guide to the markets | australia - j.p. morgan€¦ · morgan asset management; (right) rpd...

Guide to the MarketsAustralia | |

MARKET INSIGHTS

2Q 2020 31 March 2020

Global Market Insights Strategy Team

Vincent JuvynsLuxembourg

Tilmann Galler, CFAFrankfurt

Maria Paola ToschiMilan

Shogo MaekawaTokyo

Lucia Gutierrez MelladoMadrid

Tai HuiHong Kong

Marcella ChowHong Kong

Max McKechnieLondon

Yoshinori ShigemiTokyo

Kerry Craig, CFAMelbourne

Dr. Jasslyn Yeo, CFASingapore

Karen WardLondon

Ambrose Crofton, CFALondon

Chaoping Zhu, CFAShanghai

Jai Malhi, CFALondon

Manuel Arroyo Ozores, CFAMadrid

Agnes LinTaipei

Michael Bell, CFALondon

Alex Dryden, CFANew York

Samantha AzzarelloNew York

Dr. David Kelly, CFANew York

Dr. Cecelia MundtNew York

Meera Pandit, CFANew York

John ManleyNew York

Tyler Voigt, CFANew York

Gabriela SantosNew York

David LebovitzNew York

Jordan JacksonNew York

Jennie LiNew York

Hugh Gimber, CFALondon Ian Hui

Hong Kong

3

GTM – Australia 3|

Australian economy4. Economic growth and the composition of GDP5. Consumer and business confidence6. Investment7. Inflation8. Unemployment and wages9. Employment intentions10. Consumer finances11. Residential real estate prices12. Residential real estate financing13. Residential real estate activity14. Trade15. Government finances

Global economy16. Global growth17. Global Purchasing Managers’ Indices18. Manufacturing momentum19. Business sentiment and economic cycles20. Global supply chains21. Globalisation and trade22. Barriers to trade23. Global inflation24. Government debt and fiscal balance25. U.S.: GDP and inflation26. U.S.: Business cycle thermometer27. U.S.: Consumer finances28. U.S.: Labour market29. U.S.: Election30. Eurozone: GDP and inflation31. Eurozone: Growth indicators32. Japan: GDP and inflation33. China: GDP and inflation34. China: Cyclical indicators35. China: Policy stimulus timeline36. China: Financial dynamics37. China: Credit and lending

Page reference

Other asset classes69. Oil70. Commodities71. Australian dollar72. Global currencies73. U.S. dollar74. Market performance in late cycle75. Correlation and diversification

Investing principles76. Asset class returns (AUD)77. Annual returns and intra-year declines78. The power of compounding79. Life expectancy80. Time, diversification and the volatility of returns81. Asset markets in the coming decade

Equities38. World equity market returns39. Global equities: Sources of return and valuations40. Global equities: Earnings and revisions41. Australia ASX 200 at inflection points42. Australia ASX 200 valuation measures43. Australia ASX 200 earnings44. Australia sector returns45. Volatility46. U.S. S&P 500 at inflection points47. U.S. S&P 500 earnings and margins48. Recessions and bear markets49. Europe: Earnings and the euro50. Emerging markets equities: Valuations and returns51. Emerging markets equities: Relative performance52. APAC ex-Japan equites: Exports and earnings53. China: Equities snapshot

Fixed income54. Fixed income sector returns55. Central bank policy rates56. Central bank balance sheets57. Eurozone and Japan: Monetary policy58. Cash investments59. U.S.: Yield curve inversion and recessions60. Australian interest rates and inflation61. The U.S. Federal Reserve outlook62. Global fixed income: Yields63. Global fixed income: Core government bonds64. Global fixed income: Yields and correlation65. Global investment-grade bonds66. U.S.: Asset-backed securities67. U.S.: High yield bonds68. Emerging market debt

4


-4%

-2%

0%

2%

4%

6%

8%

10%

'65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

Economic growth and the composition of GDP

Real GDP Components of GDPYear-over-year change

Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management. *Values may not sum to 100% due to rounding. Guide to the Markets – Australia. Data as of 31 March 2020.

54.9% Consumption

24.1% Gov’t spending

11.0% Investment ex-housing

6.6% Housing

3.4% Net exports

Average 4Q19

Real GDP 3.3% 2.2%

Aust

ralia

nec

onom

y Nominal GDP, sum of last four quarters, AUD billions*

5

GTM – Australia 5|Consumer and business confidence

Consumer sentiment and business confidence Consumer sentiment and retail salesZ-score Year-over-year change 3-month moving average

Source: FactSet, Westpac, J.P. Morgan Asset Management; (Left) National Australia Bank; (Right) Australian Bureau of Statistics.Guide to the Markets – Australia. Data as of 31 March 2020.

Aust

ralia

nec

onom

y

Retail sales growth

Consumer sentimentBusiness confidenceConsumer sentiment

-5

-4

-3

-2

-1

0

1

2

3

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '1980

85

90

95

100

105

110

0%

1%

2%

3%

4%

5%

6%

7%

8%

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19

6


$0

$20

$40

$60

$80

$100

Mining Manufacturing Non-mining

Investment

Business investmentContribution to annual growth rate

Construction activityPrivate sector, year-over-year change

Capital expenditure intentionsAUD billions, 5-year realisation ratio*

Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management.*Forecasts use latest estimates for capital expenditure intentions for the coming years and the average realisation ratio of those intentions for the past five years.Guide to the Markets – Australia. Data as of 31 March 2020.

Aust

ralia

nec

onom

y

ForecastsActual

Non-miningMining

Total

‘20

‘20‘21

‘20

Residential

Non-residential

-30%

-20%

-10%

0%

10%

20%

30%

40%

'01 '03 '05 '07 '09 '11 '13 '15 '17 '19

-30%

-20%

-10%

0%

10%

20%

30%

-15%

-10%

-5%

0%

5%

10%

15%

'04 '06 '08 '10 '12 '14 '16 '18

‘21

‘21

7


-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

'83 '88 '93 '98 '03 '08 '13 '18

Inflation

CPI and core CPI inflationYear-over-year change

Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index, core CPI is the average of the trimmed mean and weighted median measures of inflation. Tradables represent approximately 35% of the CPI basket and non-tradables 65%. Core goods CPI is goods CPI excluding volatile items.Guide to the Markets – Australia. Data as of 31 March 2020.

Average 4Q19

Headline CPI* 3.5% 1.8%

Core CPI 3.7% 1.5%

Tradables 2.8% 1.7%

Non-tradables 4.3% 2.0%

Aust

ralia

nec

onom

y

RBA target band

8


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '199%

10%

11%

12%

13%

14%

15%

16%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

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

Unemployment and wages

Unemployment and underutilisation rates Wage growthSeasonally adjusted Year-over-year change, excluding bonuses

Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

Feb 2020:5.1%

Aust

ralia

nec

onom

y

Feb 2020: 13.7%

Underutilisation rateUnemployment rate Underemployment rate(inverted)

Wage growth

Feb 2020:8.6%

4Q19: 2.2%

9


-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-30

-25

-20

-15

-10

-5

0

5

10

15

20

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

Employment intentions

Employment growth and employment intentionsIndex, 2-month moving average, advanced 4 months Year-over-year change

Source: Australian Bureau of Statistics, FactSet, National Australia Bank, J.P. Morgan Asset Management. Guide to the Markets – Australia. Data as of 31 March 2020.

Aust

ralia

nec

onom

y

Employmentgrowth

Employmentintentions

RBA rate cutting cycle

10


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

6%

7%

8%

9%

10%

11%

12%

13%

14%

'89 '94 '99 '04 '09 '14 '19

60%

80%

100%

120%

140%

160%

180%

200%

0%

5%

10%

15%

20%

Consumer finances

Household debt and savings rate Household debt service ratioPercent of annualised household disposable income Interest payments to household disposable income, seasonally adjusted

Source: Australian Bureau of Statistics, FactSet, Reserve Bank of Australia, J.P. Morgan Asset Management. Guide to the Markets – Australia. Data as of 31 March 2020.

4Q19:8.0%

3Q08:13.2%

Savings rateHousehold debt

Aust

ralia

nec

onom

y

11


90

91

92

93

94

95

96

97

98

99

100

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28

Residential real estate prices

Capital cities house prices House prices in different cyclesYear-over-year change, 3-month moving average Index to 100 at peak, national dwelling prices

Source: RPD CoreLogic, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

Sydney

Perth

MelbourneBrisbane, Adelaide, Canberra average

Aust

ralia

nec

onom

y

Months from peak

2008

2017

2010

198919942004

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

12

GTM – Australia 12|Residential real estate financing

Mortgage lending Housing finance and house prices3-month annualised growth rate Year-over-year change

Source: Australian Bureau of Statistics, J.P. Morgan Asset Management; (Right) RPD CoreLogic.House price is the year-over-year change in the hedonic index for national dwelling prices. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Owner-occupierInvestor

Housing finance commitments (adv. 6 months, 3mma)

Aust

ralia

nec

onom

y

House prices

-2%

0%

2%

4%

6%

8%

10%

12%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

-36%

-24%

-12%

0%

12%

24%

36%

48%

60%

'03 '05 '07 '09 '11 '13 '15 '17 '19

13

GTM – Australia 13|Residential real estate activity

Sales volumes and house prices Auction clearance rate and house pricesThousands Year-over-year change 3-month moving average Year-over-year change

Source: RPD CoreLogic, J.P. Morgan Asset Management. House price and sales volume are for the eight capital city aggregate dwellings. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Aust

ralia

nec

onom

y

House pricesAuction clearance rate (adv. 5 months)

-10%

-5%

0%

5%

10%

15%

20%

15

20

25

30

35

40

'05 '07 '09 '11 '13 '15 '17 '19

House pricesMonthly sales volume

-10%

-5%

0%

5%

10%

15%

20%

35%

45%

55%

65%

75%

85%

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

14


'90 '95 '00 '05 '10 '15 '2040

50

60

70

80

90

100

110

120

130

140

20

40

60

80

100

120

140

160

Trade

Terms of trade and commodity prices Current account % of nominal GDP

Exports by type

Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management; (Left) Reserve Bank of Australia.Guide to the Markets – Australia. Data as of 31 March 2020.

Aust

ralia

nec

onom

y

Commodity pricesTerms of trade

Export / import prices RBA commodity price index

AUD billions, 6-month moving average

Natural gas

Metals oresCoal / Coke

TradeIncomeTotal

-8%

-6%

-4%

-2%

0%

2%

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

$0

$2

$4

$6

$8

$10

$12

'01 '03 '05 '07 '09 '11 '13 '15 '17 '19

15


0%

5%

10%

15%

20%

25%

30%

35%

$0

$100

$200

$300

$400

$500

$600

$700

'71 '76 '81 '86 '91 '96 '01 '06 '11 '16 '21-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22

Government finances

Commonwealth budget surplus/deficit Commonwealth gross debt% of GDP, 2019-20 budget, end of fiscal year 2019-20 budget, end of fiscal year, AUD billions

Source: Australian Treasury, J.P. Morgan Asset Management. Guide to the Markets – Australia. Data as of 31 March 2020.

2019-20: 0.3%

Forecast

% of GDPTotal debt

Aust

ralia

nec

onom

y

Forecast

16

GTM – Australia 16|Global growth

Contribution to global real GDP growthYear-over-year change

Source: OECD, World Bank, J.P. Morgan Asset Management. EM is emerging markets. DM is developed markets. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

'85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18

China

EM ex-ChinaDM ex-U.S.U.S.

Global

17


34

36

38

40

42

44

46

48

50

52

54

56

58

60

62

64

34

36

38

40

42

44

46

48

50

52

54

56

58

60

62

64

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

Global Purchasing Managers’ Indices

Manufacturing and services PMIIndex

Source: Markit, J.P. Morgan Asset Management. *Recession is U.S. economic recession.Guide to the Markets – Australia. Data as of 31 March 2020.

Services

Manufacturing

Recession*

Glob

al e

cono

my

18

GTM – Australia 18|Manufacturing momentum

Global Purchasing Managers’ Index for manufacturing, quarterly

Source: AIG, FactSet, Markit, J.P. Morgan Asset Management. Heatmap colours are based on PMI relative to the 50 level, which indicates acceleration or deceleration of the sector, for the time period shown. Heatmap is based on quarterly averages, with the exception of the two most recent figures, which are single month readings. Data for Canada, Indonesia and Mexico are back-tested and filled in from December 2007 to November 2010 for Canada and May 2011 for Indonesia and Mexico due to lack of existing PMI figures for these countries. DM and EM represent developed markets and emerging markets, respectively.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Feb Mar

Global 47.1 47.6

DM 49.5 46.0

EM 44.6 49.1

Australia 44.3 53.7

U.S. 50.7 48.5

Canada 51.8 46.1

UK 51.7 47.8

Japan 47.8 44.8

Eurozone 49.2 44.5

Germany 48.0 45.4

France 49.8 43.2

Italy 48.7 40.3

Spain 50.4 45.7

China 40.3 50.1

Indonesia 51.9 45.3

Korea 48.7 44.2

Taiwan 49.9 50.4

India 54.5 51.8

Brazil 52.3 48.4

Mexico 50.0 47.9

Russia 48.2 47.5

Dev

elop

edE

mer

ging

20202008 2009 2010 2011 2012 2013 20192014 2015 2016 2017 2018

19


1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

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

Business sentiment and economic cycles

U.S. and eurozone future capex intentions Hires, job openings and layoffs and dischargesIndex, three-month moving average Share of total nonfarm employment, seasonally adjusted, percent

Source: J.P. Morgan Asset Management:; (Left) Kansas Federal Reserve, Philadelphia Federal Reserve, Richmond Federal Reserve; (Right) Bureau of Economic Analysis.Guide to the Markets – Australia. Data as of 31 March 2020.

U.S.

Eurozone

Glob

al e

cono

my Job openings

Job Hires

Recession

Layoffs and discharges

-60

-45

-30

-15

0

15

30

-30

-20

-10

0

10

20

30

40

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

20

GTM – Australia 20|Global supply chains

Sources of value addSource of foreign value add in exports as a % of total goods exports*, 2015

Supplier delivery timesManufacturing PMI subindex, G4** average

Manufacturing share of global total

Source: J.P. Morgan Asset Management; (Left) OECD Trade in Value Add; (Top right) J.P. Morgan Economic Research, Markit; (Bottom right) United Nations Industrial Development Organization. *Origin country of value-added to goods exported from each country to the world, divided by gross exports from each country. 2015 is the latest year for which country by country data are available. **G4 is defined as the four largest economies: China, Japan, euro area, United States. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

0%

5%

10%

15%

20%

25%

30%

35%

40%

U.S. China Japan Korea Taiwan Euroarea

Australia

U.S.

China Korea

TaiwanJapan

Euro area

Other

0%

5%

10%

15%

20%

25%

30%

U.S. China EU Japan Korea Taiwan ROW

2000 2008 2018

35

40

45

50

55

'07 '09 '11 '13 '15 '17 '19

21


8.1%

12.4%

14.8%

26.2%

11.9%

13.0%

18.7%

27.5%

36.8%

18.0%

37.4%

49.2%

56.9%

0% 25% 50% 75%

U.S.

EU*

Japan

Canada

India

Brazil

China

Russia

Mexico

Australia

Korea

ASEAN

Taiwan

Globalisation and trade

Exports as share of GDP Global export volumesGoods only, 2018 Year-over-year change, 3-month moving average Index

Source: FactSet, J.P. Morgan Asset Management; (Left) IMF; (Right) Markit, Netherlands Bureau for Economic Policy Analysis World Trade Monitor. *EU exports as a percentage of GDP excludes intra-EU trade.Guide to the Markets – Australia. Data as of 31 March 2020.

U.S.European UnionChinaJapanOther

Glob

al e

cono

my

PMI manufacturing new export orders (4m adv.)

Global trade

30

35

40

45

50

55

60

65

70

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

'01 '03 '05 '07 '09 '11 '13 '15 '17 '19

22


0%

2%

4%

6%

8%

10%

Barriers to trade

U.S. and Chinese tariffs

Non-tariff barriers to trade**Number of measures

Effective weighted average tariff*Number of measures

Source. J.P. Morgan Asset Management; (Top) Chad Bown, China Ministry of Finance, International Trade Center, Peterson Institution for International Economics; (Top and bottom right) Office of the U.S. Trade Representative, U.S. International Trade Commission; (Bottom left) United Nations. *Trade-weighted average tariffs computed from product-level tariff and trade data, weighted by U.S. exports to the world and China's exports to the world in 2017. **Barriers can take the form of health and safety regulations—sanitary production requirements or health and invasive species restrictions; technical barriers—minimum standards or certifications for products sold in a certain country; anti-dumping duties—taxes on imports to prevent other countries offloading excess supply at artificially cheap prices; countervailing duties—taxes on imports to offset subsidies received elsewhere. ***Value of imports-weighted average tariff for 2017, plus additional tariffs from trade actions in 2018 or 2019 related to U.S. trade disputes calculated as the additional tariffs collected as a result of each new action as a percent of total imports for that year. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

0

1,000

2,000

3,000

4,000

5,000

6,000

U.S. China EU Japan Mexico

2017Retaliation for new U.S. tariffsU.S. steel & aluminium tariffsU.S. tariffs on China in placeU.S. threatened tariffs on China

Health and safety regulationsTechnical barriersAnti-dumping dutiesCountervailing duties

Weighted average tariff rate on imports from other

0%

5%

10%

15%

20%

25%

Jan '18 May '18 Sep '18 Jan '19 May '19 Sep '19 Jan '20

China tariffs on imports from U.S.

U.S. tariffs on imports from China

First round of Sec. 301

tariffs & retaliation

(USD 34B)

Second round of Sec. 301 tariffs & retaliation (USD 16B)

Third round of Sec. 301 tariffs & retaliation (U.S. on USD 200B of imports; China USD 60B)

U.S. & China increase Sec. 301 tariff rates

U.S. & China decrease Sec. 301 tariff rates

Tariffs placed on remainder of imports

23

GTM – Australia 23|Global inflation

Headline consumer pricesYear-over-year change, quarterly

Source: Department of Statistics Malaysia, DGBAS, Eurostat, FactSet, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, INEGI, J.P. Morgan Economic Research, Korean National Statistical Office, Melbourne Institute, Ministry of Commerce Thailand, Ministry of Internal Affairs & Communications Japan, National Bureau of Statistics China, Office for National Statistics UK, Statistics Indonesia, Statistics Institute Turkey, Statistics South Africa, U.S. Department of Labor, J.P. Morgan Asset Management. Quarterly averages, with the exception of the two most recent figures, which are single month readings, are shown. Colours are based on z-score of year-over-year inflation rate relative to each country’s own 10-year history where red (blue) indicates inflation above (below) long-run trend. EM represents emerging markets.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Inflation runningBelow trend Above trend

Jan Feb

U.S. 2.5% 2.3%

UK 1.8% 1.7%

Eurozone 1.4% 1.2%

Japan 0.7% 0.5%

Australia 1.8% 1.6%

China 5.4% 5.2%

India 7.6% 6.6%

Korea 1.5% 1.1%

Taiwan 1.1% 0.4%

Indonesia 2.7% 3.0%

Malaysia 1.6% 1.3%

Thailand 1.1% 0.7%

Brazil 4.2% 4.0%

Mexico 3.2% 3.7%

Russia -2.5% -2.8%

Turkey 12.2% 12.4%

South Africa 4.5% 4.6%

Dev

elop

ed M

arke

tsEM

Asi

aO

ther

EM

20192009 2010 2016 2017 2018 20192011 2012 2013 2014 2015

24


Indonesia

TaiwanPhilippines Australia

Thailand

South Korea

GermanyMalaysiaChinaIndia

UK

CanadaSpainFrance

U.S.Singapore

Italy

Japan

0%

50%

100%

150%

200%

250%

-6% -5% -4% -3% -2% -1% 0% 1%

Government debt and fiscal balance

Gross government debt and fiscal balance

Source: Bloomberg, European Commission AMECO forecasts, Government Budgets, International Monetary Fund - World Economic Outlook, J.P. Morgan Asset Management. Emerging and developed markets classification based on MSCI 2019 Annual Market Classification Review.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Fiscal balance

Gro

ss g

over

nmen

t deb

t

% of GDP, 2020 estimates

Emerging Market

Developed Market

25


'69 '74 '79 '84 '89 '94 '99 '04 '09 '14 '19-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

U.S.: GDP and inflation

Real GDP InflationYear-over-year change Year-over-year change

Source: FactSet, J.P. Morgan Asset Management; (Left) BEA; (Right) BLS.Guide to the Markets – Australia. Data as of 31 March 2020.

Components of GDP 4Q19Consumption 68.1%Government spending 17.6%Investment ex-housing 13.3%Housing 3.8%Net exports -2.7%

Avg1969

4Q2019

Real GDP 2.8% 2.3%

Glob

al e

cono

my

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Avg1999

Feb2020


Core CPI 2.0% 2.3%

PCE 1.8% 1.8%

Core PCE 1.7% 1.8%

26


0

25

50

75

100

ConsumerConfidence

WageGrowth

NonfarmPayrolls

HousingStarts

Light VehicleSales

BusinessConfidence

Capex DurableOrders

IndustrialProduction

LeadingEconomic

Index

CreditConditions*

Example

U.S.: Business cycle thermometer

U.S. business cycle indicatorsCurrent percentile rank relative to range of data since 1990, current and three months prior

Source: BEA, Conference Board U.S., FactSet, U.S. Census Bureau, U.S. Department of Labor, Wards Intelligence, J.P. Morgan Asset Management. Arrow shows current position versus three months ago. *Percentile ranking applied in a reverse manner, where the lowest data point is ranked the highest, while the highest data point is ranked the lowest. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Consumer Business Broad market

3 mth ago

Latest

Hot

Cold

27


9%

10%

11%

12%

13%

14%

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

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

U.S.: Consumer finances

Consumer balance sheet4Q19, USD trillions outstanding, not seasonally adjusted

Household debt service ratioDebt payments as % of disposable personal income, SA

Household net worthNot seasonally adjusted, USD trillions

Source: FactSet, FRB, J.P. Morgan Asset Management; (Top and bottom right) Bureau of Economic Analysis. Data include households and nonprofit organisations. SA – seasonally adjusted. *Revolving includes credit cards. Values may not sum to 100% due to rounding. **1Q19 figure for debt service ratio and household net worth are J.P. Morgan AssetManagement estimates. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Total assets: $134.9tn

Total liabilities: $16.6tn

Homes: 24%

Deposits: 8%

Pension funds: 24%

Other financial assets: 42%

Other tangible: 5%

Mortgages: 66%

Other non-revolving: 2%Revolving*: 7%Auto loans: 7%

Other liabilities: 9%Student debt: 10%

3Q07 Peak: $85.6tn1Q09 Low: $74.5tn

4Q07:13.2%

1Q80: 10.6% 1Q20**:

9.7%

3Q07:$71.3

1Q20:$115.7**

Glob

al e

cono

my

$20

$40

$60

$80

$100

$120

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

28


'69 '79 '89 '99 '09 '190%

2%

4%

6%

8%

10%

12%

Oct 2009: 10.0%

U.S.: Labour market

Unemployment rate and wage growthWages of production and non-supervisory workers, SA

Source: BLS, FactSet, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

Feb 2020:3.5%

Feb 2020: 3.3%

Wage growth

Unemployment rate

Glob

al e

cono

my

Recession

29


0%

4%

8%

12%

16%

20%

Presidential Election Years Midterm Elections

U.S.: Election

U.S. presidential elections and the incumbency factor Congressional seat gain/loss by chamber**Proportion of times incumbent is re-elected, 1796 - 2016 Average number of seats that switched parties as a % of seats on the ballot*

Source: J.P. Morgan Asset Management; (Left) 270toWin; (Right) U.S. House of Representatives, U.S. Senate. *Seats in the House of Representatives are filled by direct election every two years (members of the United States House of Representatives serve two-year terms), but only one-third of Senate seats are on the ballot every two years (United States Senators serve six-year terms). As a result, during every presidential election year, the entire House and one-third of the Senate are up for election. 2018 House of Representatives has one vacancy as the election result in one district is under dispute. **Covers period of 1932 – present. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

68%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Incumbent wins re-election Incumbent loses re-election

In 2020: Dems need Reps need

House* Keep 17 (4%) Pick up 17 (4%)

Senate* Pick up 4 (11%) Keep 3 (9%)

30


'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19-1%

0%

1%

2%

3%

4%

5%

Eurozone: GDP and inflation

Real GDP InflationContribution to real GDP growth, year-over-year change Year-over-year change

Source: Eurostat, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is CPI excluding food and energy.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Avg1999

Feb2020


Core CPI 1.5% 1.3%

Real GDPDomestic demandNet exports

-6%

-4%

-2%

0%

2%

4%

'07 '09 '11 '13 '15 '17 '19

31


40

45

50

55

60

65

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '01 '03 '05 '07 '09 '11 '13 '15 '17 '197%

8%

9%

10%

11%

12%

13%

Eurozone: Growth indicators

Eurozone Purchasing Managers’ IndicesIndex, 3-month moving average

Retail sales and consumer confidenceYear-over-year change, six-month moving average Level

Eurozone unemployment rateHarmonised rate, seasonally adjusted

Source: FactSet, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research, Markit; (Top right) European Commission; (Bottom right) Eurostat. Guide to the Markets – Australia. Data as of 31 March 2020.

Retail sales Consumer confidence

Glob

al e

cono

my

Feb 2020: 7.3%

RecessionMay 2013:

12.1%

Mar ’20Eurozone Manufacturing – New Export Orders 37.0

Germany Composite 37.2France Composite 30.2Italy Composite 50.7

-30

-25

-20

-15

-10

-5

0

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

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

32


'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Japan: GDP and inflation


Source: FactSet, J.P. Morgan Asset Management; (Left) Japanese Cabinet Office; (Right) Ministry of Internal Affairs and Communications. *CPI is the consumer price index. Core CPI excludes food and energy prices.Guide to the Markets – Australia. Data as of 31 March 2020.

Avg1999

4Q2019

Real GDP 0.9% -0.7%

Avg1999

Feb2020


Core CPI -0.2% 0.2%

Average

Glob

al e

cono

my

33


'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19-9%

-6%

-3%

0%

3%

6%

9%

12%

China: GDP and inflation


Source: FactSet, NBS China, J.P. Morgan Asset Management. Latest Chinese GDP growth figure is 3Q 2019. *CPI is the Consumer Price Index. PPI is the Producer Price Index.Guide to the Markets – Australia. Data as of 31 March 2020.

Consumption

GDP growthInvestment

Net exportsFeb 2020:

5.2%

Feb 2020: -0.4%

CPI*

PPI

Glob

al e

cono

my

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

34


0%

10%

20%

30%

40%

50%

-12%-9%-6%-3%0%3%6%9%

12%

'16 '17 '18 '19 '20

-30%

-20%

-10%

0%

10%

20%

30%

40%

'11 '12 '13 '14 '15 '16 '17 '18 '19 '20300

400

500

600

700

800

900

-30 -20 -10 CNY +10 +20 +30 +40 +50 +60

China: Cyclical indicators

Coal consumption in ChinaThousands tons per day

Retail and online salesYear-over-year change, 3-month moving average

Fixed asset investmentYear-over-year change, year to date

Source: CEIC, China Electricity Council, NBS China, J.P. Morgan Asset Management. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

TotalPrivate

State-owned enterprises

Retail sales

Online sales

2018

2019

2017

2020

35

GTM – Australia 35|China: Policy stimulus timeline

Chinese policy measures

Source: Various news sources, J.P. Morgan Asset Management. *RRR is the reserve requirement ratio or the amount of funds banks are required to hold for bank lending.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Fiscal policy

Monetary policy

Cut in VAT rate and firms’ social security contributions

RMB 1.95 trillion in local government special bonds issued

Local government bond issuance push

50bps targeted RRR* cuts; 200bps overall RRR cuts

100bps RRR cut

RRR cut up to 350bps for small and medium-sized banks

Liquidity support to small and medium-sized banks

50bps RRR cut, 100bps targeted RRR cut and 5bps drop in LPR rate

Loan prime rate (LPR) reform

50bps RRR cut

5bps cut in MLF, LPR and 7-day reverse repo rates. 5bps cut in 14-day reverse repo rate

2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 Jan 2020 Feb 2020 Mar 2020

2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 Jan 2020 Feb 2020 Mar 2020

1ppt cut to value-added tax (VAT) rate; individual income tax cut

Special deductibles introduced to individual income tax system

Policy support for infra-structure investment

Advance special local bond issuance

RMB 1 trillion of 2020 special local government bond quota allocated early; equity capital requirement loosened to promote investment

Social security contribution waived, tax declaration postponed, VAT waiver or cut for small business to May 31

RMB 800 billion re-lending loans to SMEs, with interest subsidy

10 bps rate cuts to reverse repo, MLF and LPR

Targeted RRR cuts of 50 bps to 100 bps

5G, industrial internet, health care infrastructure highlighted in infrastructure investment plan

20bps cut to 7-day reverse repo rate.Additional RMB 1 trillion re-lending loans to SMEs.

36


'15 '16 '17 '18 '1988

90

92

94

96

98

100

102

104

106

China: Financial dynamics

Chinese yuanRebased January 2016 = 100

Key policy rates

Required reserve ratio

Source: FactSet, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top and bottom right) CEIC, National Interbank Funding Center.*CFETS RMB Index is the China Foreign Exchange Trade System basket of 24 currencies traded against the Chinese renminbi. **In August 2019 the PBoC started torelease a monthly 1-year and 5-year loan prime rate (LPR) based on quotes from 18 banks. The central bank requests all commercial banks to reference the finalisedLPR to price their new lending and use LPR as the benchmark rate in floating rate loan contracts.Past performance is not a reliable indicator of current and future results. Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my Lending rate

Medium-term lending facility

Deposit rate

CFETS RMB Index*USD / CNY

Small and medium banks

Large banks

Per annum

Loan prime rate**

10%

12%

14%

16%

18%

20%

22%

'09 '11 '13 '15 '17 '19

0.0%

1.5%

3.0%

4.5%

6.0%

7.5%

'14 '15 '16 '17 '18 '19

37


0

200

400

600

800

1,000

Jan '18 May '18 Sep '18 Jan '19 May '19 Sep '19 Jan '20

-32%

0%

32%

64%

96%

128%

-1000

0

1000

2000

3000

4000

'15 '16 '17 '18 '19 '20

China: Credit and lending

Credit impulse and new orders% of nominal GDP, change year-over-year Difference from a year ago

Issuance of local government bonds

Total social financingRMB billions Year-over-year change, 3MMA

Source: CEIC, J.P. Morgan Asset Management; (Left) Markit; (Top right) China Central Depository & Clearing Co. Ltd; (Bottom left) People’s Bank of China.*Credit impulse is change in the ratio of broad credit to rolling 12-month nominal GDP. **A special local government bond is issued to support the investment in aspecial infrastructure or public project.Guide to the Markets – Australia. Data as of 31 March 2020.

Glob

al e

cono

my

Bank loans and directOff balance sheet

TSF

RMB millions

Special bonds**General bonds

Credit impulse(6mo. adv.*)

Global composite PMI – new orders

-8

-6

-4

-2

0

2

4

6

8

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

38


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20 Ann. Vol. 57.4%

Small Cap 57.4%

13.1% Small Cap

13.1%

2.1% U.S.

2.1%

21.2% Asia ex JP

19.7%

53.6% U.S.

32.4%

24.3% U.S.

13.7%

25.6% Japan 12.1%

13.2% Small Cap

13.2%

31.5% Asia ex JP

35.9%

6.2% U.S.

-4.4%

31.7% U.S.

31.5%

-4.6% Japan -17.5%

16.4% U.S.

13.6%

Japan 16.7%

38.8% EM

62.8%

5.2% Asia ex JP

15.6%

-10.4% Portfolio

-9.9%

20.3% Australia

20.3%

47.4% Japan 54.4%

14.9% Asia ex JP

7.7%

14.0% U.S.

1.4%

12.5% U.S.

12.0%

27.5% EM

31.0%

-2.3% Portfolio

-7.3%

24.8% Europe 24.6%

-6.2% Asia ex JP

-16.6%

9.9% Japan 8.9%

Small Cap 14.4%

37.0% Australia

37.0%

4.6% EM

14.4%

-10.5% Europe -8.8%

18.4% Europe 16.4%

46.2% Europe 22.3%

8.7% Portfolio

6.8%

10.2% Small Cap

10.2%

12.1% EM

10.1%

20.0% Small Cap

20.0%

-2.8% Australia

-2.8%

24.0% Portfolio

23.7%

-7.7% U.S.

-19.6%

9.6% Portfolio

8.7%

Asia ex JP 13.5%

33.8% Asia ex JP

67.2%

1.7% Japan 1.0%

-10.5% Australia -10.5%

17.1% EM

17.4%

30.7% Portfolio

21.9%

7.3% EM

5.6%

9.8% Europe 5.4%

11.8% Australia

11.8%

17.2% Japan 22.2%

-4.2% Japan -16.0%

23.4% Australia

23.4%

-12.2% EM

-19.0%

9.0% Asia ex JP

6.8%

U.S. 12.4%

21.1% Portfolio

36.8%

1.6% Portfolio

8.2%

-12.5% Japan -17.0%

15.8% Portfolio

17.2%

20.2% Australia

20.2%

5.7% Japan 10.3%

8.4% Portfolio

3.3%

9.4% Portfolio

9.8%

16.9% Europe 13.7%

-4.6% Asia ex JP

-12.0%

21.4% Small Cap

21.4%

-13.0% Europe -21.7%

8.4% Europe 7.8%

EM 12.1%

6.1% Europe 28.6%

1.6% Australia

1.6%

-17.1% Asia ex JP

-14.6%

14.6% U.S.

16.0%

19.9% Asia ex JP

6.2%

5.6% Australia

5.6%

2.6% Australia

2.6%

6.3% Asia ex JP

6.4%

16.7% Portfolio

19.1%

-4.7% EM

-9.7%

19.4% Japan 18.1%

-15.1% Portfolio -21.3%

7.9% Australia

7.9%

Portfolio 12.0%

-2.0% U.S.

26.5%

1.0% U.S.

15.1%

-18.2% EM

-12.5%

6.6% Small Cap

6.6%

13.4% EM

3.8%

3.1% Europe 5.2%

2.5% Asia ex JP

-5.3%

4.0% Japan 0.3%

12.8% U.S.

21.8%

-4.8% Europe -10.0%

19.1% EM

18.5%

-23.1% Australia -23.1%

6.6% EM

6.5%

Europe 11.7%

-18.8% Japan 7.6%

-8.3% Europe 7.5%

-21.4% Small Cap

-21.4%

6.2% Japan 20.9%

-0.8% Small Cap

-0.8%

-3.8% Small Cap

-3.8%

-3.9% EM

-5.4%

0.7% Europe 7.9%

11.8% Australia

11.8%

-8.7% Small Cap

-8.7%

18.7% Asia ex JP

18.2%

-26.7% Small Cap

-26.7%

4.1% Small Cap

4.1%

Australia 11.4%

10-years '10 - '19

World equity market returns

Source: FactSet, MSCI, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. Annualised return (Ann.) and volatility (Vol.) covers the period 2010 to 2019. Volatility is based on local currency returns. Small Cap: S&P ASX Small Ordinaries; Asia ex JP: MSCI AC Asia ex Japan; EM: MSCI EM Index; Europe: MSCI Europe Index; Japan: TOPIX first section; Australia: ASX 200 Index; U.S.: S&P 500 Index. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 20% U.S.; 30% Australia; 15% EM; 15% Europe; 10% Japan; 10% small cap. All indices are total returns. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

AUD

Local

Equi

ties

39


32%29%

25%23%

20% 19%

-4%

-8%-9%

-12% -13%

-23%

-30%

-20%

-10%

0%

10%

20%

30%

40%

15.614.5 14.4

12.5

12.4

1.6 1.5

0.0x

0.4x

0.8x

1.2x

1.6x

2.0x

2.4x

2.8x

3.2x

3.6x

4.0x

4.4x

4.8x

5.2x

0x

5x

10x

15x

20x

25x

30x

35x

40x

U.S. World Australia Europe Japan EM Asia ex-JP

Price-to-book

Pric

e-to

-ear

ning

s

Global equities: Sources of return and valuations

Sources of return Global valuationsTotal return, AUD Current and 20-year historical valuations*

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.All return values are MSCI indices except the U.S. and Australia, which are the S&P 500 and ASX 200, respectively. *Multiple expansion is based on the forward P/E ratio and EPS growth outlook is based on NTMA earnings estimates. Chart is for illustrative purposes only. Past performance is not indicative of future results. Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

Currency effectMultiples*Dividends

EPS growthTotal return

YTD2019 Axis

20-year rangeCurrent

20-year average

80x

40


24%

8%

5%6%

2%

-1% -1%-2%

9%

15%

13%

9%

3%

12%

10%

2%

-5%

0%

5%

10%

15%

20%

25%

30%

U.S. EM Asia Pacific ex-Japan

Europe

Global equities: Earnings and revisions

Earnings growth Earnings revisions ratiosEarnings per share, year-over-year change 13-week moving average

Source: J.P. Morgan Asset Management; (Left) Thomson Reuters Datastream; (Right) FactSet, MSCI, Standard & Poor’s. Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

U.S.

Australia

Japan

Europe

EM

2020 (March)2020 (January)2018 2019

-60%

-40%

-20%

0%

20%

40%

60%

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

41


2,000

3,000

4,000

5,000

6,000

7,000

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Australia ASX 200 at inflection points

ASX 200 Index

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Local currency returns. P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. Dividend yield is based on current data. Return calculations shown in green are based on the total return index. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

7 Mar 2002: P/E = 16.5x

3,498

13 Mar 2003:P/E = 12.6x

2,700

1 Nov 2007:P/E = 16.4x

6,829

10 Mar 2009:P/E = 15.7x

3,185

31 Dec 1996: 2,425

+207%

-20%

-50%

Total return:+77%

Equi

ties

31 Mar 2020:P/E = 14.4x

5,077

+261%

-28%

20 Feb 2020:P/E = 18.7x

7,162Characteristic Mar 2002 Nov 2007 Feb 2020Index level 3,498 6,829 7,162P/E ratio (fwd) 16.5x 16.4x 18.7xDividend yield 3.0% 3.7% 3.9%10-year Tsy 6.3% 6.3% 1.0%

42


8x

10x

12x

14x

16x

18x

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

Australia ASX 200 valuation measures

ASX 200 Index: Forward P/E ratio

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Price to earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Dividend yield is calculated as the next 12-month 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 corporate bond yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) less the yield on the AusBond Credit (5-10y) Index. *Average dates vary due to data availability, start date is 31 December 1999 except for P/B, which is January 2001, and EY spread, which is October 2003. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

Average: 14.3x

31 Mar 2020:14.4x

+1 Std. dev.: 16.0x

-1 Std. dev.: 12.6x Valuation 31 Mar measure Description 2020 Avg* P/E Forward P/E 14.4x 14.3x Div. Yield Dividend yield 4.9% 4.6% P/B Price-to-book 1.9x 2.0x P/CF Price-to-cash flow 9.2x 9.7x EY Spread EY minus corp bond yield 1.8% 1.8%

43

GTM – Australia 43|Australia ASX 200 earnings

ASX 200 earnings and performance EPS revisions: Macro sectorsIndex level, analyst estimates of the next 12 months of earnings, AUD 13-week moving average

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19$280

$300

$320

$340

$360

$380

$400

$420

$440

$460

$480

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500ASX 200 Index levelASX 200 EPS

Equi

ties

Resources

Financials ex-REITs

ASX 200

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

'15 '16 '17 '18 '19 '20

44


Comm. Services

Australia sector returns

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. All calculations are total returns in local currency not annualised. Growth and value indices are sub-sets of the ASX 200 Index. Since market peak represents period 1 November 2007 to the end of the last quarter. Since market low is the period 10 March 2009 to the end of the last quarter. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Financials MaterialsHealthCare Industrials

RealEstate Energy

Cons.Discr. Tech Utilities Australia

Equi

ties

Cons.Staples

ASX 200 weight 28.0% 18.3% 13.9% 8.0% 7.2% 6.3% 6.1% 3.9% 3.7% 2.5% 2.2% 100%

Growth 13.6% 7.1% 28.3% 12.5% 8.7% 7.8% 12.5% 3.2% 3.0% 1.2% 2.1% 100%

Value 57.1% 28.4% 0.0% 0.0% 3.5% 3.0% 0.0% 4.9% 0.3% 0.0% 2.8% 100%

1Q20 -28.0 -21.9 2.1 -27.7 -3.1 -34.8 -29.1 -15.7 -47.9 -24.5 -9.1 -23.1

2019 13.5 27.2 43.5 27.1 21.0 21.7 32.4 27.3 22.9 33.5 16.2 23.4

Since Market Peak (November 2007)

15.7 -2.8 474.9 10.1 119.5 -17.6 9.6 38.1 -47.4 178.8 115.8 29.3

Since Market Low (March 2009)

182.5 83.4 544.2 240.5 213.7 223.0 199.3 92.2 -34.4 231.8 280.4 158.3

Forward P/E Ratio 11.2x 10.6x 33.7x 22.4x 22.6x 10.4x 17.1x 17.7x 13.0x 31.7x 21.1x 14.4x

15-yr avg. 12.6x 13.2x 21.7x 18.7x 17.1x 13.0x 14.6x 13.6x 17.9x 19.7x 18.8x 14.1x

Trailing P/E Ratio 13.9x 11.8x 38.7x 26.8x 24.6x 15.3x 20.6x 19.1x 13.8x 39.7x 21.4x 16.8x

15-yr avg. 13.4x 14.7x 24.4x 21.6x 18.5x 14.5x 15.7x 13.8x 20.4x 21.8x 20.6x 15.2x

Dividend Yield 6.0% 5.8% 1.3% 4.0% 2.7% 5.2% 4.3% 4.0% 4.0% 1.4% 5.4% 4.5%

15-yr avg. 5.9% 3.1% 2.1% 4.3% 4.1% 6.9% 4.9% 6.8% 2.9% 2.7% 5.8% 4.6%

Wei

ghts

Ret

urn

(%)

P/E

Div

45


'89 '90 '91 '92 '93 '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 '190

10

2030

40

5060

7080

90

Volatility

VIX Index*

Source: FactSet, J.P. Morgan Asset Management.*The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices. **First day when VIX breaks 35;subsequent spikes above 35 within the next six months are not included. ***Number of days for VIX to return to its long-term average of 19.3 after initial VIX spikes above 35.Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

23 4 5

6

7 89

1

VIX breaks 35 in six months** Related event S&P 500 Performance VIX returns to long-term

average***(days)On the day After 1 month After 3 months After 12 months1 6-Aug-90 Recession – oil price shock and rate hikes -3.0% -4.2% -5.9% 16.8% 2182 30-Oct-97 Asian crisis -1.7% 7.5% 9.1% 21.6% 1133 27-Aug-98 Long-Term Capital Management -3.8% 0.6% 13.8% 29.3% 3094 17-Sep-01 Recession – collapse of dot-com bubble -4.9% 2.9% 9.2% -15.9% 1725 15-Jul-02 Enron accounting scandal -0.4% 1.3% -8.3% 9.0% 3046 17-Sep-08 Recession – global financial crisis -4.7% -14.8% -21.8% -7.9% 4767 7-May-10 Greece bailout package, austerity imposed -1.5% -5.0% 1.0% 21.2% 1578 8-Aug-11 European debt crisis, U.S. credit downgrade -6.7% 5.9% 12.7% 25.2% 1659 24-Aug-15 Chinese yuan devaluation -3.9% 2.1% 10.2% 15.5% 4410 5-Feb-18 Bond market re-pricing growth and rate hikes -4.1% 3.4% 0.9% 3.4% 911 24-Dec-18 Global growth and market liquidity fears -2.7% 12.4% 19.0% 37.1% 1812 29-Feb-20 COVID-19 pandemic -4.4% -14.7%

Median -3.9% 2.1% 9.1% 16.8%Average -3.4% 1.2% 3.7% 14.1%

Recession

1011

12

46


500

1,000

1,500

2,000

2,500

3,000

3,500

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

U.S. S&P 500 at inflection points

S&P 500 Index

Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management. 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, and is provided by FactSet Market Aggregates. Returns calculations shown in green are based on total return index. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

24 Mar 2000: P/E = 24.4x

1,527

9 Oct 2002:P/E = 14.1x

777

9 Mar 2009:P/E = 10.3x

677

31 Dec 1996: P/E = 16.0x

741

9 Oct 2007:P/E = 14.8x

1,565

+121%-47%

-55%

Total return:+116%

19 Feb 2020:P/E = 19.0x

3,386

+529%

31 Mar 2020:P/E = 15.6x

2,585

-23%

Characteristic Mar 2000 Oct 2007 Feb 2020Index level 1,527 1,565 3,386P/E ratio (fwd) 24.4x 14.8x 19.0xDividend yield 1.0% 1.7% 1.7%10-year Tsy 6.2% 4.6% 1.6%

47


15%

-6%

-40%

15%

47%

15%

0%

11%5%

-11%

6%

17%22%

4%

-60%

-40%

-20%

0%

20%

40%

60%

'06 '08 '10 '12 '14 '16 '18 '90 '95 '00 '05 '10 '15 '201.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

-30

-20

-10

0

10

20

30

40

50

60

U.S. S&P 500 earnings and margins

S&P 500 contribution to operating EPS* growth U.S. wage growth** and profit marginsAnnual growth contribution Year-over-year change

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Compustat; (Right) U.S. Bureau of Economic Analysis, U.S. Department of Labor. *EPS levels are based on annual operating earnings per share except for 2019, which are quarterly. Percentages may not sum due to rounding. **Wage growth is the year-over-year change in the average hourly earnings of production and non-supervisory workers. Guide to the Markets – Australia. Data as of 31 March 2020.

Equi

ties

Share of EPS growth ’19 Avg. ’06-’19Margin -1.7% 3.5%Revenue 4.0% 3.1%Share count 1.3% 0.6%Total EPS 3.6% 7.1%

Profit margins Wage growth

Recession

48


-100%

-80%

-60%

-40%

-20%

0%

1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016

Bear markets Macro environment Bull markets

Mkt. Peak Bear return

Duration (mnths)

P/E trough Recession Commodity

spikeAggressive

FedExtreme

valuationsBull begin

dateBull

returnDuration (mnths)

P/EPeak

1 Crash of 1929 Sep 1929 -86% 32 Jul 1926 152% 37 2 1937 Fed tightening Mar 1937 -60 61 Mar 1935 129 23 3 Post WWII crash May 1946 -30 36 Apr 1942 158 49 4 Flash crash of 1962. Cuban Missile Crisis Dec 1961 -28 6 Oct 1960 39 13 5 Tech crash of 1970 Nov 1968 -36 17 Oct 1962 103 73 6 Stagflation. OPEC oil embargo Jan 1973 -48 20 May 1970 74 31 7 Volcker tightening Nov 1980 -27 20 Mar 1978 62 32 8 1987 crash Aug 1987 -34 3 9.6x Aug 1982 229 60 15.2x9 Tech bubble Mar 2000 -49 30 13.8x Oct 1990 417 113 24.7x10 Global financial crisis Oct 2007 -57 17 10.2x Oct 2002 101 60 15.1x11 Coronavirus pandemic Feb 2020 Mar 2009 401 132 19.0x

Averages - -45% 25 - 169% 57

Recessions and bear markets

S&P 500 Composite declines from all-time highs

Characteristics of bull and bearmarkets

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. Guide to the Markets – Australia. Data as of 31 March 2020.

20% market decline*

Equi

ties

Recession1 2 3

4

5 6

7 8

9 10

11

49


85

90

95

100

105

110

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Europe: Earnings and the euro

Stoxx 50 yearly earnings trend European earnings vs. the euroEPS rebased to 100 in January of each year Last 12 months’ earnings per share EUR / USD

Source: FactSet, J.P. Morgan Asset Management; (Left) STOXX; (Right) MSCI.Guide to the Markets – Australia. Data as of 31 March 2020.

2017

2016

2020

2019

2018

Equi

ties

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '1940

60

80

100

120

140

160

180

200

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

MSCI Europe ex-UK EPS EUR / USD

50

GTM – Australia 50|Emerging markets equities: Valuations and returns

MSCI Emerging Markets Index: Price-to-book ratio MSCI Emerging Markets: Price to book and returnsPrice-to-book ratio and next five-year annualised % total return

Source: FactSet, MSCI, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '190.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

2.75x

3.00x

Average: 1.76x 31 Mar 2020: 1.58x

-2.0 Std. dev.

+2.0 Std. dev.

Current level

Equi

ties

-20%

-10%

0%

10%

20%

30%

40%

50%

0.75x 1.00x 1.25x 1.50x 1.75x 2.00x 2.25x 2.50x 2.75x 3.00x

51


80

90

100

110

120

1300

50

100

150

200

250

300

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

'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '1940

80

120

160

200

240

280

100

200

300

400

500

Emerging markets equities: Relative performance

EM vs. DM growth and equity performanceMonthly, consensus expectations for GDP growth in 12 months

EM equity relative performance and commodity pricesRebased 1997 = 100

EM equity relative performance and the USDRebased to 100 in 1993

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top right) Bloomberg Finance L.P.*REER is the real effective exchange rate. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

EM less DM GDP growth

EM growth & equity outperformance

Equi

ties

MSCI EM / MSCI DM

Bloomberg commodity index

MSCI EM / MSCI DM

USD REER (inverted)*MSCI EM / MSCI DM

EM growth & equity underperformance

0

20

40

60

80

100

120

140

160

-1%

0%

1%

2%

3%

4%

5%

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

52

GTM – Australia 52|APAC ex-Japan equities: Exports and earnings

Domestic vs. export-oriented Asian companies* Growth in nominal exports and earnings per shareMSCI AC Asia Pacific ex-Japan, earnings per share, Jan 2009 = 100 USD, year-over-year change

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Right) CEIC, national statistics agencies. Earnings per share (EPS) used is next 12 months’ aggregate estimate. *Universe of stocks within the MSCI AC Asia Pacific ex-Japan index are split into three buckets depending on their revenue exposure to their domestic market. Over the time period examined (01/01/09 – 30/09/19), monthly adjustments are made to the buckets to reflect changes in a company's operations over time. Subsequently, earnings-per-share (EPS) for each bucket is calculated by summing the market-value weighted EPS for each company on a monthly basis over the examined period. Each EPS series is then indexed to 100 on 01/01/09. **EM Asia ex-China includes Hong Kong, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. Overall exports aggregate is gross domestic product (GDP)-weighted. Past performance is not a reliable indicator of current and future results. For illustrative purposes only.Guide to the Markets – Australia. Data as of 31 March 2020

Equi

ties

Less than 70% of revenue derived domestically

Between 70% and 95% of revenue derived domesticallyMore than 95% of

revenue derived domestically

MSCI AC Asia Pacific ex-Japan EPS

EM Asia ex-China exports**

0

100

200

300

400

500

600

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-60%

-40%

-20%

0%

20%

40%

60%

80%

'01 '03 '05 '07 '09 '11 '13 '15 '17 '19

53


45.4% 38.0% 35.6% 29.6%

4.8%20.8%

0%

20%

40%

60%

80%

100%

Share of EMGDP*

Share of EMmarket cap**

20% A-shareinclusion(Current)

100% A-shareinclusion

-90

-60

-30

0

30

60

90

-60

-30

0

30

60

90

120

150

'15 '16 '17 '18 '19 '200%

1%

2%

3%

4%

0.0

0.5

1.0

1.5

2.0

2.5

'14 '15 '16 '17 '18 '19

'13 '14 '15 '16 '17 '18 '19 '2070

80

90

100

110

120

130

140

China: Equities snapshot

Corporate earningsNext 12-month consensus EPS, USD, indexed to January 2013

MSCI A-share inclusionChina’s share in selected emerging market indicators

Foreign investors’ holdings of onshore Chinese equitiesRMB trillions

Stock Connect monthly net flowHKD / RMB billionsEq

uitie

s

CSI 300

MSCI China

Northbound (Hong Kong to China)

Southbound (China to Hong Kong)

Source: J.P. Morgan Asset Management; (Top and bottom left) FactSet, MSCI; (Bottom left) Bloomberg Finance L.P.; (Top right) Bloomberg, MSCI, World Bank; (Bottom right) CEIC, Hong Kong Exchanges and Clearing Limited. The CSI 300 represents onshore Chinese A-share large cap equities. MSCI China represents primarily offshore listed Chinese equities and the onshore equities included in MSCI benchmarks. *Share of EM GDP is for 2018 and is calculated as Chinese nominal GDP in USD as a percentage of all emerging markets within the MSCI EM Index. **Share of EM market cap is for 2018 and is calculated as China’s market capitalisation of listed domestic companies as a percentage of all emerging markets’ capitalisation of listed domestic companies within the MSCI EM index. ***Currently, an index inclusion factor (IIF) of 10% is applied to China A Large Cap securities. By November 2019, the inclusion factor will be 20% for China A Large Cap, ChiNext Large Cap and China A Mid Cap (including eligible ChiNext shares). 100% A share inclusion is shown for illustrative purposes only. Guide to the Markets – Australia. Data as of 31 March 2020.

Total as a % of domestic market capForeign investor holdings

A-shareOffshore China

Share of MSCI EM Index***

54


2014 2015 2016 2017 2018 2019 1Q20 Ten-yr Ann 16.0%

EM Debt 6.2%

14.5% EM Debt

1.8%

15.3% Global HY

15.9%

5.1% Aus IG 5.1%

12.1% US Treas.

0.9%

13.9% Global HY

14.0%

24.3% US Treas.

8.2%

9.9% Global HY

7.7%

14.8% US Treas.

5.1%

13.4% US Treas.

0.8%

10.1% EM Debt

9.6%

3.5% Aus Gov

3.5%

9.7% US TIPS -1.3%

12.8% EM Debt 12.6%

16.8% US TIPS

1.7%

8.7% EM Debt

6.1%

13.3% US TIPS

3.6%

10.9% US TIPS -1.4%

5.7% Portfolio

5.6%

2.0% Global HY

7.6%

7.4% Global HY

-2.4%

11.7% Global IG

11.5%

8.6% Global IG

-5.4%

6.9% Portfolio

5.3%

12.8% Global IG

3.1%

8.5% Global IG

-3.6%

5.2% US TIPS

4.7%

1.0% Global IG

9.1%

7.1% Global IG

-3.6%

9.5% Portfolio

9.4%

7.4% Portfolio

-1.0%

6.7% Global IG

4.1%

11.6% Portfolio

6.2%

7.8% Global HY

-2.1%

4.8% Global IG

4.3%

0.8% Portfolio

5.2%

7.0% Portfolio

0.6%

8.6% US TIPS

8.4%

4.9% EM Debt

-8.7%

6.1% Aus IG 6.1%

10.3% Aus Gov

10.3%

7.6% Portfolio

0.5%

3.8% Aus IG 3.8%

0.3% EM Debt

8.3%

5.2% EM Debt

-5.3%

7.8% Aus Gov

7.8%

4.1% Aus Gov

4.1%

5.9% US TIPS

3.4%

9.2% Global HY

2.5%

3.0% Aus IG 3.0%

2.5% Aus Gov

2.5%

-4.6% US TIPS

3.0%

5.1% Aus Gov

5.1%

7.1% Aus IG 7.1%

0.7% Aus IG 0.7%

5.6% US Treas.

3.1%

8.1% Aus IG 8.1%

2.3% Aus Gov

2.3%

1.5% US Treas.

1.0%

-5.3% US Treas.

2.3%

3.9% Aus IG 3.9%

7.0% US Treas.

6.9%

-2.4% Global HY

-14.2%

5.5% Aus Gov

5.5%

Fixed income sector returns

Fixed income sector returns

Source: Barclays, Bloomberg Finance L.P., BoA/ML, FactSet, J.P. Morgan Asset Management. Aus Gov: AusBond Treasury (0+Y); U.S. Treas.: Barclays U.S. Aggregate Government – Treasury; Global IG: Barclays Global Aggregate – Corporate – Investment Grade; Aus IG: Bloomberg AusBond Credit (0+Y); Global HY: BoA/ML Global High Yield; EM Debt: J.P. Morgan EMBI+; U.S. TIPS: Bloomberg Barclays U.S. Treasury Inflation-Protected (TIPS). Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 25% Aus Gov, 15% Aus IG, 10% Global IG, 15% Global HY, 10% EM Debt, 15% U.S. Treas., 10% U.S. TIPS. Correlation to U.S. Treasuries and Australian Treasuries are to the Barclays U.S. Treasury (10Y) and Bloomberg AusBond Treasury (7-10Y), respectively, for the past 10 years. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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EM Debt

Australia IG

Portfolio

Australia Gov

U.S. Treasury

U.S. TIPS

Global HY

Global IG

Correl to TreasuriesYield Duration U.S. Australia

9.48% 4.2 Yrs -0.27 -0.21

6.24 8.2 0.16 0.12

3.04

2.84 0.0 0.00 0.00

1.80 3.8 0.49 0.82

0.61 6.6 0.74 0.98

0.58 7.0 0.98 0.74

-0.17 6.7 0.66 0.50

AUD

LCL

55


Number of policy rate changes by central banks

Central bank policy rates

Central bank key policy ratesTarget rates

Source: J.P. Morgan Asset Management; (Left) Bank of Japan, European Central Bank, FactSet, Reserve Bank of Australia, U.S. Federal Reserve; (Right) BIS. *Covers the 38 central banks included in the Bank for International Settlements’ central bank policy monitor. Year-to-date data reflect most recently available as of 30/11/19. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19

0%

1%

2%

3%

4%

5%

6% Policy rate Deposit rateRBA 0.25% 0.10%U.S. Fed 0-0.25% 0.00%ECB 0.00% -0.50%BoJ -0.10% -0.10%

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Developed market central banks easing or tightening policy*

DMEM

Rate hikes

Rate cutsDM

EM

-200

-150

-100

-50

0

50

100

150

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

56


-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

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

Central bank balance sheets

Central bank bond purchases Quarterly net bond purchases by G4 central banks*, USD billions

Source: Bank of England, Bank of Japan, Bloomberg Finance L.P., European Central Bank, U.S. Federal Reserve, J.P. Morgan Asset Management.*New purchases of bonds are based on period to period changes in average holdings during the quarter across various asset purchase programs as reported by eachrespective G4 central bank (the Bank of England, the Bank of Japan, the European Central Bank and the U.S. Federal Reserve), announced purchase plans of these central banks and J.P. Morgan Asset Management projections, converted to common currency by average quarterly exchange rates.Guide to the Markets – Australia. Data as of 31 March 2020.

Projection

U.S.Eurozone

JapanNet

UK

Fixe

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57

GTM – Australia 57|Eurozone and Japan: Monetary policy

ECB bond purchasesPublic sector bond purchases, billions

Bank of Japan ETF holdingsShare of market total

Bank of Japan purchaseJPY trillions, rolling six-month average Share of total

Source: FactSet, J.P. Morgan Asset Management; (Left) ECB, Eurostat; (Top right) Bank of Japan, Investment Trusts Association of Japan; (Bottom right) Bank of Japan. *The ECB public sector purchase program (PSPP) had a limit of 33% for maximum share of an issuer’s outstanding securities that the ECB is prepared to buy. This limit was initially set at 25% at the start of the PSPP and was revised upwards to 33% in September 2015. The ECB asset purchase program will now include the pandemic emergency purchase program (PEPP) and PSPP where the 33% limit will not be binding. Guide to the Markets – Australia. Data as of 31 March 2020.

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Total outstanding debt

ECB PSPP purchases

33% limit*

Equity ETFsGovernment bonds Equity ETFs

Equity EFT market

Government bond market

0%

5%

10%

15%

20%

25%

30%

35%

0

20

40

60

80

100

120

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

'11 '12 '13 '14 '15 '16 '17 '18 '19 '200%

20%

40%

60%

80%

100%

€ 0

€ 200

€ 400

€ 600

€ 800

€ 1,000

€ 1,200

€ 1,400

€ 1,600

€ 1,800

€ 2,000

€ 2,200

58

GTM – Australia 58|Cash investments

Bank deposits and interest rates U.S. and Australian bank funding costsAUD, billions 1-year term deposit, $10,000 3-month LIBOR and BBSW spread over OIS*, basis points

Source: FactSet, ICAP Plc, Reserve Bank of Australia, J.P. Morgan Asset Management. *LIBOR is the London Interbank Offer Rate, BBSW is the Bank Bill Swap Rate and they represent the rate at which banks lend to each other. The OIS is the overnight banks swap and is the rate at which central banks offer cash to the market. The spread between the bank funding rate and the OIS indicates how difficult it is for banks to acquire funding. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

AUD billions

Deposits 1-year rate

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Australia (BBSW)

U.S. (LIBOR)

0%

1%

2%

3%

4%

5%

6%

7%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

'02 '04 '06 '08 '10 '12 '14 '16 '18 '200

20

40

60

80

100

120

140

'15 '16 '17 '18 '19

59


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

'62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 '18

U.S.: Yield curve inversion and recessions

Yield curve spread10-year less 2-year U.S. Treasury*

Source: FactSet, Tullett Prebon, J.P. Morgan Asset Management. *From January 1962 to May 1976, short-term bond is the U.S. 1-year note, and from June 1976 onwards the short-term bond is the 2-year note due to a lack of data availability. Time to recessions is calculated as the time between the final sustained inversion of the yield curve prior to the recession and the onset of recession. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Recession

Rate hiking cycle

Date of first inversion prior to recession Time to recession

11 April 1968 19 months

9 March 1973 7 months

18 August 1978 16 months

12 September 1980 9 months

13 December 1988 18 months

2 February 2000 12 months

8 June 2006 17 months

Average 14 months

Inversion without recession

Inversion prior to recession

60


'70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20-10%

-5%

0%

5%

10%

15%

20%

Australian interest rates and inflation

Nominal and real 10-year Treasury yields

Source: Australian Bureau of Statistics, FactSet, Tullett Prebon, J.P. Morgan Asset Management. *December real yield calculated using 3Q19 inflation.Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

30 Jun 1982: 16.40%

Nominal 10-year Treasury yield

Real 10-year Treasury yield

Avg. 1970-2020

31 Mar2020

Nominal yield 7.96% 0.76%

Real yield* 2.64% -1.04%

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61


0.06% 0.11%0%

1%

2%

3%

4%

5%

6%

'05 '07 '09 '11 '13 '15 '17 '19 '21

The U.S. Federal Reserve outlook

Federal funds rate expectationsFOMC and market expectations for the fed funds rate

Source: FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

Federal funds rate

Market expectations 31 March 20

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Federal Reserve Policy Actions

Restarted unlimited asset purchase programs

Reduced reserve requirements for the banking sector

Expanded the asset purchase program to include commercial mortgage-backed securities

Restarted Term Asset-Backed Securities Loan Facility (TALF)

Launched a Primary (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF)

Allowed municipal debt to be eligible as collateral in Money Market Fund Liquidity Facility (MMLF) and Commercial Paper Funding Facility (CPFF)

62


0%

5%

10%

15%

20%

25%

30%

35%

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

Global fixed income: Yields

Negative-yielding debtShare of ICE BofAML Gobal Broad Market Index

Source: Bloomberg Barclays, BofA/Merrill Lynch, FactSet, J.P. Morgan Asset Management. (Right) BIS.Global HY: BofAML Global High Yield; EMD ($): J.P Morgan EMBI Global. For illustrative purposes only. Guide to the Markets – Australia. Data as of 31 March 2020.

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Yield Return

Aggregates Duration 31 Mar ‘20 31 Dec '19 2019 1Q ‘20

Global 7.0 Yrs 1.22% 1.45% 6.84% -0.33%

Australia 5.6 0.90 1.38 7.26 2.99

U.S. 5.7 1.59 2.31 8.72 3.15

Japan 9.5 0.11 0.08 1.78 -0.38

Germany 6.8 0.30 0.20 4.49 0.04

Sector

Floating rate 0.1 Yrs 3.61% 2.33% 4.28% -2.83%

MBS 1.7 1.34 2.54 6.35 2.82

Aus IG 3.8 1.80 1.87 7.06 0.75

Global IG 6.9 3.04 2.23 11.51 -5.42

Global HY 4.2 9.48 5.69 13.95 -13.64

EMD ($) 7.4 6.54 4.81 14.42 -11.76

EMD (LCL) 5.3 5.36 5.22 12.34 -1.05

EMD Corp 5.2 6.59 4.97 13.09 -10.17

Market value (USD tn) 31 Mar 20Japan (government) $4.92Europe (government) 4.43Rest of world (government) 0.03

Corporate 1.01

63


0%

2%

4%

6%

8%

10%

12%

14%

16%

'63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13 '18-1%

1%

3%

5%

7%

9%

11%

13%

15%

'89 '94 '99 '04 '09 '14 '19

Global fixed income: Core government bonds

10-year government bond yields 10-year U.S. Treasury yield and returns

Source: FactSet, Tullet Prebon, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

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AustraliaEurozone

U.S.

10-year Treasury yield

10-year avg. ann. return

Japan

64

GTM – Australia 64|Global fixed income: Yields and correlation

Yields and correlations of fixed income returns to equities10-year correlation between monthly total returns

Source: Bank of America Merrill Lynch, Bloomberg Finance L.P., FactSet, ICE, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. Based on Bloomberg Barclays U.S. Treasury (UST) Bellwether 2y & 10y (2y & 10y UST), Bloomberg Barclays Treasury Inflation Protected Securities (TIPS), ICE BofAML Country Government (1-10y) (Australia, Germany, Japan & UK (1-10y)), Bloomberg Barclays U.S. Aggregate, Credit – Investment Grade & High Yield (U.S. Aggregate, IG & HY), Bloomberg Barclays U.S. Floating Rate (U.S. Floating Rate), Bloomberg Barclays U.S. Aggregate Securitized – Mortgage-Backed Securities (U.S. MBS), Bloomberg Barclays Pan-European High Yield (Europe HY), J.P. Morgan GBI-EM Global (Local EMD), J.P. Morgan EMBI Global (USD EMD), J.P. Morgan Asia Credit (JACI) (USD Asia Credit), J.P. Morgan Asia Credit (JACI) – High Yield (USD Asia HY), J.P. Morgan CEMBI (USD EM Corporate Credit), J.P. Morgan Asia Diversified (JADE) (Local Asia). *Correlations are based on 10-years of monthly returns.Guide to the Markets – Australia. Data as of 31 March 2020.

Government

Credit

Emerging Market

Higher yieldingsectors

Stronger correlation to equities

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2y UST

10y UST TIPS

Japan (1-10y)

Germany (1-10y)

Australia (1-10y)

UK (1-10y)

U.S. Aggregate

U.S. IG

U.S. HY

U.S. Floating Rate

U.S. MBS

Europe HY

Local EMD

USD EMD

USD Asia Credit

USD Asia HY

USD EMD corporates

Local Asia

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

-0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Yiel

d

Correlation to MSCI AC World*

65


10%

20%

30%

40%

50%

60%

5

6

7

8

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '190

100

200

300

400

500

600

Global investment-grade bonds

Global investment-grade bondsOption-adjusted spreads, basis points

U.S. investment-grade leverage measuresLeverage* and interest coverage** ratio

Credit quality and durationU.S. aggregate investment-grade bond index

Source: J.P. Morgan Asset Management; (Left and bottom right) Bloomberg Barclays, FactSet; (Left) BofA Merrill Lynch; (Top right) J.P. Morgan Securities.*Leverage is net debt to earnings before interest, tax, depreciation and amortisation (EBITDA). **Interest coverage is EBITDA over interest expense. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Interest coverage

Leverage

Average 31 Mar 20U.S. 157bps 272bps

Europe 129 239

Australia 128 162

Duration (years) % of BBB bonds in index

8x

10x

12x

14x

16x

18x

0.8x

1.2x

1.6x

2.0x

2.4x

2.8x

3.2x

'04 '06 '08 '10 '12 '14 '16 '18

66


'04 '06 '08 '10 '12 '14 '16 '18 '200%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

U.S.: Asset-backed securities

Consumer sector delinquency*90+ days, % of outstanding balances

Asset-backed security breakdownIndex weight

Mortgage originations by credit score***USD billions

Source: FactSet, J.P. Morgan Asset Management; (Top right) Bloomberg Barclays; (Bottom right) Federal Reserve Bank of New York.*Delinquency rate is defined as loans at least 90 days late or more with repayments. **Sectors not shown but included in the total figure are Revolving Home Equity and Others. ***FICO scores indicate borrowers’ credit worthiness, the higher score the lower the risk of default. Scores less than 670 are considered to be subprime.Guide to the Markets – Australia. Data as of 31 March 2020.

Debt balance (USD trillion)**

Student 1.51Credit card 0.93Auto 1.33Mortgage 9.56Total 14.15

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< 620620 - 659660 - 719720 - 759> 760

Agency fixed rate

MBS, 91.7%

Non-agency CMBS, 4.0%

Agency CMBS, 2.9%

ABS, 1.4%

$0

$200

$400

$600

$800

$1,000

$1,200

'03 '05 '07 '09 '11 '13 '15 '17 '19

67

GTM – Australia 67|U.S.: High yield bonds

U.S. high yield spread and default rate

High yield sectors and default ratesLast 12-month default rate

U.S. high yield leverage measuresNet leverage* and interest coverage ratio**

Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management. Default rates are defined as the par value percentage of the total market trading at or below 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. Spreads indicated are benchmark yield to worst less comparable maturity Treasury yields. Yield to worst is defined as the lowest potential yield that can be received on a bond without the issue actually defaulting and reflects the possibility of the bond being called at an unfavourable time for the holder. *Net leverage is net debt divided by adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). **Interest coverage ratio is EBITDA over interest expense. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Asset class Average since 1986 Latest

HY spread (RHS) 567bps 949bpsHY energy spread 641bps 2137bpsHY default (LHS) 3.8% 3.4%

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Net leverage

Interest coverage ratio

Recession

Default rateIndex weight

3.0x

3.5x

4.0x

4.5x

5.0x

'11 '12 '13 '14 '15 '16 '17 '18 '19

0bps

500bps

1000bps

1500bps

2000bps

0%

5%

10%

15%

20%

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19

0%

2%

4%

6%

8%

10%

12%

Healthcare Energy Technology Services Financial Lodging andliesure

68


3%

5%

7%

9%

11%

13%

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Emerging market debt

Emerging market yields Real 10-year government bond yieldsYield to maturity Local currency

Source: J.P. Morgan Asset Management; (Left) J.P. Morgan Securities Research; (Right) FactSet, Tullet Prebon. Real yield is calculated by using nominal yield less current CPI for the respective countries. Sector yields based on J.P. Morgan GBI-EM (EM sovereign (local currency)), J.P. Morgan EMBI+ (EM sovereign (USD)), J.P. Morgan CEMBI (EM corporate (USD)). Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Average 31 Mar 20Corporate (USD) 6.08% 6.59%

Sovereign (USD) 6.16% 6.24%Sovereign (LCL) 6.56% 5.36%

Developed marketsEmerging markets

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

S. A

frica

Indo

nesi

a

Rus

sia

Braz

il

Mex

ico

Mal

aysi

a

Turk

ey

Japa

n

Indi

a

Aust

ralia

U.S

.

Ger

man

y

Chi

na

69


'12 '13 '14 '15 '16 '17 '18 '19900

950

1,000

1,050

1,100

1,150

1,200

1,250

0

500

1,000

1,500

2,000

2,500

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20$0

$25

$50

$75

$100

$125

$150

Oil

Price of oilBrent crude, nominal prices, USD / barrel

Fiscal breakeven oil priceUSD / barrel, 2020 estimates

U.S. crude oil inventories and rig count*Millions barrels Number of active rigs

Source: FactSet, J.P. Morgan Asset Management; (Top left) J.P. Morgan EM Macro bites, J.P. Morgan Securities; (Bottom left) Baker Hughes, U.S. Department of Energy.*Weekly U.S. crude oil and petroleum ending inventory includes strategic petroleum reserve, and active rig count represents both natural gas and oil rigs.Guide to the Markets – Australia. Data as of 31 March 2020.

Inventories (incl. SPR)

Active rigs

31 Mar 2020: $25.94

Jul 2008: $145.65

Dec 2008: $34.27

Jun 2014: $115.60

Oth

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asse

t cla

sses

$0

$20

$40

$60

$80

$100

$120

Qatar Russia Kuwait Iraq UAE SaudiArabia

Nigeria

70


'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '1920

40

60

80

100

120

140

160

180

200

Commodities

Commodity pricesRBA commodity indices

Iron ore: Chinese port inventories and days of supplyMt Days

Gold and real ratesUSD/troy oz Yield

Source: J.P. Morgan Asset Management; (Left) FactSet, Reserve Bank of Australia; (Top right) Bloomberg Finance L.P., National Bureau of Statistics of China; (Bottom right) FactSet, U.S. Federal Reserve. *Not plotted on chart.Guide to the Markets – Australia. Data as of 31 March 2020.

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Index weights 2019Bulk commodities 54.0%Rural commodities 12.2%Base metals 4.2%Other resources* 29.6%Index 100.0%

Days of supplyInventories at port

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000 -1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Gold price TIPS yield (inverted)

0

10

20

30

40

50

60

020406080

100120140160

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

71


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

$40

$60

$80

$100

$120

$140

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

Australian dollar

Iron ore price and FX Short rates (bps) and FXIron ore price and FX 2-year U.S. / Australia Treasury difference

Source: FactSet, J.P. Morgan Asset Management; (Left) Commodity Research Bureau; (Right) Tullett Prebon. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Iron ore price AUD / USD

'13 '14 '15 '16 '17 '18 '19-200

-150

-100

-50

0

50

100

150

200

250

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

Spread (bps)

AUD / USD

72


-3

-2

-1

0

1

2

3

Global currencies

Currency deviation from 10-year average in real effective exchange rate* termsNumber of standard deviations away from average

Source: FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.*The real trade-weighted exchange rate index is the weighted average of a country’s currency relative to a basket of other major currencies adjusted for the effects ofinflation. The weights are determined by comparing the relative trade balances, in terms of one country’s currency, with other countries within the basket. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Min

Current

Max

Above average

Below average

73


'74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '2070

80

90

100

110

120

130

U.S. dollar

U.S. dollar index

Source: FactSet, J.P. Morgan Asset Management.*The real trade-weighted exchange rate index is the weighted average of a market’s currency relative to a basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one market’s currency, with other markets within the basket. **The Dollar Index is a trade-weighted index calculated using seven major U.S. trade partners’ currencies – Australian dollar, British pound, Canadian dollar, euro, Japanese yen, Swedish kroner and Swiss franc. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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U.S. Dollar Index (DXY)**Real trade-weighted exchange rate index*

Recession

74

GTM – Australia 74|Market performance in late cycle

Asset class performance during S&P 500 peak to trough periodsTotal returns, local currency

Source: Barclays, Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.Based on MSCI World (DM equities), MSCI EM (EM equities), Bloomberg Barclays U.S. Aggregate Credit High Yield Corporate Index (U.S. High yield), Bloomberg Barclays U.S. Aggregate Corporate Index (U.S. Investment grade), Bloomberg Barclays U.S. Aggregate Treasuries (U.S. Treasuries), DXY Index (U.S. dollar). Peak to trough periods for the S&P 500 are 25/08/87-04/12/87, 16/07/90-11/10/90, 24/03/00-09/10/02 and 09/10/07-09/03/09. For the 1987 period, the ASX All Ordinaries price index is used. Guide to the Markets – Australia. Data as of 31 March 2020.

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S&P 500DM equitiesEM equities

ASX 200U.S. High yieldU.S. Investment grade

U.S. Dollar indexU.S. TreasuriesGold

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1987 1990 2000 2007

75


$40$60$80

$100$120$140$160$180$200$220

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Portfolio returns: Equities vs. equity and fixed income blend

Correlation and diversification

Correlations between stocks and sovereign bondsWeekly rolling correlation of U.S. equities and sovereign bond returns*

000s, total returns**

Source: Bloomberg LLP, FactSet, Standard & Poor’s, J.P. Morgan Asset Management; *Rolling six-month pairwise correlations between weekly returns in U.S. equities (S&P 500) and U.S. bonds (Bloomberg Barclays U.S. Aggregate Government Treasuries).**Portfolio is combination of ASX 200 total return index and Bloomberg Barclays Ausbond Composite (+0Y) Index and is rebalanced annually.Guide to the Markets – Australia. Data as of 31 March 2020.

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One-year Six-month

Stocks and bonds moving in the same direction

Aug ’09: 40/60

portfolio recovers

Oct. ’10: 60/40

portfolio recovers

Sep ’13: ASX 200 recovers

Feb. ’09: Market low

Oct. ’07: Market peak

40/60 equities & bonds60/40 equities & bondsASX 200

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

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

76

GTM – Australia 76|Asset class returns (AUD)

Source: Bloomberg Finance L.P., FactSet, FTSE, J.P. Morgan, MSCI, Standard & Poor's, J.P. Morgan Asset Management. Annualised return (Ann.) and volatility(Vol.) covers the period 2004 to 2018. EME: MSCI Emerging Markets; Australian FI: Bloomberg AusBond Composite (0+Y); Global FI: Barclays Global Aggregate; DMEquities: MSCI World; Australian equities: ASX 200 Index; REITs: FTSE EPRA/NAREIT Australia; Cash: Bloomberg AusBond Bank Bill Index. Port. is hypotheticalportfolio (for illustration purposes only and should not be taken as a recommendation): 15% DM equities; 10% EM equities; 25% Australian equities; 25% Australian FI;10% Global FI; 5% Cash and 10% REITs. Returns are unhedged, total return, in Australian dollars. Past performance is not a reliable indicator of current and futureresults.Guide to the Markets – Australia. Data as of 31 Mach 2020.

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ples

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20 Ann. Vol.EM

equity 43.8%

REITS 33.2%

EM equity 25.5%

Global FI

32.0%

EM equity 38.8%

Aus. FI 6.0%

Aus. FI 11.4%

REITS 32.2%

DM equity 47.8%

REITS 27.3%

REITS 14.0%

REITS 13.9%

EM equity 27.5%

Global FI

9.8%

DM equity 28.6%

Global FI

14.5%

EM equity 8.6%

REITS 16.4%

Aus. Equity 22.8%

Aus. Equity 24.2%

Aus. Equity 16.1%

Aus. FI 14.9%

Aus. Equity 37.0%

Cash 4.7%

Global FI

5.6%

Aus. Equity 20.3%

Aus. Equity 20.2%

DM equity 15.3%

DM equity 12.1%

EM equity 12.1%

DM equity 13.9%

REITS 5.7%

Aus. Equity 23.4%

Aus. FI 3.0%

DM equity 8.3%

EM equity 13.7%

DM equity 17.6%

EM equity 23.4%

Cash 6.8%

Cash 7.6%

Port. 12.6%

EM equity 4.6%

Cash 5.0%

EM equity 17.1%

Port. 16.2%

Port. 10.8%

Global FI

8.9%

Aus. Equity 11.8%

Aus. Equity 11.8%

Aus. FI 4.5%

EM equity 19.1%

Cash 0.3%

Aus. Equity 8.0%

Aus. Equity 12.9%

Port. 16.2%

Port. 14.6%

Port. 6.6%

Port. -15.6%

Cash 3.5%

Port. 1.7%

Port. -1.8%

DM equity 15.1%

EM equity 13.4%

Global FI

10.0%

Port. 5.1%

DM equity 8.7%

Port. 9.2%

DM equity 2.0%

REITS 18.9%

DM equity -9.2%

Port. 7.4%

DM equity 11.3%

REITS 15.5%

DM equity 12.3%

Aus. FI 3.5%

DM equity -24.9%

REITS 3.3%

Aus. Equity 1.6%

REITS -2.0%

Port. 14.7%

Global FI

13.0%

Aus. FI 9.8%

Aus. FI 2.6%

Port. 7.9%

REITS 5.1%

Cash 1.9%

Port. 16.5%

Port. -10.2%

Aus. FI 5.7%

Port. 9.2%

Aus. FI 5.8%

Cash 6.0%

DM equity -1.6%

Aus. Equity -38.4%

Aus. FI 1.7%

REITS 0.4%

DM equity -5.0%

Aus. FI 7.7%

REITS 6.6%

EM equity 7.3%

Aus. Equity 2.6%

Aus. FI 2.9%

Aus. FI 3.7%

Port. 1.9%

Aus. FI 7.3%

EM equity -12.2%

REITS 4.7%

Global FI

5.4%

Cash 5.7%

Aus. FI 3.1%

Global FI

-1.7%

EM equity -41.0%

DM equity 1.4%

DM equity -1.4%

Aus. Equity -10.5%

Cash 4.0%

Cash 2.9%

Aus. Equity 5.6%

Cash 2.3%

Global FI

2.6%

Cash 1.7%

Aus. Equity -2.8%

Global FI

7.0%

Aus. Equity -23.1%

Global FI

3.9%

Aus. FI 2.8%

Global FI

2.1%

Global FI

-0.8%

REITS -7.7%

REITS -55.2%

Global FI

-17.1%

Global FI

-7.4%

EM equity -18.2%

Global FI

3.0%

Aus. FI 2.0%

Cash 2.7%

EM equity -3.9%

Cash 2.1%

Global FI

-0.6%

EM equity -4.7%

Cash 1.5%

REITS -39.9%

Cash 3.9%

Cash 0.5%

15-years '05 - '19

77

GTM – Australia 77|Annual returns and intra-year declines

ASX 200 Index intra-year declines vs. calendar year returnsDespite average intra-year drops of 13.6% (median 11.5%), annual returns are positive in 19 out of 26 years

Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are based on price only and exclude dividends. Intra-year decline refers to the largest market fall from peak to trough in a short period of time during the calendar year. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

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Calendar year return

Intra-year decline

-12%

16%

10% 8%6%

15%

3%7%

-12%

10%

23%

18% 19%

12%

-41%

31%

-3%

-15%

15% 15%

1%

-2%

7% 7%

-7%

18%

-24%-21%

-5%

-10%

-17% -16%

-11% -10%

-16% -17%

-12%

-3%-7%

-10%-12%

-47%

-17% -16%

-22%

-10% -11%-9%

-18%

-10%

-5%

-14%

-6%

-37%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

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

78


$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

25 30 35 40 45 50 55 60 65

The power of compounding

$5,000 invested annually with 5% growth per year One-off $5,000 investment with/without income reinvestedAUD AUD, MSCI Australia returns

Source: FactSet, MSCI, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Inve

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inci

ples

'89 '94 '99 '04 '09 '14 '19$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Without dividends reinvested

With dividends reinvested

$27,294

$113,799

Starting at age 35

Starting at age 25

Age

$353,804

$639,199

79


68%

24%

78%

37%

93%

52%

0%

20%

40%

60%

80%

100%

80 years 90 years

Life expectancy

Probability of reaching ages 80 and 90Persons aged 65, by gender, and combined by couple

Source: ABS Life Tables, J.P. Morgan Asset Management.Guide to the Markets – Australia. Data as of 31 March 2020.

Men

WomenCouple – at least one lives to specified age

Inve

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inci

ples

80


-39%

-8%

-15%

-3% -2%

1%

-1% 1% 2%6%

1%5%

47%43%

33%28%

23% 21% 19%16% 16% 17%

12% 14%

-50%

-40%

-30%

-20%

-10%

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Time, diversification and the volatility of returns

Range of equity, bond and blended total returnsAnnual total returns, 1950-2019

Source: Barclays, FactSet, Robert Shiller, Strategas/Ibbotson, U.S. Federal Reserve, J.P. Morgan Asset Management. Returns shown are based on calendar year returns from 1950 to 2018. Large cap equity represents the S&P 500 Shiller Composite and bonds represents the Strategas/Ibbotson for periods from 1950 to 1980 and the Barclays Aggregate after index inception in 1980. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Australia. Data as of 31 March 2020.

Large cap equityBonds50/50 portfolio

1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling

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81

GTM – Australia 81|Asset markets in the coming decade

Expected annualised returnsPercent per year, AUD hedged returns

Source: 2020 Long-term capital market assumptions, J.P. Morgan Asset Management, November 2019. *Returns are translated to AUD unhedged.Guide to the Markets – Australia. Data as of 31 March 2020.

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J.P. Morgan Asset Management – Index DefinitionsThe MSCI Small Cap IndicesSM target 40% of the eligible Small Cap universe within each industry group, within each country. MSCI defines the Small Cap universe as all listed securities that have a market capitalization in the range of USD200-1,500 million. The MSCI Value and Growth IndicesSM cover the full range of developed, emerging and All Country MSCI Equity indexes. As of the close of May 30, 2003, MSCI implemented an enhanced methodology for the MSCI Global Value and Growth Indices, adopting a two dimensional framework for style segmentation in which value and growth securities are categorized using different attributes - three for value and five for growth including forward-looking variables. The objective of the indexdesign is to divide constituents of an underlying MSCI Standard Country Index into a value index and a growth index, each targeting 50% of the free-float adjusted market capitalization of the underlying country index. Country Value/Growth indices are then aggregated into regional Value/Growth indices. Prior to May 30, 2003, the indices used Price/Book Value (P/BV) ratios to divide the standard MSCI country indices into value and growth indices. All securities were classified as either "value" securities (low P/BV securities) or "growth" securities (high P/BV securities), relative to each MSCI country index.The following MSCI Total Return IndicesSM are calculated with gross dividends:This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits.The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore. Credit Suisse/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted hedge fund index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under management, a 12-month track record, and audited financial statements. It is calculated and rebalanced on a monthly basis, and shown net of all performance fees and expenses. It is the exclusive property of Credit Suisse Tremont Index, LLC. The NFI-ODCE, short for NCREIF Fund Index - Open End Diversified Core Equity, is an index of investment returns reporting on both a historical and current basis the results of 33 open-end commingled funds pursuing a core investment strategy, some of which have performance histories dating back to the 1970s. The NFI-ODCE Index is capitalization-weighted and is reported gross of fees. Measurement is time-weighted.The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry performance, and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the American Stock Exchange or the NASDAQ National Market List.The Dow Jones Industrial Average measures the stock performance of 30 leading blue-chip U.S. companies.The Bloomberg Commodity Index is composed of futures contracts on physical commodities and represents twenty two separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc

All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The S&P 400 Mid Cap Index is representative of 400 stocks in the mid-range sector of the domestic stock market, representing all major industries.The Russell 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The Russell 1000 Index ® measures the performance of the 1,000 largest companies in the Russell 3000. The Russell 1000 Growth Index ® measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index ® measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index ® measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Growth Index ® measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index. The Russell Midcap Value Index ® measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value index. The Russell 2000 Index ® measures the performance of the 2,000 smallest companies in the Russell 3000 Index.The Russell 2000 Growth Index ® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Value Index ® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Top 200 Index ® measures the performance of the largest cap segment of the U.S. equity universe. It includes approximately 200 of the largest securities based on a combination of their market cap and current index membership and represents approximately 68% of the U.S. market. The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWIconsisted of 45 country indices comprising 23 developed and 22 emerging market country indices.

J.P. Morgan Asset Management – Index Definitions All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P GSCI Index is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully collateralized basis with full reinvestment. Individual components qualify for inclusion in the index on the basis of liquidity and are weighted by their respective world production quantities.The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis. This U.S. Treasury Index is a component of the U.S. Government index. West Texas Intermediate (WTI) is the underlying commodity for the New York Mercantile Exchange's oil futures contracts. The Barclays Capital High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included.The Barclays Capital 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate andnon convertible.The Barclays Capital General Obligation Bond Index is a component of the Barclays Capital Municipal Bond Index. To be included in the index, bonds must be general obligation bonds rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody's, S&P, Fitch. If only two of the three agencies rate the security, the lowerrating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates, and derivatives, are excluded from the benchmark.The Barclays Capital Revenue Bond Index is a component of the Barclays Capital Municipal Bond Index. To be included in the index, bonds must be revenue bonds rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody's, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates, and derivatives, are excluded from the benchmark.The Barclays High Yield Municipal Index includes bonds rated Ba1 or lower or non-rated bonds using the middle rating of Moody’s, S&P and Fitch.The Barclays Capital Taxable Municipal Bond Index is a rules-based, market-value weighted index engineered for the long-term taxable bond market. To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies if all three rate the bond: Moody's, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate and must be at least one year from their maturity date. Remarketed issues (unless converted to fixed rate), bonds with floating rates, and derivatives, are excluded from the benchmark.

Municipal Bond Index: To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody's, S&P, Fitch. If only two of the three agencies rate the security, the lowerrating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates, and derivatives are excluded from the benchmark.The Barclays Capital Emerging Markets Index includes USD-denominated debt from emerging markets in the following regions: Americas, Europe, Middle East, Africa, and Asia. As with other fixed income benchmarks provided by Barclays Capital, the index is rules-based, which allows for an unbiased view of the marketplace and easy replicability.The Barclays Capital MBS Index covers the mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. Aggregate components must have a weighted average maturity of at least one year, must have $250 million par amount outstanding, and must be fixed rate mortgages.The Barclays Capital Corporate Bond Index is the Corporate component of the U.S. Credit index.The Barclays Capital TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market. The CS/Tremont Equity Market Neutral Index takes both long and short positions in stocks with the aim of minimizing exposure to the systematic risk of the market (i.e., a beta of zero).The CS/Tremont Multi-Strategy Index consists of funds that allocate capital based on perceived opportunities among several hedge fund strategies. Strategies adopted in a multi-strategy fund may include, but are not limited to, convertible bond arbitrage, equity long/short, statistical arbitrage and merger arbitrage.The Barclays U.S. Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated floating rate note market.*Market Neutral returns for November 2008 are estimates by J.P. Morgan Funds Market Strategy, and are based on a December 8, 2008 published estimate for November returns by CS/Tremont in which the Market Neutral returns were estimated to be +0.85% (with 69% of all CS/Tremont constituents having reported return data). Presumed to be excluded from the November return are three funds, which were later marked to $0 by CS/Tremont in connection with the Bernard Madoff scandal. J.P. Morgan Funds believes this distortion is not an accurate representation of returns in the category. CS/Tremont later published a finalized November return of -40.56% for the month, reflecting this mark-down. CS/Tremont assumes no responsibility for these estimates.

J.P. Morgan Asset Management – Definitions, risks & disclosuresBonds are subject to interest rate risks. Bond prices generally fall when interest rates rise.The price of equity securities may rise, or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies, sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities are subject to “stock market risk” meaning that stock prices in general may decline over short or extended periods of time. Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of market volatility than the average stock.Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically, mid-cap companies' stock has experienced a greater degree of market volatility than the average stock.Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in thevalue of real estate, risks related to general and economic conditions, changes in the value of the underlying property ownedby the trust and defaults by borrower.International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations. Investments in emerging markets can be more volatile. As mentioned above, the normal risks of investing in foreign countries are heightened when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property.Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments involve greater risks than traditional investments and should not be deemed a complete investment program. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. The value of the investment may fall as well as rise and investors may get back less than they invested.Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or market conditions than other types of investments and could result in losses that significantly exceed the original investment. The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce investment returns. Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book valuecompares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share paid in the previous year, used as a measure of a company's potential as an investment.

There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Using long and short selling strategies may havehigher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale positions.The HFRI Monthly Indices (HFRI) are equally weighted performance indexes, utilized by numerous hedge fund managers as a benchmark for their own hedge funds. The HFRI are broken down into 4 main strategies, each with multiple substrategies. All single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite, which accounts for over 2200 funds listed on the internal HFR Database.Equity Market Neutral Strategies employ sophisticated quantitative techniques of analyzing price data to ascertain information about future price movement and relationships between securities, select securities for purchase and sale. Equity Market Neutral Strategies typically maintain characteristic net equity market exposure no greater than 10% long or short.Distressed Restructuring Strategies employ an investment process focused on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged(par value) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings.Merger Arbitrage Strategies which employ an investment process primarily focused on opportunities in equity and equity related instruments of companies which are currently engaged in a corporate transaction. Global Macro Strategies trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets.Relative Value Strategies maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. The Cambridge Associates LLC U.S. Private Equity Index® is an end-to-end calculation based on data compiled from 1,052 U.S. private equity funds (buyout, growth equity, private equity energy and mezzanine funds), including fully liquidated partnerships, formed between 1986 and 2013.The Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that provides investors with an unbiased, comprehensive benchmark for the asset class.

J.P. Morgan Asset Management – Risks & disclosures

The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.

For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specificallyrelated to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared inaccordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investmentresearch.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for anyspecific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in anyof the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support aninvestment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of thelegal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to theirpersonal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategiesset out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein isconsidered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investmentinvolves risks, the 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 full amountinvested. Both past performance and yields are not reliable indicators of current and future results.

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Prepared by: Kerry Craig, Tai Hui, Jasslyn Yeo, Marcella Chow, Ian Hui, Agnes Lin, Chaoping Zhu.

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