (25%) Non-defense

disc.: $860bn (17%) Net int.: $290bn (6%)

Other: $316bn (6%) Other: $694bn (14%)

Borrowing: $1,810bn (36%)

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Total government spending Sources of financing Total spending: $5.1tn

CBO Forecast -18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

'90 '95 '00 '05 '10 '15 '20 '25 '30

CBO Forecast

2030:

108.9%

2020:

100.1%

2030:

-5.3%

2020:

-15.2%

(30)

30

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

Civilian unemployment rate and year-over-year wage growth for private production and non-supervisory workers

Seasonally adjusted, percent

50-year avg.

Unemployment rate 6.3%

Wage growth 4.0%

May 1975: 9.0%

Nov. 1982: 10.8%

Jun. 1992: 7.8%

Jun. 2003: 6.3%

Oct. 2009: 10.0%

Apr. 2020: 14.7%

Nov. 2020: 6.7%

Nov. 2020:

4.5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

'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

(31)

Source: Bureau of Labor Statistics, J.P. Morgan Asset Management.

Employees on total nonfarm payrolls Payroll employment lost and regained by industry

Thousands Thousands, % recovered

Jobs added (Feb.'10-Feb.'20) 22.8m m Jobs lost (Feb.'20-Apr.'20) 22.2m m Jobs regained (Apr.'20-present) 12.3m m

59%

71%

55%

54%

68% 56% 74%

-36%

2% 59%

-48%

-1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Jobs regained (Apr.'20-present) Jobs lost (Feb.'20-Apr.'20)

% recovered

125,000 130,000 135,000 140,000 145,000 150,000 155,000

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

(32)

32

Source: J.P. Morgan Asset Management; (Left) BLS, FactSet; (Right) Census Bureau.

Unemployment rates shown are for civilians aged 25 and older. Earnings by educational attainment comes from the Current Population Survey and is published under historical income tables by person by the Census Bureau.

Unemployment rate by education level Average annual earnings by highest degree earned

Workers aged 18 and older, 2019

Education level Nov. 2020

Less than high school degree 9.0%

High school no college 7.7%

Some college 6.3%

College or greater 4.2%

$39,371

$73,163

$106,767

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

High school graduate Bachelor's degree Advanced degree +34K

+34K

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

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

(33)

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

CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed- weight basket used in CPI calculations.

CPI and core CPI

% change vs. prior year, seasonally adjusted

50-yr. avg. Oct. 2020 Nov. 2020

Headline CPI 3.8% 1.2% 1.2%

Core CPI 3.8% 1.6% 1.7%

Food CPI 3.9% 3.9% 3.7%

Energy CPI 4.1% -9.1% -9.4%

Headline PCE deflator 3.4% 1.2% 1.1%

Core PCE deflator 3.3% 1.4% 1.4%

-3%

0%

3%

6%

9%

12%

15%

'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 Recession

(34)

34

Source: J.P. Morgan Asset Management. *High or low inflation distinction is relative to median CPI-U inflation for the period 1988 to 2020 (33 years), which was 2.5% y/y. Rising or falling inflation distinction is relative to previous year CPI-U inflation rate. Indices: Bonds – Bloomberg Barclays U.S.

Aggregate; Cash – Bloomberg Barclays 1-3 Month T-Bill index since its inception in 1992 and 3-month T-Bill rates prior to that; U.S. high yield – Bloomberg Barclays US Aggregate Credit (corporate high yield); Equities – S&P 500; Growth – Russell 1000 Growth; Value – Russell 1000 Growth;

Small Cap – Russell 2000; EM equity – MSCI Emerging Markets (USD); REITs – FTSE Nareit / All Equity REITs; Commodities – Bloomberg Commodity Index since its inception in 1992 and S&P GSCI prior to that; Gold – NYM $/ozt continuous future closing price. For illustrative purposes only. Past performance is not indicative of comparable future returns. Returns are based on calendar year performance and are total return unless otherwise specified.

Guide to the Markets – U.S. Data are as December 31, 2020.

High and rising inflation* High and falling inflation

Occurred 10 times since 1988 Occurred 6 times since 1988

Low and rising inflation Low and falling inflation

Occurred 4 times since 1988 Occurred 13 times since 1988

Below median

Falling inflation Rising inflation

Above median

Median inf lation:

2.5%

Equity Fixed incom e Alternatives

7%

4%

9%

13% 14%

11% 10%

26%

12% 11%

4%

0%

5%

10%

15%

20%

25%

30%

9%

4%

17% 15% 16% 17%

19%

28%

17%

2% 3%

0%

5%

10%

15%

20%

25%

30%

6%

1%

9% 11% 11% 11% 10%

16%

12%

10%

16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

5%

2%

6%

12% 13%

10% 11%

2%

9%

-10%

4%

-15%

-10%

-5%

0%

5%

10%

15%

(35)

Source: J.P. Morgan Asset Management; (Left) FactSet, ICE; (Top right) Bureau of Economic Analysis, FactSet; (Bottom right) Tullett Prebon.

Currencies in the DXY Index are: British pound, Canadian dollar, euro, Japanese yen, Swedish krona and Swiss franc. *Interest rate differential is the difference between the 10-year U.S. Treasury yield and a basket of the 10-year yields of each major trading partner (Australia, Canada, Europe, Japan, Sweden, Switzerland and UK). Weights on the basket are calculated using the 10-year average of total government bonds outstanding in each region. Europe is defined as the 19 countries in the euro area.

The U.S. dollar The U.S. trade balance

U.S. Dollar Index Current account balance, % of GDP

Developed markets interest rate differentials

Difference between U.S. and international 10-year yields*

Dec. 31, 2020:

89.9

60 70 80 90 100 110 120 130

'95 '98 '01 '04 '07 '10 '13 '16 '19

3Q20: -3.4%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19

Dec. 31, 2020:

1.1%

-2%

-1%

0%

1%

2%

3%

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19

(36)

36

Source: J.P. Morgan Asset Management; (Top and bottom left) EIA; (Right) FactSet; (Bottom left) Baker Hughes.

*Forecasts are from the December 2020 EIA Short-Term Energy Outlook and start in 2020. **U.S. crude oil inventories include the Strategic Petroleum Reserve (SPR). Active rig count includes both natural gas and oil rigs. WTI crude prices are continuous contract NYM prices in USD.

Change in production and consumption of liquid fuels Price of oil

Production, consumption and inventories, millions of barrels per day WTI crude, nominal prices, USD/barrel

Production 2017 2018 2019 2020* 2021* Growth since '17

U.S. 15.7 17.9 19.5 18.6 18.7 19.5%

OPEC 36.8 36.8 34.6 30.6 32.5 -11.7%

Russia 11.2 11.4 11.5 10.5 10.7 -5.0%

Global 98.2 100.8 100.6 94.3 97.4 -0.7%

Consumption

U.S. 20.0 20.5 20.5 18.2 19.8 -0.8%

China 13.3 13.9 14.8 14.3 15.1 13.5%

Global 99.4 100.4 101.2 92.4 98.2 -1.2%

Inventory Change

-1.2 0.4 -0.6 1.9 -0.7

U.S. crude oil inventories and rig count**

Million barrels, number of active rigs

0 500 1,000 1,500 2,000 2,500

900 950 1,000 1,050 1,100 1,150 1,200 1,250

'13 '14 '15 '16 '17 '18 '19 '20

Inventories (incl. SPR) Active rigs

Jul. 3, 2008:

$145.29

Feb. 12, 2009: $33.98

Jun. 13, 2014:

$106.91

Feb. 11, 2016: $26.21

Oct. 3, 2018:

$76.41

Apr. 21, 2020: $11.57 Dec. 31,

2020:

$48.52

$0

$20

$40

$60

$80

$100

$120

$140

$160

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

(37)

Source: Bloomberg, FactSet, Federal Reserve, J.P. Morgan Asset Management.

Market expectations are the federal funds rates priced into the fed futures market as of the following date of the December 2020 FOMC meeting and are through December 2023. *Long-run projections are the rates of growth, unemployment and inflation to which a policymaker expects the economy to converge over the next five to six years in absence of further shocks and under appropriate monetary policy.

Federal funds rate expectations

FOMC and market expectations for the federal funds rate

(38)

38

Source: Bureau of Economic Analysis, Federal Reserve, Federal Reserve Bank of St. Louis, J.P. Morgan Asset Management. The 5 year, 5 year forward inflation expectation rate measures the expected inflation rate (on average) over the five-year period that begins five years from today.

Headline personal consumption deflator

Year-over-year percent change

5-year, 5-year forward inflation expectation rate

Percent, not seasonally adjusted

(39)

Source: FactSet, Federal Reserve, J.P. Morgan Investment Bank, J.P. Morgan Asset Management.

Currently, the balance sheet contains $4.4 trillion in Treasuries and $2.0 trillion in MBS. The end balance sheet forecast is $5.4 trillion in Treasuries and $2.5 trillion in MBS by December 2021. *Balance sheet forecast assumes the Federal Reserve maintains its current pace of purchases of Treasuries and MBS through December 2021 as suggested in the December 2020 FOMC meeting. **Loans include liquidity and credit extended through newly established corporate credit facilities in March 2020. Loan figures shown are max usage over the QE period referenced and are not growth of loan portfolio over the period. Other includes primary, secondary and seasonal loans, repurchase agreements, foreign currency reserves,

The Federal Reserve balance sheet

USD trillions

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Treasuries MBS

Other

Forecast*

Loans Balance sheet expansion under rounds of quantitative easing (QE), USD billions

Announced Terminated Length (m) Treasuries MBS Loans** Balance sheet

QE1 11/25/2008 3/31/2010 16 $300 $1,074 $0 $1,403

QE2 11/3/2010 6/29/2012 19 $829 -$196 $0 $568

QE3 9/13/2012 10/29/2014 25 $822 $874 $0 $1,674

QE4*** 3/23/2020 Ongoing 9 $2,209 $715 $197 $3,245

(40)

40

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

Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for December 2020 where real yields are calculated by subtracting out November 2020 year-over-year core inflation.