guide to the markets - covid-19 - j.p. morgan...15 | for professional clients/qualified investors...

Guide to the Markets®

MARKET INSIGHTS

April 30, 2020

|GTM – Latin America

2

|

Source: Bloomberg, DAX, FTSE, Hang Seng, MSCI, Standard and Poor's, TOPIX, J.P. Morgan Asset Management. MSCI indices are used for Brazil, Chile, Colombia, Mexico, Argentina, Peru, Australia, and South Korea. Other indices used are DAX, CSI 300, Hang Seng, FTSE MIB, TOPIX, S&P 500. Data are as of April 28, 2020.

COVID-19: Market reaction

Stock market returnsYear-to-date, price returns, local currencies

Government bond yield changesYear-to-date, basis points

Change in 2-year yield

Change in 10-year yield

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

-160

-110

-60

-10

40

90

140


3

Services momentum

Source: Markit, J.P. Morgan Asset Management.Heatmap colors are based on PMI relative to the 50 level, w hich indicates acceleration or deceleration of the sector, for the time period show n. Heatmap is based on quarterly averages, w ith the exception of the tw o most recent f igures, w hich are single month readings. Data for the U.S. are back-tested and f illed in from December 2007 to September 2008 due to lack of existing PMI f igures. DM and EM represent developed markets and emerging markets, respectively. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Latin America. Data are as of April 27, 2020.

Global Purchasing Managers’ Index for services, quarterly

25

Mar Apr

Global 37.0 -

DM 34.8 -

EM 42.1 -

U.S. 39.8 27.0

Japan 33.8 22.8

UK 34.5 12.3

Euro Area 26.4 11.7

Germany 31.7 15.9

France 27.4 10.4

Italy 17.4 -

Spain 23.0 -

China 43.0 -

India 49.3 -

Brazil 34.5 -

Mexico 39.4 -

Russia 37.1 -

Em

erg

ing

De

ve

lop

ed

20202008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 '20

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4

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$0

$20

$40

$60

$80

$100

$120

$140

$160

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

Source: J.P. Morgan Asset Management; (Top and bottom left) EIA; (Bottom left) Baker Hughes; (Right) Commodity Research Bureau, FactSet.*Forecasts are from the April 2020 EIA Short-Term Energy Outlook and start in 2020. **U.S. crude oil inventories include the Strategic Petroleum Reserve (SPR). Active rig count includes both natural gas and oil rigs. Brent crude prices are monthly averages in USD using global spot ICE prices.

Guide to the Markets – Latin America. Data are as of April 27, 2020.

Oil markets

U.S. crude oil inventories and rig count**Million barrels, number of active rigs

Change in production and consumption of liquid fuelsProduction, consumption and inventories, millions of barrels per day

Price of oilBrent crude, nominal prices, USD/barrel, monthly average

Inventories (incl. SPR) Active rigs

61

Oth

er

asse

t cla

sse

s

Apr. 2020: $20.04

Jul. 2008: $135.73

Dec. 2008: $43.09

Jun. 2014: $111.93

Jan. 2016: $30.98

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

U.S. 15.7 18.0 19.5 19.0 18.7 19.4%

OPEC 36.8 36.8 34.7 33.7 34.3 -6.8%

Russia 1.9 2.0 2.0 2.0 2.0 5.9%

Global 98.1 100.8 100.6 99.4 100.2 2.1%

Consumption

U.S. 20.0 20.5 20.5 19.1 20.4 2.2%

China 13.6 14.0 14.5 13.7 15.4 13.2%

Global 98.7 100.0 100.8 95.5 101.9 3.2%

Inventory Change -0.6 0.9 -0.2 3.9 -1.7


5

|

-11% -9% -7% -5% -3% -1% 1%

Saudi Arabia

Venezuela

Russia

Colombia

Mexico

Brazil

Argentina

U.S.

Peru

Germany

France

China

Japan

Chile

India

Weight of the oil sector Net oil consumption% of GDP, 2017

Source: EIA, IMF, MSCI, J.P. Morgan Global Economic Research, J.P. Morgan Asset Management.

% in U.S. f ixed income market includes corporate credit. % in Latin America f ixed income market includes only U.S. dollar debt, and includes corporate

and sovereign debt.

Data are as of April 27, 2020.

Net producers

Net consumers

% in

equity

market

% in

fixed income

market

U.S. 2.7% 8.5%

Latin America 8.4% 10.2%

Colombia 21.5% 18.7%

Brazil 11.6% 13.7%

Argentina 9.2% 32.4%

Chile 7.2% 0.0%

Mexico 0.0% 2.7%

Peru 0.0% 7.4%

Importance of oil industry

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Source: IIF, J.P. Morgan Asset Management. Data are as of April 27, 2020.

Portfolio flows to EM

Net non-resident purchase of EM stocks and bondsCumulative total and days since each date, billions of $

Net non-resident purchase of EM stocks and bondsCumulative total by time period, billions of $

-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

$40

010

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200

210

220

230

240

250

260

270

280

290

300

310

days

GFC

Taper Tantrum

China scare

COVID-19

-$33.6

-$15.0

-$34.5

-$73.7-$2.8

-$15.9

$1.6

-$27.1

-$36.4

-$30.9-$33.0

-$100.8

-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

GFC Taper Tantrum China scare COVID-19

Equity

Debt


7

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

'16 '17 '18 '19 '20

Source: J.P. Morgan Asset Management; (Left) Bank of England, Bank of Japan, European Central Bank, FactSet, Federal Reserve System, J.P. Morgan Global Economic Research. *Includes the Bank of Japan (BoJ), Bank of England (BoE), European Central Bank (ECB) and Federal Reserve. **Bond purchase forecast assumes $200bn GBP in net purchases from BoE through August 2021; continued BoJQE of $50trn JPY ann. for 2020; $1.11trn EUR in net purchases from the ECB through 2020; and the Federal Reserve to purchase $2.5trn of Treasuries, $1.2trn of agency MBS and $50bn of agency CMBS through 2020. Fed assumptions are based on purchase activity in March 2020 and previous QE announcements . Data are as of April 28, 2020.

Developed market central bank bond purchases* USD billions, 12-month rolling flow

Fiscal response to COVID-19 % of GDP, announced measures

Forecast**

Fed

BoJ

ECB

BoE

Total

0%

3%

6%

9%

12%

15%

18%

21%


8

|

Source: Bloomberg, MSCI, FactSet, Standard and Poor's, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Data are as of April 28, 2020.

Phases of markets

First phase: From February 19 to March 23Total return, local currencies

Second phase: From March 24 to April 28Total return, local currencies

-25%-28%

-33%-34%

-40%

5%

-12%

-21% -21%

11%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

18%19%

20%

28%

23%

1%

13%

7%

13%

1%

0%

5%

10%

15%

20%

25%

30%

|GTM – Latin America |

9

U.S.Germany

France

Italy

Spain

United Kingdom

Canada

Taiwan

China

India

Brazil

Russia

Mexico

South Korea

South Africa

TurkeyJapan

0.10%

Indonesia

0.01%

0.30%

World

Argentina

Peru

Colombia

Chile

Sweden

0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

CO

VID

19

mo

rta

lity

ra

te

COVID19 cases, weekly % change

COVID-19: Global confirmed cases and fatalities

Source: Johns Hopkins CSSE, UN, J.P. Morgan Asset Management. Data are as of April 27, 2020.

Mortality rate, growth of confirmed cases and % population infected (bubble size)Bubble size = % population

infected

Developed markets

Emerging markets

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FOR PROFESSIONAL CLIENTS/QUALIFIED INVESTORS ONLY - NOT FOR RETAIL USE OR DISTRIBUTION

Latin America Equity

April 2020

Luis Carrillo, Managing Director

Portfolio Manager

[email protected]

Sophie Bosch de Hood, Executive Director

Portfolio Manager

[email protected]

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11 | FOR PROFESSIONAL CLIENTS/QUALIFIED INVESTORS ONLY - NOT FOR RETAIL USE OR DISTRIBUTION

62875250-88c2- 11ea- b488- eeee0aff7006

Global outlook: Three States

Tug of war between slowing macro and central bank liquidity.

EM trades with typical beta to global markets,

but recovers first as China stimulates and EM has fewer imbalances.DM resorts to fiscal stimulus.

ExtendedBusiness

Cycle

Muddle Through

Recession

Next cycle

Now

Source: J.P. Morgan Asset Management. Data as 2 April 2020. EM = Emerging Markets, DM = Developed Markets

2019

Central banks extend the cycle.

Global macro stabilisation, earnings recover.


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How did we get into Recession? And how do we get out?

OIL

COVID

Financial

Demand

SupplyFiscal

SHOCKS POLICIESDISRUPTIONS

Monetary

Source: J.P. Morgan Asset Management. Data as 21st April 2020.


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Disruptions already seen in markets & macro data

Financial:

VIX spike

Demand:

US PMI services

Supply:

US PMI Manufacturing

0

10

20

30

40

50

60

70

80

90

20

25

30

35

40

45

50

55

60

Apr '17 Aug '17 Dec '17 Apr '18 Aug '18 Dec '18 Apr '19 Aug '19 Dec '19 Apr '20

VIX

US Manufacturing

US Services

Source: Bloomberg, CBOE, Markit, J.P. Morgan Asset Management. Data as 24 April 2020


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Disruptions hurt more in some economies: Tourism-dependent & Small businesses

0102030405060708090

0

5

10

15

20

25

30

Total contributions of travel & tourism, % of GDP

SMEs as % of total enterprises

Source: World Travel and Tourism Council, OECD, HSBC, J.P. Morgan Asset Management. Data as 24 April 2020


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Trade with DM & Oil

0102030405060708090

-10

-5

0

5

10

15

20

25

30

EM exports to US & Eurozone, % of total exports

Net oil exports, % GDP

Source: UNCTAD, HSBC, J.P. Morgan Securities, J.P. Morgan Asset Management. Data as 24 April 2020


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Fiscal stimulus has been delivered in DMs, EMs following except China

Source: IMF, J.P Morgan Asset Management. DM’s = Developed Markets

In the budget: this is absorbed into the fiscal balance immediately and includes immediate funding for medical services and cash payments to businesses and residents. Outside budget: Equity injections,

asset purchases, loans, debt assumptions, quasi -fiscal operations, use of extra-budgetary funds. Guarantees: Guarantees on loans and other contingent l iabilities.

Data as of 20 April 2020.

0

5

10

15

20

25

30

35

40

In the budget (Classic)

Outside budget (equity injections, asset purchases & loans)

Guarantees

Fiscal stimulus & stabilisers, % of GDP


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Monetary easing: rate cuts everywhere + huge Fed balance sheet

0

1

2

3

4

5

6

7

'00

'01

'01

'02

'02

'03

'03

'03

'04

'04

'05

'05

'05

'06

'06

'07

'07

'08

'08

'08

'09

'09

'10

'10

'10

'11

'11

'12

'12

'13

'13

'13

'14

'14

'15

'15

'15

'16

'16

'17

'17

'18

'18

'18

'19

'19

'20

PBOC Fed ECB

Central bank balance sheets, USD tn

Source: Bloomberg, PBoC, Federal Reserve, ECB, J.P. Morgan Asset Management. Data as 31 March 2020


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COVID-19 in China: Disruptions and Reactions

Financial

Policy responses so far and future

options:

• Rate cuts

• Special purpose lending facilities

• Liquidity injections

• Easier credit conditions

How long can firms survive w ith current

cash

% of 1000 Chinese SMEs surveyed,

Feb 2020

0

10

20

30

40

1 2 3 4 5 6

Months

Demand sideSupply side

Industrials & manufacturers are steadily

resuming activity post shutdown

Consumer: Stringent disease control

measures continue and thus

depressing general consumption


options:

• Reduce VAT for businesses

• Reduce social security

contribution for companies

• Toll road fee waive

• Electricity unit price cuts

• Energy price cuts


options:

• Auto purchase tax cuts

• Reduce VAT for consumers

• “New infrastructure” projects

• Property ownership and lending

adjustments

• Vouchers & helicopter money

Source: WIND, CICC Research, J.P. Morgan Asset Management. As of April 20 2020.

Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to

change without notice. There can be no guarantee they will be met.. * CNY is Chinese New Year

Activity levels compared to pre CNY, %

020406080

100

Coalconsumption

Employeesreturned to

place of work

Freightcapacityutilization

Activity levels compared to pre CNY, %

early Feb

mid April

0

50

100

Urban civiltransport

Openrestaurants

Mall traffic

early Feb

mid April


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COVID update

10

100

1,000

10,000

0 5 10 15 20 25 30 35 40 45 50 55 60

Italy

China

South Korea

Spain

US

France

33% daily increase

UK

0

500

1,000

1,500

2,000

2,500

3,000

07 Mar 14 Mar 21 Mar 28 Mar 04 Apr 11 Apr 18 Apr

Chile

Brazil

Mexico

Argentina

Peru

0

200

400

600

800

1,000

1,200

1,400

1,600

07 Mar 14 Mar 21 Mar 28 Mar 04 Apr 11 Apr 18 Apr

Thailand

Philippines

Malaysia

Indonesia

India

Peaking in Europe, hopefully US soonCumulative number of deaths by number of days since 10 th death

Huge question about EMs: India, Brazil, MexicoDaily increase in cases, 5 day moving average

Source: Johns Hopkins CSSE, J.P. Morgan Asset Management. Data as 23 April 2020


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COVID + OIL unknowns in EM = bigger downside risk for EM

85

90

95

100

105

110

115

2019: Q1 2019: Q2 2019: Q3 2019: Q4 2020: Q1 2020: Q2 2020: Q3 2020: Q4 2021: Q1 2021: Q2 2021: Q3 2021: Q4

EM

DM

GDP vs Jan 2020 estimates (prior), rebased to Q1 2019

Source: International Monetary Fund, J.P. Morgan Asset Management. Data as 24 April 2020. Estimates shown here are the IMD Ap ril World Economic Outlook.


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Conclusions: How did we get into Recession? And how do we get out?

OIL

COVID

Financial

Demand

SupplyFiscal

How long? 1) Are the enough?

2) Do they cause structural change?

(fiscal balances, debt, FX)

How deep?

Monetary

Source: J.P. Morgan Asset Management. Data as 21st April 2020.

SHOCKS POLICIESDISRUPTIONS


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Portfolio design

Long-term approach Lowers cost and breakeven skill level

Greater return to skill (versus chance)

– Turnover typically <50% p.a.

– Investment horizon 3 - 5 years

Prioritise return over

risk minimisation Focus on size of total active positions and

diversification within it

– Typical active position 40%+

– Positions start with 50 - 500 bps

Diversified portfolio Forces selectivity and scrutiny – On average 50-70 holdings

Independent positions Forces understanding of sources of return

Stock level decisions give greater choices

Where it all comes together


Market outlook


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Source : J.P. Morgan Asset Management. Data as of April 27 th, 2020 or latest available. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.

Argentina: Argentina entered this year with a GDP contraction of 1% in 2019 with one engine running, trade, everything else was weak fixed capital

formation, public expenditures, private consumption, etc.. Now they have imposed strict stay at home requirements that will very likely decelerate the

COVID exponential growth, but the economic toll will be huge for a country already struggling to pay their bills. We are watching how the debt renegotiation process advances and what policy signals the government issues to address economic crisis.

Chile: Chile did not enter the year on a very strong note as it was just recovering from the social unrest episode that derailed the economy in October

2019, but it has already implemented a stimulus package of roughly 4.7% of GDP. If it was not because it came in to the year with the carryover of the

weakness derived by the social protests, it would be also growing a bit faster in 2020 than the bigger peers.

Colombia: Colombia was also still growing as of February extending the virtuous business cycle of 2019 driven by consumption and investment.

Manufacturing in February showed growth in 28 of the 39 sectors and retail sales posted the largest growth in six years, COVID-19 will clearly halt this

trend but Colombia will likely experience one of the smallest contractions in LATAM. The oil shock may add additional budget pressures and limit their ability to stimulate the economy.

Peru: Peru came in to the crisis growing 3.8% yoy in February and it has implemented social distancing restrictions earlier, enforced them better and then

accompany them with the most comprehensive stimulus in the region and therefore is likely going to end up better off than mos t other counties in the

region.

Mexico: Mexico will probably be the hardest hit as it seems to be a perfect storm, it was poorly prepared for the pandemic, it was la te to react and the oil

price shock adds additional strain to the government finances. The budget relied 17% on oil, it cannot increase output and th e price fell 50% +, tourism and

remittances that are a significant source of FX and income have been hit hard and will likely recover slowly and finally a go vernment unwilling to spend with ideological principles guiding policy responses that from our perspective will only amplify the shock. We will likely suffer one of the worst recessions in its

history -6.3% or more which is much worse than the Tequila Crisis when GDP dropped about 5.8%.

Brazil: Brazil was late and not very good at enforcing social distancing although the private sector was more proactive at implementi ng WFH policies and

closing establishments. The Central bank has been very active ensuring there is enough liquidity support in addition of whate ver fiscal support can come from the government where political tensions remain high over disagreements around how to handle the response leading to sig nificant cabinet turnover.

The currency has lost almost 40% since December and we expect the economy to shrink 4.3% in 2020 with downside risks.

Review and outlook


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Sector and country positions

Source: J.P. Morgan Asset Management. The fund is actively managed. Holdings, sector weights, allocations and leverage, as ap plicable, are subject to change at the discretion of the Investment Manager without notice.

Relative to benchmark (%)

Relative to benchmark (%)

7.4 7.10.5

-0.2

5.6 5.1 4.90.3

-0.7-3.2 -4.2 -4.3 -5.1 -6.9

2.4

-10.0

0.0

10.0

Financials Diversi fied

Financials

Insurance Banks Consumer

Discretionary

Industr ials Information

Technology

Real

Estate

Health

Care

Utili ties Materials Energy Communication

Services

Consumer

Staples

Cash

Portf olio

Weight (%)36.6 11.1 2.4 23.2 11.0 11.4 6.0 1.6 1.4 2.7 10.2 3.5 3.1 10.2 2.4

Active and absolute sector positions

Portf olio

Weight (%)4.8 5.5 61.3 2.9 0.5 1.0 20.4 1.3 2.4

4.82.0 1.9 1.3 0.5

-2.0 -3.2-6.5

2.4

-10.0

0.0

10.0

U.S. Peru Brazil Argentina Panama Colombia Mexico Chile Cash

Active and absolute country positions

Benchmark MSCI Latin America


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Three months style analysis

Source: J.P. Morgan Asset Management. Data as of 31st March 2020. Image of analytics tool are shown for i llustrative purposes only

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28

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.

Equities:

The Dow Jones Industrial Average is a price-weighted average of 30 activ ely traded blue-chip U.S. stocks.

The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of dev eloped and emerging markets.

The MSCI EAFE Index(Europe, Australasia, Far East)is a free float-adjusted market capitalization index that is designed to measure the equity market performance of dev eloped markets, excluding the US & Canada.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure dev eloped market equity performance in Europe.

The MSCI Pacific Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region.

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 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 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market capitalization.

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 Grow th 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 S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. The S&P 500 Index focuses on the large-cap segment of the market; however, since it includes a significant portion of the total v alue of the market, it also represents the market.

Fixed income:

The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon US Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated inv estment 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 fix ed rate and non convertible.

The Bloomberg Barclays Global High Yield Index is a multi-currency flagship measure of the global high y ield debt market. The index represents the union of the US High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive. Until January 1, 2011, the index also included CMBS high yield securities.

The Bloomberg Barclays Municipal Index: consists of a broad selection of inv estment-grade general obligation and rev enue bonds of maturities ranging from one year to 30 years. It is an unmanaged index representativ e of the tax -exempt bond market.

The Bloomberg Barclays US Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated floating rate note market.

The Bloomberg Barclays US Corporate Investment Grade Index is an unmanaged index consisting of publicly issued US Corporate and specified foreign debentures and secured notes that are rated inv estment grade (Baa3/BBB or higher) by at least tw o ratings agencies, have at least one y ear to final maturity and have at least $250 million par amount outstanding. To qualify, bonds must be SEC-registered.

The Bloomberg Barclays US High Yield Index covers the universe of fix ed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included.

The Bloomberg Barclays US Mortgage Backed Securities Indexis an unmanaged index that measures the performance of inv estment grade fixed-rate mortgage backed pass-through securities of GNMA, FNMA and FHLMC.

The Bloomberg Barclays US TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.

The J.P. Morgan Emerging Market Bond Global Index(EMBI)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 inv estable universe of the U.S. dollar domestic high y ield corporate debt market.

The J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI Broad Diversified)is an expansion of the J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI). The CEMBI is a market capitalization weighted index consisting of U.S. dollar denominated emerging market corporate bonds.

The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified) tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sov ereign entities: Brady bonds, loans, Eurobonds. The index limits the exposure of some of the larger countries.

The J.P. Morgan GBI EM Global Diversified tracks the performance of local currency debt issued by emerging market governments, whose debt is accessible by most of the international inv estor base.

The U.S. Treasury Index is a component of the U.S. Gov ernment index.


29

J.P. Morgan Asset Management – Definitions

Other asset classes:

The Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that prov ides investors with an unbiased, comprehensive benchmark for the asset class.

The Bloomberg Commodity Index and related sub-indices are composed of futures contracts on physical commodities and represents twenty tw o separate commodities traded on U.S. exchanges, with the ex ception of aluminum, nickel, and zinc

The Cambridge Associates U.S. Global Buyout and Growth Index® is based on data compiled from 1,768 global (U.S. & ex –U.S.) buyout and growth equity funds, including fully liquidated partnerships, formed between 1986 and 2013.

The CS/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 w ith 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 ex clusive property of Credit Suisse Tremont Index , LLC.

The HFRI Monthly Indices (HFRI) are equally weighted performance indexes, utilized by numerous hedge fund managers as a benchmark for their ow n hedge funds. The HFRI are broken down into 4 main strategies, each with multiple sub strategies. All single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite, which accounts for ov er 2200 funds listed on the internal HFR Database.

The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of ov erall industry performance, and includes all tax-qualified real estate inv estment trusts (REITs) that are listed on the NYSE, the American Stock Exchange or the NASDAQ National Market List.

The NFI-ODCE, short for NCREIF Fund Index -Open End Diversified Core Equity, is an index of inv estment returns reporting on both a historical and current basis the results of 33 open-end commingled funds pursuing a core inv estment strategy, some of w hich have performance histories dating back to the 1970s. The NFI-ODCE Index is capitalization-w eighted and is reported gross of fees. Measurement is time-weighted.

Definitions:

Inv esting in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated inv estors. Alternative investments involve greater risks than traditional inv estments and should not be deemed a complete inv estment program. They are not tax efficient and an inv estor should consult with his/her tax advisor prior to inv esting. Alternative investments have higher fees than traditional investments and they may also be highly lev eraged and engage in speculative investment techniques, which can magnify the potential for inv estment loss or gain. The v alue of the inv estment may fall as well as rise and investors may get back less than they invested.

Bonds are subject to interest rate risks. Bond prices generally fall w hen interest rates rise.

Inv estments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments inv olve leverage. The value of commodity-linked derivative instruments may be affected by changes in ov erall 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 lev eraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.

Derivatives may be riskier than other ty pes of inv estments because they may be more sensitive to changes in economic or market conditions than other ty pes of investments and could result in losses that significantly exceed the original inv estment. The use of deriv atives may not be successful, resulting in investment losses, and the cost of such strategies may reduce investment returns.

Distressed Restructuring Strategies employ an investment process focused on corporate fix ed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their v alue at issuance or obliged (par v alue) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings.

Inv estments in emerging markets can be more volatile. The normal risks of inv esting in foreign countries are heightened w hen investing in emerging markets. In addition, the small size of securities markets and the low trading v olume may lead to a lack of liquidity , which leads to increased volatility . Also, emerging markets may not prov ide adequate legal protection for private or foreign investment or private property.

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 indiv idual 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.

Equity market neutral strategies employ sophisticated quantitative techniques of analyzing price data to ascertain information about future price mov ement and relationships between securities, select securities for purchase and sale. Equity Market Neutral Strategies typically maintain characteristic net equity market ex posure no greater than 10% long or short.

Global macro strategies trade a broad range of strategies in w hich the investment process is predicated on mov ements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets.

International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and tax ation policies outside the U.S. can raise or lower returns. Some ov erseas markets may not be as politically and economically stable as the United States and other nations.

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 have higher 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.

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.

Mid-capitalization investing ty pically 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 av erage stock.

Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value compares a stock's market value to its book value. Price to cash flow is a measure of the market's ex pectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock ex change to the div idends per share paid in the previous year, used as a measure of a company's potential as an inv estment.

Real estate inv estments may be subject to a higher degree of market risk because of concentration in a specific industry , sector or geographical sector. Real estate inv estments may be subject to risks including, but not limited to, declines in the v alue of real estate, risks related to general and economic conditions, changes in the value of the underly ing property owned by the trust and defaults by borrower.

Relative Value Strategies maintain positions in w hich the investment thesis is predicated on realization of a v aluation discrepancy in the relationship between multiple securities.

Small-capitalization investing ty pically carries more risk than investing in w ell-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has ex perienced a greater degree of market volatility than the av erage stock.


30

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 specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of inv estment research, nor are they subject to any prohibition on dealing ahead of the dissemination of inv estm ent research.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be as adv ice or a recommendation for any specific 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 any of the transactions mentioned herein. Any examples used are generic, hy pothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of inv esting in any securities or products. In addition, users should make an independent assessment of the legal, regulatory , tax, credit, and accounting implications and determine, together with their ow n professional advisers, if any inv estment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or inv estment techniques and strategies set out are for information purposes only, based on certain assumptions and current mark et conditions and are subject to change w ithout prior notice. All information presented herein is considered to be accurate at the time of production, but no w arranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that inv estment involves risks, the value of inv estments and the income from them may fluctuate in accordance with market conditions and tax ation agreements and investors may not get back the full amount inv ested. Both past performance and yields are not reliable indicators of current and future results.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates w orldw ide.

To the ex tent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data w ill be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.

This communication is issued by the follow ing entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority ; in other European jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Inv estment Trusts Association, Japan, the Japan Investment Advisers Association, Ty pe II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia to w holesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in LatAm countries, by local J.P. Morgan entities, as the case may be; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by J.P. Morgan Institutional Inv estments, Inc. or JPMorgan Distribution Services, Inc., both are members of FINRA; J.P. Morgan Investment Management, Inc. or J.P. Morgan Alternative Asset Management, Inc.

In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other markets in APAC, to intended recipients only. In Latin America, distribution intended to recipients only.

Copy right 2020 JPMorgan Chase & Co. All rights reserved.

Prepared by : Gabriela D. Santos and Jennie Li.

Unless otherwise stated, all data are as of March 31, 2020 or most recently available.

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