MARKET INSIGHTS
Guide to the
Markets
Asia | 3Q 2023 | As of June 30, 2023
Global Market Insights Strategy Team
Americas
GTM ASIA
Europe
Karen Ward
London
Dr. David Kelly, CFA
New York
David Lebovitz
New York
Gabriela Santos
New York
Jack Manley
New York
Meera Pandit, CFA
New York
Asia
Hugh Gimber, CFA
London
Tai Hui
Hong Kong
Vincent Juvyns
Luxembourg
Marcella Chow
Hong Kong
Tilmann Galler, CFA
Frankfurt
Ian Hui
Hong Kong
Max McKechnie
London
Jordan Jackson
New York
Chaoping Zhu, CFA
Shanghai
Maria Paola Toschi
Milan
Stephanie Aliaga
New York
Adrian Tong
Hong Kong
Natasha May
London
Mary Park Durham
New York
Nimish Vyas
New York
Marina Valentini
São Paulo
Brandon Hall
New York
2
Kathleen Clum
New York
Zara Nokes
London
Shogo Maekawa
Tokyo
Arthur Jiang
Shanghai
Elena Domecq
Madrid
Jennifer Qiu
Hong Kong
Lucia Gutierrez Mellado
Madrid
Sahil Gauba
Mumbai
Agnes Lin
Taipei
Kerry Craig, CFA
Melbourne
2
Page reference
GTM ASIA
Regional economy
Equities
Other asset classes
4.
5.
6.
7.
8.
9.
10.
11.
30.
31.
32.
33.
34.
35.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
ASEAN: Exports and mobility
China: Economic snapshot
China: Cyclical indicators
China: Unemployment and income
China: Property sector
China: Fiscal policy
China: Monetary policy and credit growth
China: Exchange rate
Global economy
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
Global growth forecasts
Global Purchasing Managers’ Index (PMI)
Global inflation
Global inflation forecasts
Central bank inflation targets
Global central bank policy rate changes
G4 central bank policy rates and market expectations
United States: Economic growth and the contribution
to GDP
United States: Economic monitor
United States: Consumption and investments
United States: Employment and wages
United States: Housing market
United States: Inflation
United States: Monetary policy
United States: Federal Reserve balance sheet
Eurozone: Economic monitor
Eurozone: Economic snapshot
Japan: Economic snapshot
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
Fixed income
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
3
Global and Asia equity market returns
Global equities: Return composition
Global equities: Earnings expectations
Global equities: Valuations
Global equities: Growth versus value
APAC ex-Japan equities: Earnings expectations by
market and sector
APAC ex-Japan equities: Performance drivers
APAC ex-Japan equities: Returns and valuations by
sector
APAC ex-Japan equities: Earnings trend by revenue
source and exports
APAC ex-Japan equities: Export and revenue
exposure by geography
APAC ex-Japan equities: Dividends
China: Sector earnings and valuations
India: Sector earnings and valuations
Japan: Corporate governance and valuations
Europe: Sector earnings and valuations
United States: Sector earnings and valuations
United States: Sources of earnings per share growth
United States: Earnings and rate hikes
United States: Bull and bear markets
Global fixed income returns
Global fixed income: Yields and duration
Global fixed income: Interest rate sensitivity
Global fixed income: Return composition
Global fixed income: Valuations
Global fixed income: Government bond yields and
expected inflation
Global fixed income: Yields and risks
U.S. real yields
U.S. investment grade bonds
U.S. high yield bond spreads
U.S. high yield bond fundamentals
U.S. securitized assets
Emerging market debt
Asia fixed income
3
Asset class returns
Volatility
U.S. dollar
Currencies
Emerging market external positions
Commodities
Gold
Oil: Short-term market dynamics
Alternative sources of income
Understanding alternatives
Investing principles
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
Global energy transition
New energy vehicles
Global commodities and sustainable energy
Equity annual returns and intra-year declines
Fixed income annual returns and intra-year declines
U.S. market implied recession probabilities
U.S. economic cycle and asset performance
Long-term returns of asset classes
The compounding effect
Portfolio construction, asset class returns and
volatility
83. 60/40 stock-bond portfolio performance
84. Correlation between stocks and bonds
Regional economy
ASEAN: Exports and mobility
GTM ASIA
Exports
4
Tourist arrivals
Year-over-year change, 6-month moving average
60%
Relative to respective month in 2019
100%
90%
50%
80%
40%
70%
30%
60%
20%
50%
40%
10%
30%
0%
20%
-10%
-20%
'10
10%
'12
Indonesia
Vietnam
4
'14
Malaysia
'16
Philippines
'18
'20
Singapore
'22
Thailand
0%
Jan '22 Mar '22 May '22 Jul '22 Sep '22 Nov '22 Jan '23 Mar '23 May '23
Indonesia
Malaysia
Philippines
Vietnam
Source: FactSet, J.P. Morgan Asset Management; (Left) National Statistics Agencies; (Right) CEIC, Development of Tourism Thailand, General Statistics Office Vietnam,
Tourism Malaysia.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Singapore
Thailand
Regional economy
China: Economic snapshot
GTM ASIA
Contribution to real GDP growth
Caixin/Markit Purchasing Managers’ Indices
Year-over-year change (y/y)
28%
Index
65
2Q22 3Q22 4Q22
Contribution to y/y change
24%
20%
5
1Q23
Investment (ppts)
0.3
0.8
3.9
1.6
Consumption (ppts)
-0.8
2.0
0.2
3.0
Net exports (ppts)
1.0
1.1
-1.2
-0.1
Total GDP (% change, y/y)
0.4
3.9
2.9
4.5
05/2023: 57.1
06/2023: 50.5
60
55
16%
YTD 2023: 4.5%
12%
50
45
8%
40
4%
35
0%
30
-4%
-8%
5
'80
'85
'90
'95
'00
'05
'10
Investment (Gross capital formation)
Consumption
Net exports
GDP
'15
'20
25
07' 08' 09' 10' 11' 12' 13' 14' 15' 16' 17' 18' 19' 20' 21' 22' 23'
Services
Manufacturing
Source: J.P. Morgan Asset Management; (Left) CEIC, National Bureau of Statistics of China; (Right) Caixin/Markit, J.P. Morgan Economic Research.
Total gross domestic product (GDP) figures may not sum due to rounding. Purchasing Managers’ Index (PMI) is relative to 50, which indicates deceleration (below 50) or
acceleration (above 50) of economic activities in the sector. Data for the Caixin/Markit Purchasing Managers’ Services index begins from 31/10/08.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Regional economy
China: Cyclical indicators
GTM ASIA
Fixed asset investment
6
Consumption
Year-to-date, year-over-year change
40%
Year-over-year change, 3-month moving average
50%
130
40%
30%
120
20%
30%
10%
20%
0%
10%
-10%
0%
110
100
90
-10%
-20%
-30%
'11
'12
'13
Aggregate
6
'14
'15
Private
'16
'17
'18
'19
'20
'21
State-owned enterprises
Source: CEIC, National Bureau of Statistics of China, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'22
'23
-20%
'16
'17
Retail sales
Online sales
'18
'19
'20
'21
'22
'23
Consumer confidence
80
Regional economy
China: Unemployment and income
GTM ASIA
Surveyed urban unemployment rate by age
Chinese consumer income and wealth effect
Indexed, 31/12/2020 = 100
110
26%
05/2023:
20.8%
21%
105
100
95
16%
90
85
11%
80
75
70
6%
05/2023:
4.1%
1%
'18
'19
Aged 16 to 24
7
'20
Aged 25 to 59
'21
'22
'23
65
60
Dec '20
Jun '21
CSI 300 index
Dec '21
Jun '22
Dec '22
Secondary residential property price index
Income confidence index
Source: CEIC, FactSet, National Bureau Statistics of China, J.P. Morgan Asset Management.
The urban survey unemployment rate began in 2018 as a more accurate replacement to the old indicator of registered unemployment rate, and it is now the major indicator
used by policymakers for unemployment.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
7
Regional economy
China: Property sector
GTM ASIA
China residential property price and volume
Source of fundings for property developers**
Year-over-year change
60%
Trillion RMB
25
50%
20
40%
30%
Domestic loans
Self-raised funds
Deposit and advanced
payments
Personal mortgage loans
Others
36%
0.65
19%
4%
0.02
15
0.01
0.05 0.06 0.03
10%
1.4
10
0%
-10%
0.8
5
-20%
2.2
3.5
-30%
'11
'12
'13
'14
'15
'16
Residential property price
'17
'18
'19
'20
'21
'22
'23
0
1.4
0.66
1.1
3.4
3.0
3.3
3.0
4.2
3.9
5.0
4.9
4.9
3.2
0.55
2.4
2.4
4.9
5.6
6.1
5.1
6.7
7.4
2.4
4.9
2.7
4.7
0.61
2.7
2.4
1.7
0.04
0.08
8
YTD proportion
of total funding
13%
29%
0.70
20%
-40%
8
5.6
5.8
6.3
YTD
0.23
6.5
5.3
1.0
2.0
1.3
1.5
2.0
2.1
2.0
2.2
2.5
2.4
2.5
2.7
2.3
1.7
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Housing volume*
(3-month moving average)
Source: National Bureau of Statistics of China, J.P. Morgan Asset Management; (Left) CEIC; (Right) Wind.
*Housing volume is the sum of the floor space of residential buildings sold, residential buildings newly started and residential buildings completed.
**Domestic loans refers to loans borrowed from banks. Self-raised funds include developers’ internal funds, funds raised from bond issuance, equity issuance and accounts
payable to construction contractors and other relevant parties. Personal mortgage loans are mortgage loans that home buyers borrow from banks and public housing
funds. Proportion of total funding percentages may not sum to 100% due to rounding.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
1.6
0.7
'23
Regional economy
China: Fiscal policy
GTM ASIA
Fiscal revenue and expenditure*
9
Fiscal balance**
Year-over-year change, 3-month moving average
40%
% of nominal GDP
0%
-2%
30%
-4%
20%
-6%
10%
-8%
0%
-10%
-10%
-12%
-20%
-30%
-14%
'14
'15
Revenue
9
'16
'17
'18
Expenditure
'19
'20
'21
'22
'23
-16%
'10
'11
'12
Budget deficit
'13
'14
'15
'16
Actual deficit***
'17
'18
'19
'20
'21
Augmented deficit
Source: CEIC, Ministry of Finance of China, J.P. Morgan Asset Management.
*Fiscal revenue includes taxes, government funds, which are mostly derived from local government land sales, and other government revenues. Fiscal expenditure
includes government spending of funds raised from taxes, government funds and general bond issuance. **Fiscal balance figures for 2023 are forecasts. ***Actual deficit =
fiscal revenues – fiscal expenditures. Budget deficit = actual deficit adjusted with the fiscal stability fund. Augmented deficit is an estimate of all the fiscal resources used by
the government to support economic growth, i.e. fiscal balance plus investment via local government financing vehicles, policy banks and other channels.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'22
'23
Regional economy
China: Monetary policy and credit growth
Chinese credit impulse and global new orders
% of nominal GDP, year-over-year change
25%
Difference from one year ago
35
GTM ASIA
10
Key interest rates
Per annum
7.5%
20%
25
6.0%
15%
15
10%
5%
5
4.5%
0%
-5
-5%
-10%
3.0%
-15
1.5%
-15%
-25
-20%
-25%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
Credit impulse*
(forward 6 months)
10
Global composite PMI - new orders
-35
0.0%
'15
'16
'17
'18
'19
'20
Loan prime rate (1-year)**
Medium-term lending facility (1-year)
Source: CEIC, People’s Bank of China (PBoC), J.P. Morgan Asset Management; (Left) Ministry of Finance of China; (Right) National Interbank Funding Center.
*Credit impulse measures the year-over-year change of credit flow (net aggregate social financing) as a percentage of nominal GDP. Rolling 12-month nominal GDP and
credit stock are used in the calculation. **Previously, the 1-year lending rate was a key interest rate. In August 2019, the PBoC started to release 1-year and 5-year loan
prime rates (LPR) on a monthly basis, which are based on quotes from 18 large banks. LPR has become the benchmark for commercial loans and floating rate loan
contracts.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'21
'22
'23
Loan prime rate (5-year)
Interbank repo (7-day)
Regional economy
China: Exchange rate
GTM ASIA
Chinese yuan exchange rate
CFETS Index*
108
106
06/08/18:
Risk reserve ratio
for forward sales of
CNY raised to 20%
from 0%
Stronger CNY
104
102
11/12/15:
Launch of the CFETS
index
100
96
15'
16'
5.9
6.1
6.3
6.5
6.7
6.9
15/05/22: Reserve
ratio on foreign
exchange deposit cut
to 8% from 9%
17'
18'
7.1
7.3
27/10/20: Suspension of
counter-cyclical factor
19'
20'
21'
22'
CFETS CNY Index
11
5.7
15/09/22:
Reserve ratio on foreign
exchange deposit cut to
6% from 8%
26/05/17:
Introduction of counter-cyclical factors to stabilize daily
central parity
92
90
28/09/22:
Risk reserve ratio for
forward sales of CNY
raised to 20% from 0%
Weaker CNY
94
USD/CNY
5.5
12/10/20:
Risk reserve ratio for
forward sales of CNY
cut to 0% from 20%
11/08/15:
Market reform to
mechanism of
CNY exchange
rate
98
11
Source: China Foreign Exchange Trade Center, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.
*CFETS CNY Index is the China Foreign Exchange Trade System basket of 24 currencies traded against the Chinese renminbi, where the base value was set at 100 as of
31/12/14. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
23'
USD / CNY (inverted)
7.5
Global growth forecasts
GTM ASIA
Developed markets quarterly real GDP growth
Global economy
Year-over-year change
15%
Emerging markets quarterly real GDP growth
Forecast*
Year-over-year change
25%
Forecast*
20%
10%
15%
5%
10%
0%
5%
-5%
Jan '21
U.S.
12
Jul '21
Jan '22
Eurozone
Jul '22
Japan
Jan '23
12
Jul '23
0%
Jan '21
China
Jul '21
India
Jan '22
Jul '22
Brazil
Source: FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Real GDP growth forecasts are based on growth forecasts estimated by J.P. Morgan
Economic Research.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Jan '23
Jul '23
Global Purchasing Managers’ Index (PMI)
Global economy
55
50
45
40
'99
'01
'03
'05
Manufacturing
13
'07
'09
Services
'11
'13
'15
'17
'19
'21
'23
Jun '23
May '23
Apr '23
Mar '23
Feb '23
Jan '23
Dec '22
Nov '22
Oct '22
Sep '22
Jul '22
60
35
13
Global manufacturing PMI breakdown
Index
65
Aug '22
Global manufacturing and services PMI
GTM ASIA
Global
49.6 48.8
DM*
47.6 46.3
EM**
51.4 51.1
U.S. (Markit)
48.4 46.3
U.S. (ISM)
46.9 46.0
Eurozone
44.8 43.6
Germ any
43.2 40.6
France
45.7 46.0
Italy
45.9 43.8
Spain
48.4 48.0
UK
47.1 46.5
Australia
48.4 48.2
Japan
50.6 49.8
China (Markit)
50.9 50.5
China (NBS)
48.8 49.0
Korea
48.4 47.8
Taiw an
44.3 44.8
Indonesia
50.3 52.5
India
58.7 57.8
Russia
53.5 52.6
Brazil
47.1 46.6
Mexico
50.5 50.9
Source: Institute for Supply Management, J.P. Morgan Economic Research, Markit, S&P Global, J.P. Morgan Asset Management.
PMIs are relative to 50, which indicates deceleration (below 50) or acceleration (above 50) of the sector. Heatmap colors are based on PMI relative to the 50 level, with
green (red) corresponding to acceleration (deceleration). *Developed market includes Australia, Canada, Denmark, eurozone, Japan, New Zealand, Norway, Sweden,
Switzerland, UK and the U.S. **Emerging market includes Brazil, Chile, China, Colombia, Croatia, Czech Republic, Hong Kong SAR, Hungary, India, Indonesia, Israel,
Korea, Malaysia, Mexico, Philippines, Poland, Romania, Russia, Saudi Arabia, Singapore, South Africa, Taiwan, Thailand, Turkey and Vietnam.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Global inflation
GTM ASIA
14
Headline consumer prices
Year-over-year change, quarterly
Below trend
Inflation running
Above trend
Developed Markets
Other EM
14
May
'23
Jun
'23
U.S.
4.1%
-
UK
8.7%
-
Eurozone
6.1%
5.5%
Japan
3.2%
-
Australia
5.9%
5.7%
China
0.2%
-
India
4.3%
-
Korea
3.3%
2.7%
Taiwan
2.2%
-
Indonesia
4.0%
3.5%
Malaysia
2.8%
-
Thailand
0.5%
-
Brazil
3.9%
-
Mexico
5.8%
-
Turkey
39.6%
-
South Africa
6.3%
-
2013
EM Asia
Global economy
Legend
2014
2015
2016
2017
2018
2019
2020
2021
Source: Department of Statistics Malaysia, DGBAS, Eurostat, FactSet, IBGE, India Ministry of Statistics & Programme Implementation, INEGI, J.P. Morgan Economics
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. Seasonally adjusted quarterly averages, with the exception of the two most recent figures, which are seasonally adjusted single month readings, are shown.
Colors are based on z-score of year-over-year inflation rate relative to each market’s own 10-year history where red (green) indicates inflation above (below) long-run trend.
EM represents emerging markets.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
2022
Global inflation forecasts
GTM ASIA
Developed market headline consumer price inflation
Global economy
Year-over-year change
12%
15
Emerging market headline consumer price inflation
Forecast*
Year-over-year change
14%
Forecast*
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
2018
2019
U.S.
15
Japan
2020
2021
Euro Area
2022
2023
2024
-2%
2018
2019
China
2020
India
2021
Brazil
Source: FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Inflation forecasts are based on forecasts estimated by J.P. Morgan Economic
Research.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
2022
2023
2024
Central bank inflation targets
GTM ASIA
16
Inflation and central bank inflation targets
Year-over-year change
12%
Global economy
11%
10.5%
Inflation target range
Inflation target or midpoint
Current inflation
10%
9.2%
Inflation six months ago
9%
8.7%
8%
7%
5.9%
4%
2.8%
3%
1%
0%
4.1%
4.0%
China
3.3%
4.0%
4.1%
5.5%
6.6%
6.9%
4.3%
3.5%
2.2%
1.8%
0.2%
3.2%
5.7%
5.5%
5.0%
5%
2%
6.9%
6.4%
6%
16
8.6%
0.5%
Thailand
Taiwan
Japan
Korea
Malaysia** Indonesia
U.S.
India
Eurozone
Australia* Philippines
Source: FactSet, J.P. Morgan Asset Management. *The inflation figure used for Australia is based on trimmed-mean consumer price index (CPI), which is the preferred
metric used by the Reserve Bank of Australia for its inflation target. **The inflation figure used for Malaysia is based on core CPI, which is the preferred metric used by the
Bank Negara Malaysia (The Central Bank of Malaysia) for its inflation target. Inflation figures for other listed economies are based on headline CPI, in accordance with their
preferred inflation target metric. Note that while the U.S. Federal Reserve officially targets 2% headline personal consumption expenditure (PCE) inflation, headline CPI is
used for U.S. inflation in this chart due to the timelier release of data.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
UK
Global central bank policy rate changes
Changes in central bank policy rates
7%
250
Global economy
17
Expected change in central bank policy rates**
Number of hikes or cuts*
200
GTM ASIA
Rate hikes
6%
150
5%
100
4%
50
3%
2%
0
1%
-50
0%
-100
17
Interest rate at start of 2022
Current interest rate
Source: Bank of International Settlements, J.P. Morgan Asset Management; (Right) CEIC, J.P. Morgan Economic Research.
*Count covers the 38 central banks included in the Bank for International Settlements’ central bank policy monitor except Argentina, Croatia and Hong Kong.
**Unseen markers are likely due to overlapping values.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Expected rate by 31/12/23
India
Philippines
Indonesia
U.S.
UK
Australia
Euro area
Malaysia
China
South Korea
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 YTD
'23
Emerging markets
/ Developed markets
/
Thailand
-200
Taiwan
-1%
-150
Japan
Rate cuts
G4 central bank policy rates and market expectations
G4 central bank key policy rates
GTM ASIA
18
Market expectations* for central bank policy rates
Per annum
6.0%
Expected rate by 31/12/23
7.0%
Global economy
5.5%
6.0%
5.0%
4.5%
5.0%
4.0%
3.5%
4.0%
3.0%
3.0%
2.5%
2.0%
2.0%
1.5%
1.0%
1.0%
0.5%
0.0%
0.0%
-0.5%
-1.0%
'10
'12
U.S.
UK
'14
Eurozone
'16
'18
Japan
'20
'22
-1.0%
Dec '22
Feb '23
U.S. Federal Reserve
Apr '23
Bank of England
Bank of Japan
18
Source: J.P. Morgan Asset Management; (Left) FactSet; (Right) Bloomberg. *Expectations are derived from the World Interest Rate Probability (WIRP) estimated forward
rates. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Jun '23
European Central Bank
United States: Economic growth and the contribution to GDP
Real GDP
Global economy
Percentage points
Real GDP
1Q23
12%
Year-over-year change:
1.8%
10%
Quarter-over-quarter SAAR* change:
2.0%
8%
19
Component contribution to GDP
Year-over-year change
14%
GTM ASIA
20
15
10
10-year
average: 2.1%
50-year average: 2.6%
6%
Contribution
1Q23
Consumption
2.79
Investment
-2.22
Government
0.85
Net Exports
0.58
5
4%
0
2%
0%
-5
-2%
-10
-4%
-6%
-15
-8%
-10%
19
'72
'77
'82
'87
'92
'97
'02
'07
'12
'17
'22
-20
Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
'19 '19 '20 '20 '20 '20 '21 '21 '21 '21 '22 '22 '22 '22 '23
Source: Bureau of Economic Analysis, FactSet, J.P. Morgan Asset Management.
The chart on the right shows that real GDP growth reached a low of -29.9% quarter-over-quarter annualized during 2Q20 and a high of 35.3% quarter-over-quarter
annualized during 3Q20.
*SAAR stands for seasonally adjusted annualized rate.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Economic monitor
GTM ASIA 20
U.S. economic indicators
Percentile rank relative to historic data since 1990
Global economy
Broad indicators
Consumer and services
Manufacturing
Labor market
Key:
Elevated
recession risk
100
90
Lower
recession
risk
80
70
6 months
prior
60
50
Latest
40
30
20
Higher
recession
risk
10
0
20
Conference
Board Leading
Economic Index
Conference
Board Leading
Credit Index
Consumer
ISM nonConfidence Index manufacturing
ISM
manufacturing:
New orders
Non-farm payrolls
Source: Conference Board U.S., FactSet, Institute for Supply Management, U.S. Department of Labor, J.P. Morgan Asset Management. Elevated recession risk flags are
shown when the underlying indicator is at a level consistent with the onset of any of the three recessions prior to the COVID-19 recession. Transformations used for each
of the indicators are year-over-year percentage change for the Leading Economic Index and Consumer Confidence Index, index level for Leading Credit Index, ISM nonmanufacturing and ISM manufacturing new orders and three-month moving average of monthly absolute change for non-farm payrolls. Past performance is not a reliable
indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Consumption and investments
Global economy
Real wage growth* and personal consumption expenditure
GTM ASIA
Investments and future CAPEX*** intentions
Year-over-year change, 3-month moving average
5%
10%
4%
8%
3%
6%
2%
4%
Year-over-year change
20%
Net percentage of respondents
50%
15%
40%
10%
30%
5%
20%
0%
1%
2%
-5%
0%
0%
-1%
-2%
-2%
-4%
-20%
-6%
-25%
-3%
'00
'02
'04
'06
'08
Real wage growth*
21
21
'10
'12
'14 '16 '18 '20 '22
Real personal consumption
expenditure**
10%
-10%
0%
-15%
-10%
'00
'02
'04
'06
'08
'10
Business fixed investment
'12
'14 '16 '18 '20 '22
Empire State future capital
expenditure survey****
(3-month moving average)
Source: U.S. Bureau of Economic Analysis, J.P. Morgan Asset Management; (Left) Federal Reserve Bank of Atlanta, U.S. Department of Labor; (Right) Federal Reserve
Bank of New York. *Real wage growth is calculated by taking the year-over-year change in Atlanta Fed Hourly Wage Growth Tracker adjusted using the U.S. Consumer
Price Index. **Axis cut off to maintain reasonable scale. ***CAPEX refers to capital expenditure. ****Future capital expenditure intention is the difference between the
percentage of businesses looking to increase capital expenditure vs the percentage of businesses looking to decrease capital expenditure over the next 6 months.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
-20%
United States: Employment and wages
Unemployment rate and average hourly earnings*
Labor market supply and demand
Percent of labor force, year-over-year change, seasonally adjusted
16%
Global economy
GTM ASIA 22
2.2
68%
05/2023:
1.7 jobs per
unemployed
person
2.0
14%
1.8
12%
66%
1.6
Recessions
64%
1.4
10%
05/2023: 3.7%
05/2023: 5.0%
8%
1.2
62%
1.0
6%
0.8
60%
0.6
4%
0.4
2%
0%
'85
0.2
'90
'95
Unemployment rate
22
58%
'00
'05
'10
Average hourly earnings
'15
'20
0.0
'00
'02
'04
'06
'08
'10
'12
JOLTS** job openings
per unemployed person
Source: J.P. Morgan Asset Management; (Left) FactSet, U.S. Bureau of Labor Statistics; (Right) Conference Board of U.S., U.S. Department of Labor.
*Average hourly earnings are calculated from the wages of production and non-supervisory workers. **JOLTS stands for Job Openings and Labor Turnover Survey.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'14
'16
'18
'20
Civilian labor force
participation rate
'22
56%
United States: Housing market
GTM ASIA 23
Mortgage rate and housing starts
Global economy
Per annum
2%
Year-over-year change, 6-month moving average
60%
40%
4%
Recessions
Distribution of mortgage rates
Percentage of total outstanding value of residential mortgages, as of 3Q23
40%
38%
35%
30%
20%
6%
0%
8%
25%
20%
23%
20%
15%
-20%
10%
10%
10%
12%
23
-40%
'90
'95
'00
30-year fixed rate
mortgage (inverted)
'05
'10
'15
'20
Privately owned
housing starts
-60%
9%
5%
0%
Less Than or Between 3% Between and Between 5% Greater Than
Equal to 3%
and 4%
4% to 5%
and 6%
6%
Source: J.P. Morgan Asset Management; (Left) FactSet, Freddie Mac, U.S. Census Bureau; (Right) Federal Housing Finance Agency, National Mortgage Database.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Inflation
GTM ASIA 24
Potential pathways for inflation
Consumer Price Index (CPI) components contribution
7%
10%
Core CPI, seasonally adjusted, forecasts post-May 2023
Year-over-year change, seasonally adjusted
9%
Global economy
Forecast
8%
6%
5.10%
5%
7%
6%
5%
4%
4%
3.66%
3%
3%
2%
2.43%
2%
1%
0%
1%
1.21%
-1%
-2%
0%
Jan '20
Aug '20
Mar '21
Historical
Assuming 0.3% m/m
Oct '21
May '22
Dec '22
Jul '23
Assuming 0.41% m/m (6-month average)
Assuming 0.2% m/m
Assuming 0.1% m/m
24
Feb '24
Source: FactSet, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
-3%
'20
'21
Core goods
Food
'22
Core services ex-shelter
Energy
'23
Shelter
United States: Monetary policy
GTM ASIA 25
Federal funds rate expectations
Global economy
Market expectations for the fed funds rate
7%
FOMC June 2023 forecasts
Percent
6%
5%
4%
2023
2024
2025
Long
run
Change in real GDP, 4Q to 4Q
1.0
1.1
1.8
1.8
Unemployment rate, 4Q
4.1
4.5
4.5
4.0
PCE inflation, 4Q to 4Q
3.2
2.5
2.1
2.0
3%
2.5%
2%
1%
0%
'00
'02
'04
Federal funds rate
25
'06
'08
'10
Market expectations on 30/06/23
'12
'14
'16
FOMC year-end estimates
'18
'20
'22
FOMC long-run projection
Source: Bloomberg, FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management.
Market expectations are derived from market implied policy rates as of 30/06/23. Federal Reserve projections shown are the median estimates of Federal Open Market
Committee (FOMC) participants.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'24
'26
Long
run
United States: Federal Reserve balance sheet
GTM ASIA 26
The Federal Reserve balance sheet
Global economy
USD trillions
10
Balance sheet expansion under rounds of quantitative easing (QE), USD billions
9
8
7
Announced
Terminated
Length (m)
Treasuries
MBS**
Loans***
Balance sheet
QE1
25/11/08
31/03/10
16
300
1,074
0
1,403
QE2
03/11/10
29/06/12
19
829
-196
0
568
QE3
13/09/12
29/10/14
25
822
874
0
1,674
QE4
23/03/20
15/03/22
24
3,286
1,343
62
4,779
Forecast*
Loans
6
5
Other
4
MBS
3
2
Treasuries
1
0
26
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Source: FactSet, Federal Reserve, J.P. Morgan Investment Bank, J.P. Morgan Asset Management.
At its peak, the balance sheet contained $5.7tn in Treasuries and $2.7tn in MBS. *The forecast assumes the Federal Reserve begins balance sheet runoff in mid-May and
gradually increases the monthly cap on maturing Treasury and MBS securities per meeting until a max cap of $100bn/month. The forecast does not include the active
selling of securities from the committee. **MBS stands for mortgage-backed-securities.***Loans include liquidity and credit extended through corporate credit facilities
established in March 2020, as well as new deposit facility for regional banks in 2023. Other includes primary, secondary and seasonal loans, repurchase agreements,
foreign currency reserves and maiden lane securities. Forecasts are not a reliable indicator of future performance. Forecasts, projections and other forward-looking
statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent
uncertainties and risks associated with forecasts, projections or other forward-looking statements, actual events, results or performance may differ materially from those
reflected or contemplated.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'23
'24
'25
Eurozone: Economic monitor
GTM ASIA
27
Eurozone economic indicators
Percentile rank relative to historic data since 1999
Global economy
Financial conditions
Consumer and services
Manufacturing
Labor market
100
Key:
Elevated
recession risk
90
Lower
recession risk
80
70
60
6 months
prior
50
Latest
40
30
20
10
Higher
recession risk
0
Bloomberg
financial
conditions
27
Consumer
confidence
Services PMI:
Business
expectations
Manufacturing
PMI: New
orders
Unemployment
Source: Bloomberg, European Commission, Eurostat, FactSet, S&P Global, J.P. Morgan Asset Management. Elevated recession risk flags are shown when the underlying
indicator is at a level consistent with eurozone recessions prior to the COVID-19 recession.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Eurozone: Economic snapshot
GTM ASIA 28
Eurozone activity
Consumer Price Index (CPI) components contribution
Global economy
Year-over-year change
40%
30%
10%
20%
8%
10%
6%
0%
4%
-10%
2%
-20%
0%
-30%
'00
'02
'04
Retail sales
28
Year-over-year change, seasonally adjusted
12%
'06
'08
'10
'12
'14
'16
'18
'20
Exports
Source: Eurostat, FactSet, J.P. Morgan Asset Management; (Right) European Commission.
*Core rate is inflation ex food and energy.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'22
-2%
'20
'21
Core rate*
Food, alcohol, tobacco
'22
'23
Energy
Japan: Economic snapshot
GTM ASIA 29
Component contribution to GDP
Japan core inflation and wage growth
Global economy
Year-over-year change
8%
Year-over-year change
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-4%
-6%
-8%
-10%
Contribution
1Q23
Consumption
1.40
Investment
0.40
Government
0.20
Net Exports
-0.70
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
'20 '20 '20 '20 '21 '21 '21 '21 '22 '22 '22 '22 '23
-2%
-4%
-6%
'00
'02
'04
'06
'08
'10
Inflation ex-food and energy
29
'12
'14
'16
'18
'20
Nominal wage growth
(3-month moving average)
Source: FactSet, J.P. Morgan Asset Management; (Left) Japanese Cabinet Office; (Right) Japan Ministry of Health, Labor and Welfare, Japan Ministry of Internal Affairs
and Communications.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'22
Global and Asia equity market returns
Equities
10-yrs ('13 - '23)
Ann. Ret. Ann. Vol.
2022
2Q '23
YTD '23
U.S.
ASEAN
India
Taiwan
U.S.
China A
45.2%
28.7%
-4.1%
12.4%
20.4%
12.9%
24.2%
China A
Taiwan
Taiwan
India
U.S.
U.S.
Taiwan
China
-7.3%
37.2%
42.0%
26.8%
-7.5%
8.7%
16.9%
12.2%
23.2%
India
Taiwan
U.S.
China A
India
Europe
Japan
Korea
India
Korea
9.2%
38.8%
-8.2%
31.5%
38.4%
26.7%
-14.5%
6.4%
14.6%
9.0%
21.7%
APAC
ex-JP
37.3%
ASEAN
Europe
China
Europe
Japan
Taiwan
Europe
Europe
India
-2.3%
APAC
ex-JP
7.1%
-8.4%
24.6%
29.7%
17.0%
-16.3%
4.8%
14.2%
6.3%
19.8%
China
India
ASEAN
China A
Japan
China
Korea
Japan
China A
Taiwan
4.2%
8.3%
-6.1%
6.2%
32.6%
-12.6%
23.7%
APAC
ex-JP
22.8%
4.5%
13.2%
6.2%
19.4%
China
ASEAN
Korea
Japan
ASEAN
Japan
4.0%
6.4%
-6.3%
2.7%
30.1%
APAC
ex-JP
-13.7%
20.1%
APAC
ex-JP
3.7%
APAC
ex-JP
3.1%
China
China
Taiwan
Europe
-7.6%
1.1%
28.5%
-14.3%
2019
2020
U.S.
Taiwan
Korea
54.3%
-4.4%
37.7%
U.S.
Korea
India
2.4%
12.0%
47.8%
U.S.
U.S.
Korea
26.0%
13.7%
1.4%
Taiwan
Taiwan
Europe
9.8%
10.1%
Korea
2014
2015
2016
2017
U.S.
China A
Japan
Taiwan
China
32.4%
52.1%
9.9%
19.6%
Japan
India
China A
27.3%
23.9%
Europe
2013
30
GTM ASIA 30
China A
Japan
-2.6%
-3.7%
APAC
ex-JP
-9.1%
India
Europe
-3.8%
2018
APAC
ex-JP
19.5%
2021
2.0%
APAC
ex-JP
-17.2%
U.S.
ASEAN
U.S.
Europe
India
Japan
18.4%
0.2%
-18.1%
3.1%
5.3%
5.6%
India
China A
China
15.9%
-1.0%
-21.8%
APAC
ex-JP
-0.9%
APAC
ex-JP
3.2%
APAC
ex-JP
4.8%
China A
ASEAN
ASEAN
Korea
ASEAN
-26.5%
-4.5%
-1.7%
4.7%
15.7%
Japan
APAC
ex-JP
16.6%
Europe
16.4%
Europe
Europe
China
Korea
Japan
0.2%
26.2%
-18.7%
13.1%
14.9%
APAC
ex-JP
-2.7%
Taiwan
India
Japan
Korea
ASEAN
Europe
Korea
Korea
China A
China A
China
U.S.
-5.7%
-11.0%
-1.4%
24.4%
-20.5%
8.8%
5.9%
-7.9%
-28.9%
-9.2%
-3.9%
3.2%
14.9%
ASEAN
Korea
ASEAN
China A
U.S.
China A
India
ASEAN
China
Taiwan
China
China
ASEAN
Japan
-4.5%
-10.7%
-18.4%
-15.2%
21.8%
-27.6%
7.6%
-6.2%
-21.6%
-29.1%
-9.6%
-5.4%
0.0%
13.8%
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
Returns are total returns in U.S. dollars based on MSCI indices, except the U.S., which is the S&P 500, and China A, which is the CSI 300 index in U.S. dollar terms. China
return is based on the MSCI China index. 10-yr total (gross) return data is used to calculate annualized returns (Ann. Ret.) and annualized volatility (Ann. Vol.) and reflect
the period 30/06/13 – 30/06/23. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Global equities: Return composition
GTM ASIA
31
Sources of global equity returns*
Total return, USD
30%
2022
2023 YTD
13.2%
16.9%
20%
14.2%
Equities
10%
5.1%
3.2%
0%
-10%
-20%
-17.2%
-30%
-14.5%
-40%
Europe
-19.7%
U.S.
EM
-16.3%
Japan
Multiple expansion**
31
-18.1%
Asia Pacific
ex-Japan
EPS growth outlook***
Dividend yield
Europe
Currency return
Japan
Asia Pacific
ex-Japan
Total return
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. *All return values are MSCI Gross Index (official) data, except the U.S., which is the S&P 500.
**Multiple expansion is based on the forward price-to-earnings ratio. ***Earnings per share (EPS) growth outlook is based on next 12-month aggregate (NTMA) earnings
estimates.
Diversification does not guarantee positive returns or eliminate risk of loss. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
U.S.
EM
Global equities: Earnings expectations
Earnings growth
Earnings revisions ratios
Earnings per share, year-over-year change, consensus estimates
Net earnings revisions to consensus estimates, 12-week moving average
80%
25%
20%
19%
18.2%
14%
15%
GTM ASIA 32
60%
40%
Equities
12%
10%
5%
7%
6%
5%
4%
20%
8%
0%
3%
1%
0%
-20%
-5%
-40%
-5.2%
-10%
-8.9%
-9%
-60%
-11%
-15%
U.S.
2022
32
Europe
2023
2024
Japan
Asia Pacific
ex-Japan
EM
-80%
'20
'21
U.S.
Europe
'22
Asia Pacific ex-Japan
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Asia Pacific ex-Japan, emerging markets (EM), Europe and U.S. equity indices used are the
MSCI AC Asia Pacific ex-Japan, MSCI Emerging Markets, MSCI Europe and S&P 500, respectively. Consensus estimates used are calendar year estimates from FactSet.
Revisions are based on the current unreported year. Net earnings revisions is (number of companies with upward earnings revisions minus number of companies with
downward earnings revisions) divided by the number of total companies. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'23
Japan
Global equities: Valuations
GTM ASIA 33
Equity market valuations – Price-to-earnings
Forward P/E ratios
41.3
30x
19.3
20x
Equities
21.8
16.3
13.3
10x
0x
35.8
15-yr. range
15-yr. average
Latest
AC World
S&P 500
Europe
ex-UK
13.5
Asia Pac
ex-Japan
ASEAN
China A
14.9
10.2
12.0
Emerging
markets
14.5
13.0
13.5
12.4
China
Hong
Kong
India
Indonesia
Japan
16.3
14.2
Korea
13.2
Malaysia
12.6
Philippines
17.2
11.7
Singapore
Taiwan
Thailand
Equity market valuations – Price-to-book
Trailing P/B ratios
15-yr. range
15-yr. average
Latest
5x
4x
3x
4.0
3.4
2.6
2x
1.9
2.4
1.6
1.6
1.6
1.3
1x
0x
33
AC World
S&P 500
Europe
ex-UK
Asia Pac
ex-Japan
Emerging
markets
ASEAN
2.3
1.6
China A
China
1.3
1.0
Hong
Kong
India
Indonesia
Japan
1.0
Korea
1.7
1.3
Malaysia
1.8
1.3
Philippines
Source: China Securities Index, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
Emerging markets is represented by the MSCI Emerging Markets Index. China A is represented by the CSI 300 Index. Price-to-earnings (P/E) and price-to-book (P/B)
ratios are in local currency terms. 15-year range for P/E and P/B ratios are cut off to maintain a more reasonable scale for some indices. Past performance is not a reliable
indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Singapore
Taiwan
Thailand
Global equities: Growth versus value
Growth vs. value valuations*
MSCI World growth / value fwd. P/E ratio, # of std. dev.** over / under average
3
2
GTM ASIA 34
Trailing 12-months earnings per share
Indexed, Dec 2004 = 100
350
300
Growth expensive
relative to value
Equities
250
1
200
0
150
-1
100
-2
Growth cheap
relative to value
-3
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
50
0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
MSCI World Growth
34
MSCI World
Source: J.P. Morgan Asset Management; (Left) FactSet, MSCI; (Right) Bloomberg.
*Growth is the MSCI World Growth index and value is the MSCI World Value index. **Std. dev. is standard deviation, which is a measure of dispersion relative to the mean.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
MSCI World Value
APAC ex-Japan equities: Earnings expectations by market and
sector
GTM ASIA 35
Earnings growth by market
Earnings per share, year-over-year change, consensus estimates
80%
66.9%
60%
36.5%
40%
20%
0%
-20%
6.1%
0.6%
30.1%
26.1%
4.4% 8.6%
10.3%
9.1%
-5.8%
12.6% 12.5%
-5.2%
-9.6%
-27.3%
Equities
-40%
-60%
24.3%
18.2%
18.0% 17.8%
12.5% 12.9% 14.5%
Australia
2023
Singapore
Malaysia
Philippines
Indonesia
Thailand
Hong Kong
China
India
2024
Asia Pacific
ex-Japan
Taiwan
-39.0%
Korea
Earnings growth by sector
Earnings per share, year-over-year change, consensus estimates
60%
40%
18.7%
20%
9.4%
-20%
-13.3%
-40%
-45.3%
Information
technology
2023
35
15.6%
5.8%
0%
-60%
343.5%
59.7%
-12.8%
0.2%
9.3%
23.4%
7.1%
36.7%
11.1% 7.2%
20.6%
37.6%
40.9%
19.5%
-1.9%
-31.5%
Industrials
Materials
Energy
Consumer
staples
Real estate
Health care
Financials
Communication Consumer
services
discretionary
2024
Source: FactSet, MSCI, J.P. Morgan Asset Management. Consensus estimates used are calendar year estimates from FactSet. (Top) Equity indices used are the
respective MSCI indices. (Bottom) Sector indices used are from the MSCI AC Asia Pacific ex-Japan Index. Past performance is not a reliable indicator of current and future
results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Utilities
APAC ex-Japan equities: Performance drivers
APAC ex-JP price-to-book* and subsequent returns
GTM ASIA 36
APAC ex-JP / DM equity performance and USD index
Relative index level, Dec. 1997 = 100
250
120%
Index level
40
Equities
Current
level
80%
200
60
40%
150
80
0%
100
100
-40%
50
120
-80%
0.8
1.2
1.6
2.0
2.4
2.8
0
'98
'00
'02
'04
'06
'08
'10
'12
'14
MSCI APAC ex-JP / MSCI World (DM)
36
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research. *Price-to-book ratio used here is trailing 12-months price-to-book ratio.
Dots represent monthly data points since 1996. DM = Developed markets. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'16
'18
'20
'22
USD Index (inverted)
140
37
Telecom
Utilities
Tech.
APAC exJP
APAC ex-JP
Weights
22.6%
3.7%
5.0%
5.2%
12.7%
7.0%
8.5%
4.0%
8.5%
2.4%
20.4%
100%
YTD '23
0.6%
-7.0%
-7.2%
-1.7%
-4.9%
4.5%
2.7%
5.0%
4.1%
-10.6%
20.7%
3.2%
2022
-4.1%
-15.3%
-20.2%
-10.5%
-20.7%
-14.0%
-4.0%
8.4%
-28.7%
-8.4%
-33.0%
-17.2%
0.83
-0.30
0.84
0.78
0.41
0.16
0.95
0.56
0.40
0.31
0.97
0.87
2023 earnings
growth
11.1%
0.2%
7.1%
-1.9%
37.6%
-31.5%
-13.3%
-12.8%
36.7%
343.5%
-45.3%
-5.2%
2024 earnings
growth
7.2%
9.3%
23.4%
15.6%
19.5%
18.7%
9.4%
5.8%
20.6%
40.9%
59.7%
18.2%
Forward P/E Ratio
8.9x
11.1x
30.2x
22.4x
14.8x
13.3x
12.6x
9.9x
19.5x
14.1x
20.2x
13.5x
10-yr avg.
10.1x
10.6x
28.7x
21.1x
16.5x
13.6x
12.9x
12.0x
18.8x
14.5x
14.2x
13.2x
Trailing P/B Ratio
1.1x
0.7x
3.9x
3.5x
2.1x
1.2x
1.7x
1.2x
2.6x
1.3x
2.2x
1.6x
10-yr avg.
1.2x
0.8x
4.9x
3.2x
2.2x
1.3x
1.5x
1.2x
2.5x
1.4x
2.3x
1.6x
Dividend Yield
4.1%
4.3%
1.1%
2.3%
1.1%
3.9%
4.7%
5.7%
1.3%
3.8%
2.5%
3.0%
10-yr avg.
3.8%
4.0%
1.1%
2.3%
1.5%
2.5%
3.8%
3.7%
2.7%
3.3%
2.1%
2.8%
Correl to S&P 500
sectors and
index*
Source: FactSet, MSCI, J.P. Morgan Asset Management. EPS refers to earnings per share, P/E ratio refers to price-to-earnings ratio and P/B ratio refers to price-to-book
ratio, returns are in U.S. dollar terms. *Correlation (p) to S&P 500 sectors and index are based on the correlation between the S&P 500 index and MSCI Asia Pacific exJapan index and S&P 500 sectors relative to the corresponding MSCI AC Asia Pacific ex-Japan sectors. Past performance is not indicative of current or future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Weights
Energy
Return
Industrials Materials
p
Cons.
Discr.
EPS
Cons.
Staples
P/E
Health
Care
37
P/B
Equities
Financials Real Estate
GTM ASIA
Div
APAC ex-Japan equities: Returns and valuations by sector
APAC ex-Japan equities: Earnings trend by revenue source
and exports
Domestic vs. export-oriented Asian companies*
GTM ASIA 38
Growth in nominal exports and earnings per share
MSCI AC Asia Pacific ex-Japan, earnings per share, Jan. 2010 = 100
450
USD, year-over-year change
80%
400
60%
350
Equities
40%
300
20%
250
200
0%
150
-20%
100
0
38
-40%
More than 95% of revenue derived domestically
Between 70% and 95% of revenue derived domestically
Less than 70% of revenue derived domestically
50
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
MSCI APAC ex-JP earnings per share
'22
'23
-60%
EM Asia ex-China exports**
'01
'03
'05
'07
'09
'11
'13
Source: J.P. Morgan Asset Management; (Left) FactSet, MSCI; (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 (29/01/10 – 30/06/23), monthly adjustments are made to the buckets to
reflect changes in a company's operations over time. Subsequently, 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 29/01/10. **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. Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'15
'17
'19
'21
'23
APAC ex-Japan equities: Export and revenue exposure by
geography
GTM ASIA 39
Asian economies’ export exposure to U.S. and European Union
Equities
Value of exports to U.S. and European Union as a share of nominal GDP, USD
40%
35%
30%
25%
20%
15%
10%
5%
0%
Vietnam
Singapore
2001
2008
Malaysia
Thailand
Korea
Philippines
Japan
India
Indonesia New Zealand
Australia
China
2022
Geographic revenue exposure
Revenue exposure of MSCI indices
100%
80%
60%
40%
20%
0%
Indonesia
China
Local domestic
39
Philippines
China
Thailand
Elsewhere in Asia
India
Malaysia
Americas
New Zealand
Europe
Japan
Singapore
Africa and Middle East
Source: FactSet, J.P. Morgan Asset Management; (Top) IMF Direction of Trade Statistics, Oxford Economics; (Bottom) MSCI.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Australia
Hong Kong
Korea
Taiwan
APAC ex-Japan equities: Dividends
GTM ASIA 40
APAC ex-JP earnings and dividends growth estimates
Number of companies yielding greater than 4% by region
Year-over-year change
70%
Constituents of various MSCI Indices
240
60%
220
50%
200
180
Equities
40%
160
30%
140
20%
120
10%
100
0%
80
-10%
60
-20%
40
-30%
20
-40%
0
-50%
'03
'05
'07
'09
'11
'13
'15
MSCI APAC ex-JP earnings per share
MSCI APAC ex-JP dividends per share
40
'17
'19
'21
'23
Asia Pacific
ex-Japan
Financials
Utilities
Europe
Real Estate
Industrials
Emerging
markets exAsia
Energy
Others*
Source: FactSet, MSCI, J.P. Morgan Asset Management. *Others include Communication Services, Consumer Discretionary, Consumer Staples, Health Care and
Materials. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
U.S.
Japan
Information technology
China: Sector earnings and valuations
MSCI China earnings growth estimates
MSCI China price-to-earnings
50%
70x
40%
60x
Earnings per share, year-over-year change, consensus estimates
Forward P/E ratios
Equities
30%
15-yr. range
15-yr. average
Latest
50x
20%
40x
10%
30x
0%
20x
2023
Industrials
MSCI China
Utilities
Materials
Comm. Serv.
Cons. Staples
Cons. Discr.
Health Care
6.2
Real Estate
3.0
Financials
Sector
Weight
(%)
Tech.
-20%
Energy
-10%
41
GTM ASIA
16.3
3.2
5.6
100.0
2.6
3.4
20.4
5.8
29.5
5.6
2024
2023 estimate
three months ago
10x
0x
2024 estimate
three months ago
Source: FactSet, MSCI, J.P. Morgan Asset Management. Tech refers to Technology; Cons. Staples refers Consumer Staples; Comm. Services refers to Communication
Services; Cons. Discr. refers to Consumer Discretionary. Consensus estimates used are calendar year estimates from FactSet. Past performance is not a reliable indicator
of current and future results. *Data for the forward price-to-earnings ratio in the real estate and health care sectors begin from 30/09/16 and 30/06/09, respectively.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
41
India: Sector earnings and valuations
MSCI India earnings growth estimates
GTM ASIA 42
MSCI India price-to-earnings
Earnings per share, year-over-year change, consensus estimates
80%
Forward P/E ratios
70x
70%
60x
60%
Equities
50%
15-yr. range
15-yr. average
Latest
50x
40%
40x
30%
20%
30x
10%
20x
2023
42
2024
Industrials
Cons. Discr.
Comm. Serv.
9.8
Materials
Cons. Staples
Energy
11.8
Financials
13.2
Health Care
3.6
MSCI India
Sector
Weight
(%)
Tech.
-10%
Utilities
0%
100.0
5.1
26.7
8.8
6.3
11.1
2.8
2023 estimate
three months ago
10x
0x
2024 estimate
three months ago
Source: FactSet, MSCI, J.P. Morgan Asset Management. Tech refers to Technology; Cons. Staples refers Consumer Staples; Comm. Services refers to Communication
Services; Cons. Discr. refers to Consumer Discretionary. Consensus estimates used are calendar year estimates from FactSet. *The communication services sector
reached a historic maximum of 2,099x and a historic minimum of -1,782x. Data for MSCI India real estate sector is unavailable. Past performance is not a reliable indicator
of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Japan: Corporate governance and valuations
TOPIX share buyback announcements* and net profit margins
Number of companies
300
Net profit margin
7%
6%
250
MSCI Japan price-to-book
Trailing P/B ratios
3.5x
15-yr. range
15-yr. average
Latest
3.0x
2.5x
5%
Equities
GTM ASIA 43
200
4%
150
2.0x
1.5x
1.0x
3%
0.5x
43
'19
'20
'21
'22
'23
Net profit margins
0%
Less than
P/B 1.0x** 100.0 100.0 87.0
(% )
Health Care
'18
Tech.
Number of companies
announcing share buybacks
'17
Cons. Staples
'16
Comm. Services
'15
Industrials
'14
MSCI Japan
'13
Cons. Discr.
'12
Materials
'11
Real Estate
0
1%
Financials
50
0.0x
Utilities
2%
Energy
100
35.7
62.5
35.5
35.0
33.3
13.3
0.0
20.6
0.0
Source: J.P. Morgan Asset Management; (Left) Bank of America Global Research, Bloomberg, QUICK, TOPIX; (Right) FactSet, MSCI. Cons. Discr. refers to Consumer
Discretionary, Comm. Services refers Communication Services, Cons. Staples refers to Consumer Staples, Tech refers to Technology. *Share buybacks during the period
of April and May since Japanese companies tend to announce capital management-related share buyback plans following the release of full-year fiscal year financial
results in March. **Percentage of companies with a valuation of less than 1.0x price-to-book ratio is calculated based on the number of constituents.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Europe: Sector earnings and valuations
MSCI Europe earnings growth estimates
GTM ASIA 44
MSCI Europe price-to-earnings
Earnings per share, year-over-year change, consensus estimates
Forward P/E ratios
35x
40%
30%
30x
15-yr. range
15-yr. average
Latest
20%
25x
Equities
10%
20x
0%
-10%
15x
-20%
2023
44
2024
2023 estimate
three months ago
3.1
11.7
15.0
Tech.
16.9 100.0 12.4
Health Care
Cons. Staples
MSCI Europe
Financials
Materials
6.8
Industrials
4.3
Cons. Discr.
0.7
Utilities
Real Estate
5.5
Comm. Services
Sector
Weight
(%)
Energy
-30%
10x
15.3
6.8
5x
0x
2024 estimate
three months ago
Source: FactSet, J.P. Morgan Asset Management. Tech refers to Technology; Cons. Staples refers Consumer Staples; Comm. Services refers to Communication Services;
Cons. Discr. refers to Consumer Discretionary.
*Data for the forward price-to-earnings ratio in the real estate sector begins 30/09/16.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Sector earnings and valuations
S&P 500 earnings growth estimates
GTM ASIA 45
S&P 500 price-to-earnings
Earnings per share, year-over-year change, consensus estimates
Forward P/E ratios
60x
30%
20%
50x
15-yr. range
15-yr. average
Latest
10%
Equities
40x
0%
30x
-10%
20x
2023
45
2024
12.1 100.0
2023 estimate
three months ago
27.7
8.3
Cons. Discr.
8.3
Comm. Services
Tech.
S&P 500
13.2
Financials
6.7
Industrials
2.6
Health Care
2.5
Utilities
2.5
Cons. Staples
4.0
Materials
Sector
Weight
(%)
Real Estate
-30%
Energy
-20%
10x
0x
10.5
2024 estimate
three months ago
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Tech refers to Technology; Cons. Staples refers Consumer Staples; Comm. Services refers to
Communication Services; Cons. Discr. refers to Consumer Discretionary.
*The energy sector reached a historic maximum of 1,160x and a historic minimum of -491x.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Sources of earnings per share growth
GTM ASIA 46
S&P 500 year-over-year operating EPS growth
Annual growth broken into revenue, changes in profit margin & changes in share count
80%
Share of EPS growth
Margin
Revenue
Share count
Total EPS
60%
47%
2023*
8.1%
2.4%
0.2%
10.8%
70%
Avg. '01-'22
4.1%
4.0%
0.3%
8.4%
Equities
40%
19%
19%
20%
YTD
15%
24%
13%
17%
15%
15%
11%
0%
22%
11%
6%
5%
4%
0%
-11%
-6%
-20%
-5%
-22%
-40%
-60%
46
-31%
-40%
'01
'03
'05
'07
'09
'11
'13
'15
'17
Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
EPS levels are based on annual operating earnings per share. *2023 earnings figures are based on weekly operating earnings estimates from Standard & Poor’s.
Percentages may not sum due to rounding. Past performance is not indicative of future returns.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'19
'21
'23
United States: Earnings and rate hikes
S&P 500 performance around the last rate hike in the cycle
Price returns six months after the final rate hike in the cycle
Equities
120
110
100
90
-252 -210 -168 -126
1984
47
1989
-84
-42
1995
0
42
Days
2000
84
2006
126
168
210
47
S&P 500 sector performance
S&P 500 indexed to 100 at date of last rate hike
130
80
GTM ASIA
1995
2000
2006
2018
Health Care
19.4%
10.8%
11.2%
-1.7%
Consumer Staples
15.7%
17.6%
7.7%
-2.6%
Utilities
5.5%
19.0%
14.5%
-2.9%
Communication Services
9.4%
-20.7%
16.9%
-7.2%
Information Technology
47.0%
-25.4%
13.4%
22.9%
Energy
14.6%
0.8%
7.7%
0.8%
Financials
21.0%
11.9%
13.7%
-4.3%
Real Estate*
-
-
20.5%
-17.4%
Consumer Discretionary
15.6%
-18.5%
14.9%
8.4%
Industrials
21.9%
0.6%
5.0%
-6.3%
Materials
23.0%
-17.9%
10.0%
11.9%
252
2018
Source: FactSet, Standard & Poor’s, U.S. Federal Reserve, J.P. Morgan Asset Management. *Price return data for the real estate sector begins in 09/10/01.
Past performance is not indicative of future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
United States: Bull and bear markets
GTM ASIA 48
S&P 500 Composite declines from all-time highs
0%
-20%
4
-40%
5
3
2
Equities
-80%
Recessions
1
-100%
1926
1931
1936
1941
1946
Characteristics of bull and bear
markets
1
2
3
4
5
6
7
8
9
10
11
12
11
9
6
-60%
48
20% Market 12
Decline
8
7
1951
1956
1961
1966
Bear markets*
Bear
Duration
Mkt. Peak return
(mths)
(%)
Market corrections
Crash of 1929
09/1929
-86
32
1937 Fed tightening
03/1937
-60
61
Post WWII crash
05/1946
-30
36
Flash crash of 1962. Cuban Missile Crisis
12/1961
-28
6
Tech crash of 1970
11/1968
-36
17
Stagflation. OPEC oil embargo
01/1973
-48
20
Volcker tightening
11/1980
-27
20
1987 crash
08/1987
-34
3
Tech bubble
03/2000
-49
30
Global financial crisis
10/2007
-57
17
Coronavirus pandemic
02/2020
-34
1
Stagflation worries
01/2022
-25
9
Averages
-43
22
1971
1976
1981
1986
1991
1996
2001
Macro environment
P/E
trough
9.6x
13.8x
10.2x
13.3x
15.3x
Recession
Commodity
spike
Aggressive
Fed
Extreme
valuations
2006
2011
2016
Bull markets
Bull
Bull begin
Duration
return
date
(mths)
(%)
07/1926
152
37
03/1935
129
23
04/1942
158
49
10/1960
39
13
10/1962
103
73
05/1970
74
31
03/1978
62
32
08/1982
229
60
10/1990
417
113
10/2002
101
60
03/2009
401
131
03/2020
114
21
165
54
Source: FactSet, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management.*A bear market represents a 20% or more decline from the previous market
high using a monthly frequency. Periods of recession are defined using the NBER’s business cycle dates. Commodity spike is defined by a significant upward movement in
oil prices. Periods of extreme valuation are defined as periods where the forward P/E multiple on the S&P 500 were approximately two standard deviations above the longrun average. Aggressive Fed tightening is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude. Peak and trough price-toearnings ratios quoted are next 12 months forward P/Es. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
2021
P/E
Peak
15.2x
24.7x
15.1x
19.1x
21.6x
Global fixed income returns
Fixed income
2013
2015
2016
2017
2018
2019
2020
2021
2022
2Q '23
YTD '23
10-yrs ('13 - '23)
Ann. Ret.
Ann. Vol.
U.S. HY
USD Asian
Asia HY
U.S. HY
Local EMD
Cash
U.S. IG
U.S. IG
U.S. HY
Cash
Local EMD
Local EMD
U.S. HY
Local EMD
7.4%
8.3%
5.2%
17.1%
15.2%
1.8%
14.5%
9.9%
5.3%
1.5%
2.5%
7.8%
4.4%
11.4%
DM Gov't
Cash
USD Asian
U.S. HY
U.S. HY
USD Asian
Asia HY
9.7%
0.0%
-11.0%
1.7%
5.4%
3.0%
10.1%
USD
EMD
3.8%
Asia HY
U.S. IG
USD Asian
Asia HY
2.0%
7.5%
2.8%
11.2%
Cash
Asia HY
U.S. MBS
0.0%
6.1%
1.5%
USD
EMD
10.2%
USD
EMD
9.3%
U.S. MBS
1.0%
7.5%
U.S.
Treas
0.9%
Local EMD
Asia HY
9.9%
USD
EMD
14.4%
14.3%
U.S.
Treas
8.0%
DM Gov't
Local EMD
U.S. HY
U.S. MBS
Local EMD
Cash
U.S. IG
6.9%
-0.7%
13.5%
7.1%
-1.0%
-11.7%
1.2%
3.2%
USD
EMD
2.6%
U.S. HY
U.S. HY
U.S. IG
U.S. HY
-1.0%
-11.2%
USD
EMD
1.5%
U.S. IG
2.6%
USD
EMD
8.6%
USD Asian
U.S. MBS
-1.4%
6.1%
USD
EMD
1.2%
U.S. MBS
USD
EMD
U.S.
Treas
U.S. IG
DM Gov't
USD Asian
Asia HY
USD Asian
USD
EMD
U.S. MBS
USD Asian
USD Asian
Asia HY
U.S. IG
-1.4%
5.5%
0.8%
6.1%
6.8%
-0.8%
12.8%
6.3%
-1.5%
-11.8%
0.4%
2.9%
2.2%
6.4%
U.S. IG
U.S.
Treas
Cash
USD Asian
U.S. IG
U.S. HY
USD Asian
USD
EMD
U.S.
Treas
U.S.
Treas
U.S. IG
Cash
U.S. MBS
DM Gov't
-1.5%
5.1%
0.0%
5.8%
6.4%
-2.1%
11.3%
5.9%
-2.3%
-12.5%
-0.3%
2.3%
1.1%
6.0%
U.S. HY
U.S. IG
U.S. MBS
USD Asian
U.S. IG
Asia HY
USD Asian
Asia HY
U.S. MBS
Asia HY
Cash
USD Asian
2.5%
-0.7%
1.7%
5.8%
-2.5%
U.S.
Treas
6.9%
4.9%
-2.4%
-15.1%
-0.6%
2.0%
1.0%
4.9%
DM Gov't
DM Gov't
DM Gov't
DM Gov't
U.S. MBS
Asia HY
U.S. MBS
U.S. MBS
DM Gov't
U.S. IG
Asia HY
U.S. MBS
-4.5%
0.7%
-2.6%
1.6%
2.5%
-3.2%
6.4%
3.9%
-6.5%
-15.8%
-1.0%
1.9%
U.S.
Treas
1.0%
U.S.
Treas
4.4%
Cash
U.S. HY
USD
EMD
-4.6%
Local EMD
Local EMD
2.7%
-8.7%
U.S.
Treas
-1.4%
U.S.
Treas
1.6%
U.S. MBS
6.0%
USD
EMD
-16.5%
DM Gov't
-4.5%
U.S.
Treas
2.3%
DM Gov't
0.0%
U.S.
Treas
1.0%
-0.3%
1.8%
Local EMD
Local EMD
Local EMD
Cash
Cash
Local EMD
Cash
Cash
Asia HY
DM Gov't
DM Gov't
DM Gov't
Local EMD
Cash
-9.0%
-5.7%
-14.9%
0.3%
0.8%
-6.2%
2.2%
0.5%
-11.0%
-17.2%
-2.2%
0.8%
-0.6%
0.4%
U.S.
Treas
-2.7%
USD
EMD
-6.6%
49
2014
GTM ASIA 49
Source: Bloomberg, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Based on Bloomberg U.S. Aggregate Credit – Corporate High Yield Index
(U.S. HY), Bloomberg U.S. Aggregate Credit – Corporate Investment Grade Index (U.S. IG), J.P. Morgan Government Bond Index – EM Global Diversified (GBI-EM Div.)
(Local EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asian Bond), Bloomberg U.S. Aggregate
Securitized - MBS (U.S. MBS), J.P. Morgan Government Bond Index – Global Traded (DM Government Bond), J.P. Morgan Asia Credit High Yield Index (Asia HY),
Bloomberg Global U.S. Treasury – Bills (3-5 years) (U.S. Treasury) and Bloomberg U.S. Treasury – Bills (1-3 months) (Cash). 10-year data is used to calculate annualized
returns (Ann. Ret.) and annualized volatility (Ann. Vol.). Returns are in U.S. dollars and reflect the period from 30/06/13 to 30/06/23. Past performance is not a reliable
indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
U.S. HY
7.5%
Global fixed income: Yields and duration
GTM ASIA 50
Fixed income yields
Yield to maturity
15%
Developed market
government bonds
13%
Investment-grade bonds
High yield bonds
Asia & emerging market bonds
11%
9%
Fixed income
7%
5%
3%
1%
Duration (years)
-1%
4.5
-3%
Japan Germany U.S.
10y
10y
10y
6.1
Europe U.S.
IG
MBS
6.1
7.1
2.8
5.2
Global
IG
U.S.
IG
U.S.
ABS
Asia
IG
3.1
3.5
Europe U.S.
HY
HY
3.5
5.1
5.0
5.2
7.0
4.2
Global
HY
Asia
HY
Local
EMD
USD
Asia
Credit
USD
EMD
USD
China
Offshore
Credit
Yield to maturity on 31/12/21
50
Source: Bloomberg, FactSet, ICE BofA Merrill Lynch, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Based on Bloomberg U.S. Aggregate Credit –
Corporate Investment Grade Index (U.S. IG), Bloomberg Euro Aggregate Credit – Corporate (Europe IG), J.P. Morgan Asia Credit Investment Grade Index (Asia IG),
Bloomberg Global Aggregate – Corporate (Global IG), Bloomberg U.S. Aggregate Credit – Corporate High Yield Index (U.S. HY), Bloomberg U.S. Aggregate Securitized –
Asset Backed Securities (U.S. ABS), Bloomberg U.S. Aggregate Securitized – Mortgage Backed Securities (U.S. MBS), Bloomberg Pan European High Yield (Europe HY),
J.P. Morgan Asia Credit High Yield Index (Asia HY), ICE BofA Global High Yield (Global HY), J.P. Morgan GBI-EM Global Diversified (Local EMD), J.P. Morgan EMBI
Global (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asia Credit), J.P. Morgan Asia Credit China Index (USD China Offshore Credit). Duration is a measure of
the sensitivity of the price (the value of the principal) of a fixed income investment to a change in interest rates and is expressed as number of years. Spread durations are
shown for Asia IG, Asia HY, USD EMD, USD Asia Credit and USD China Offshore Credit. Rising interest rates mean falling bond prices, while declining interest rates mean
rising bond prices. Yields are not guaranteed, positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Global fixed income: Interest rate sensitivity
GTM ASIA
51
Impact of a 1% rise or fall in interest rates
Total return, assumes a parallel shift in the yield curve
28%
1% fall
23.5%
24%
1% rise
20%
15.1%
16%
12%
13.1%
11.6%
10.8%
11.3%
12.3%
12.0%
8.7%
Fixed income
8%
5.0%
4%
1.2%
1.5%
-4%
6.8%
5.8%5.9%
3.0%
2.4%
0.3%
0%
-1.3%
9.3%
-0.2%
-1.2%
-3.9%
-8%
-12%
-16%
51
-11.6%
U.S. MBS
U.S. IG
USD EMD Local EMD USD Asia
Credit
U.S. HY
U.S.
Floating
Rate
30y UST
10y UST
5y UST
Source: Barclays, Bloomberg, FactSet, J.P. Morgan Economics Research, J.P. Morgan Asset Management. Based on Bloomberg Barclays U.S. Treasury Bellwethers
Index (2, 5, 10, 30-year UST), Bloomberg Barclays U.S. Treasury Inflation-Protected Notes Index (TIPS), Bloomberg Barclays U.S. Floating Rate Notes Index (U.S.
Floating Rate), Bloomberg Barclays U.S. Aggregate Securitized – MBS Index (U.S. MBS), Bloomberg Barclays U.S. Aggregate Credit – Corporate – Investment Grade
Index (U.S. IG), Bloomberg Barclays U.S. Aggregate Credit – Corporate – High Yield Index (U.S. HY), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD
EMD), J.P. Morgan Asia Credit Index (USD Asia Credit), J.P. Morgan Government Bond Index – EM Global Diversified (GBI-EM) (Local EMD). Past performance is not
indicative of current or future results. Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
TIPS
2y UST
Global fixed income: Return composition
GTM ASIA 52
Debt return composition
Last 6 months
9%
Fixed income
6%
3%
0%
-3%
52
Local EMD
sovereigns
U.S. high yield
Price return
Income return
USD DM
high yield
Currency return
USD EMD
sovereigns
USD EMD
corporates
USD Asia
corporates
USD Asia
high yield
USD China
offshore credit
Total return
Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management.
Based on J.P. Morgan Asia Credit High Yield Index (USD Asia high yield), J.P. Morgan CEMBI (USD emerging market debt (EMD) corporates), J.P. Morgan EMBI Global
(USD EMD sovereigns), J.P. Morgan Asia Credit Corporates Index (USD Asia corporates), J.P. Morgan Asia Credit China Index (USD China offshore credit), J.P. Morgan
Developed Market HY Index (USD DM high yield), J.P. Morgan Domestic High Yield Index (U.S. high yield), J.P. Morgan GBI-EM Global Diversified (Local EMD
sovereigns), J.P. Morgan GBI-DM (Local DM sovereigns). Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Local DM
sovereigns
Global fixed income: Valuations
GTM ASIA 53
Spread to worst across fixed income sub-sectors
Basis points, last 10 years
1,600
10-yr. range
1,400
Latest
10-yr. average
1,200
Fixed income
1,000
984
800
627
600
501
400
434
200
0
53
494
462
154
144
U.S. high
yield
U.S.
investment
grade
114
91
Euro high
yield
Euro
investment
grade
246
233
USD
Asia
credit
368
361
331
269
USD China
offshore credit
USD Asia
high yield
USD EMD
Source: iBoxx, ICE BofA Merrill Lynch, J.P. Morgan Economics Research, J.P. Morgan Asset Management.
Based on J.P. Morgan Domestic High Yield Index (U.S. high yield), J.P. Morgan U.S. Liquid Index (JULI) (U.S. investment grade), J.P. Morgan Euro High Yield Index (Euro
high yield), iBoxx EUR corporates (Euro investment grade), J.P. Morgan Asia Credit Index (JACI) (USD Asia credit), J.P. Morgan Asia Credit China Index (USD China
offshore credit), J.P. Morgan Asia Credit High Yield Index (USD Asia high yield), J.P. Morgan EMBI Global Diversified (USD EMD), J.P. Morgan Corporate Emerging
Markets Bond Index – CEMBI (USD EMD corporates). Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
317
295
USD EMD
corporates
Global fixed income: Government bond yields and expected
inflation
10-year government bond yields
Market-based inflation expectations
5-year 5-year inflation swap rate
4%
16%
14%
U.S.
Germany
Japan
12%
GTM ASIA 54
Average
since 1970*
6.0%
5.1%
2.1%
Latest
3.8%
2.4%
0.4%
10%
3%
2%
Fixed income
8%
1%
6%
4%
0%
2%
-1%
0%
-2%
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
'20
-2%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
U.S.
54
Eurozone
Japan
Source: J.P. Morgan Asset Management; (Left) FactSet, Tullett Prebon; (Right) Bloomberg.
*Data begins, and averages calculated from, 01/01/70 for U.S. Treasuries, 02/10/72 for German Bunds and 03/02/86 for Japanese Government Bonds.
Past performance is not a reliable indicator of current and future results. Positive yield does not imply positive return.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Global fixed income: Yields and risks
GTM ASIA 55
Yields and correlations of fixed income returns to equities
Yield, 10-year correlation between monthly total returns
14%
13%
USD Asia HY
Higher yields
12%
11%
Latest yield to maturity
Fixed income
10%
9%
8%
UK (1-10y)
2y UST
10y UST
U.S. MBS U.S. Aggregate
U.S. Floating Rate
U.S. IG
TIPS
Local Asia
Germany (1-10y)
3%
France (1-10y)
2%
1%
Stronger correlation
to equities
Japan (1-10y)
0%
-1%
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Correlation to MSCI AC World*
Government
55
Europe HY
USD EMD corporates
Local EMD
6%
4%
USD EMD
USD Asia Credit
7%
5%
U.S. HY
USD China offshore
credit
Credit
Emerging Market
Government & Credit
Source: Bloomberg, FactSet, ICE BofA Merrill Lynch, J.P. Morgan Economics Research, MSCI, J.P. Morgan Asset Management.
Based on Bloomberg U.S. Treasury (UST) Bellwether 2y & 10y (2y & 10y UST), Bloomberg Treasury Inflation-Protected Securities (TIPS), ICE BofAML Country
Government (1-10y) (France, Germany, Japan & UK (1-10y)), Bloomberg U.S. Aggregate, Credit – Investment Grade & High Yield (U.S. Aggregate, IG & HY), Bloomberg
U.S. Floating Rate (U.S. Floating Rate), Bloomberg U.S. Aggregate Securitized – Mortgage-Backed Securities (U.S. MBS), Bloomberg Pan-European High Yield (Europe
HY), J.P. Morgan GBI-EM Global Diversified (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 Asia Credit China Index (USD China offshore credit), J.P. Morgan CEMBI (USD EMD corporates), J.P. Morgan Asia
Diversified (JADE) (Local Asia). *Correlations are based on 10-years of monthly returns. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
0.8
0.9
U.S. real yields
GTM ASIA 56
Real 10-year and 2-year U.S. Treasury yields*
U.S. 10-year Treasury yield breakdown**
6%
6%
5%
5%
4%
3%
4%
2%
3%
Fixed income
1%
0%
2%
-1%
1%
-2%
-3%
0%
-4%
Recessions
-1%
-5%
-6%
'90
'95
10-year Treasury
56
'00
'05
2-year Treasury
'10
'15
'20
-2%
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
10-year real yield
10-year nominal yield
10-year inflation breakeven
Source: FactSet, Federal Reserve, J.P. Morgan Asset Management; (Right) Tullett Prebon.
*Real 10-year and 2-year Treasury yields are calculated as the daily Treasury yields less year-over-year core consumer price index inflation for that month except for June
2023, where real yields are calculated by subtracting May 2023 year-over-year core inflation. **Real yield calculated using 10-year breakeven, which represents the
difference in yield between nominal and inflation-protected government bonds and is a market-based measure of average inflation expectations over the next 10 years.
Yield is not guaranteed. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
U.S. investment grade bonds
Corporate bond spread
Basis points, option-adjusted spread over U.S. Treasury*
700
Average Latest
Investment grade 132bps 123bps
GTM ASIA
57
U.S. investment grade return decomposition
30%
25%
600
20%
500
Fixed income
400
15%
Recessions
10%
5%
300
0%
-5%
200
-10%
100
Base***
Spread
Total
Source: Bloomberg, FactSet, J.P. Morgan Asset Management. *Investment grade is Bloomberg U.S. Aggregate Credit – Corporate Investment Grade Index. **YTD ’23 is
year-to-date figures as of 30/06/23 annualized. ***Base returns refer to equivalent-duration U.S. Treasury base rate returns and any residuals. The sum of spread to
Treasury returns and Treasury base rate returns equate to bond price returns. The sum of Treasury base rate returns, spread to Treasury returns and coupon returns may
not add up to the total returns due to rounding. Past performance is not indicative of current or future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
**YTD '23
'22
'21
'20
'19
'18
'17
'16
'15
'14
'13
'12
'11
'10
'09
'08
'07
'06
'05
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Coupon
57
'04
'03
'02
0
'01
-20%
'00
-15%
U.S. high yield bond spreads
GTM ASIA 58
High yield spread and default rate*
20%
2,000
HY spread to
worst
HY energy spread
to worst
HY default rate
HY ex-energy
default rate
Recessions
16%
Fixed income
12%
Latest
502bps
434bps
648bps
373bps
2.2%
1.5%
2.4%**
1.6%
1,600
1,200
8%
800
4%
400
0%
'90
'95
Default rate
58
10-yr
average
'00
'05
'10
'15
'20
Spread to worst (basis points)
Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management.
*Default rate is defined as the percentage of the total market trading at or below 50% of par value and includes any Chapter 11 filing, pre-packaged filing or missed interest
payments. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. **Data reflects 21-year average and is as of 31/12/22. U.S. corporate
high yield is represented by the J.P. Morgan Domestic High Yield Index.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
0
U.S. high yield bond fundamentals
U.S. high yield leverage measures
Recovery rates
Net leverage* and interest coverage ratio**
Last 12 months (LTM), cents on the dollar recovered***
70
6.0x
1Q23:
5.7x
Fixed income
5.5x
LTM
60
5.0x
50
4.5x
40
Long-term average:
41 cents / USD
Average:
4.4x
30
4.0x
Average: 3.7x
3.5x
1Q23:
3.5x
2.5x
20
10
3.0x
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
Net leverage ratio*
59
GTM ASIA 59
0
1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022
Interest coverage ratio**
Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management; (Right) AMG Data services. *Net leverage is net debt divided by adjusted earnings before
interest, tax, depreciation and amortization (EBITDA). **Interest coverage ratio is EBITDA over interest expense. ***LTM represents latest data as of 31/05/2023.
Recoveries are issuer-weighted and in 2009 were 22.4 based on prices 30 days post default and were 35.7 based on year-end prices.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
U.S. securitized assets
GTM ASIA 60
Spreads
Mortgage originations by credit score*
Basis points, option-adjusted spreads
350
USD trillions
5.0
4.5
300
4.0
250
3.5
3.0
Fixed income
200
2.5
150
2.0
1.5
100
YTD
1.0
50
0
0.5
0.0
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
Mortgage-backed securities
Asset-backed securities
Commercial mortgage-backed securities
60
'22
'23
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 23
<620
620-659
660-719
720-759
Source: J.P. Morgan Asset Management; (Left) Bloomberg; (Right) Equifax, New York Fed Consumer Credit. *Credit score is Equifax Risk Score 3.0. Credit scores
measure creditworthiness or likelihood of repayment of a borrower. The higher the score, the less risk of default.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
760+
Emerging market debt
GTM ASIA
Spread between local rates and U.S. Treasuries
EM real and nominal yields**
Fixed income
61
1000
800
600
400
200
-200
3-5 year local currency government bond index*, basis points
-12%
Moody's
China
A+
A1
Malaysia
A
A3
Poland
A
A2
Thailand
A-
Baa1
Mexico
BBB+
Baa2
Indonesia
BBB
Baa2
Indonesia
India
BBB-
Baa3
India
Colombia
BBB-
Baa2
Colombia
S. Africa
BB
Ba2
S. Africa
Brazil
BB-
Ba2
Brazil
0
S&P
5-year average
Current
61
-8%
-4%
0%
China
Malaysia
Poland
Thailand
Mexico
Nominal yield
Real yield
Source: J.P. Morgan Asset Management; (Left) Bloomberg, J.P. Morgan Economics Research; (Right) FactSet.
*J.P. Morgan GBI-EM Broad Diversified Index sub-component used for each market. Spread is the difference between the yield on each market’s local 3-5 year
government bond, except for South Africa, which uses 1-5 year, and the yield on the Bloomberg U.S. Aggregate Government - Treasury (3-5 Year). S&P and Moody’s are
respective market’s local currency long-term debt ratings. ** Yields are the 10-year local currency government bond yield for each respective market. Real yield is
calculated based on nominal yield and the 12-month average of the yearly change in the Consumer Price Index (CPI) for each respective market.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
4%
8%
12%
Asia fixed income
GTM ASIA 62
JACI spread
Basis points over U.S. Treasury
1,600
10-yr average
Non-investment grade
612bps
Non-investment grade
418bps
ex-China real estate
JACI
278bps
Investment grade
197bps
1,400
1,200
Latest
907bps
660bps
290bps
173bps
Fixed income
1,000
800
600
400
200
0
62
'08
'09
'10
'11
'12
'13
Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management.
The JACI is the J.P. Morgan Asia Credit Index.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'14
'15
'16
'17
'18
'19
'20
'21
'22
'23
Asset class returns
2013
2014
2015
2016
2017
DM
Equities
27.4%
Asian
Bonds
8.3%
Asian
Bonds
2.8%
EM exAsia
25.2%
APAC
ex-JP
37.3%
U.S. IG
EMD
7.5%
1.2%
Global
Corp HY
14.0%
Diversified
EMD
Cash
EMD
5.4%
5.5%
0.0%
10.2%
APAC
ex-JP
3.7%
DM
Equities
5.5%
DM
Equities
-0.3%
DM
Equities
8.2%
Other asset classes
Global
Corp HY
8.4%
63
GTM ASIA 63
Cash
Diversified
U.S. IG
Diversified
0.0%
3.3%
-0.7%
8.1%
Asian
Bonds
-1.4%
APAC
ex-JP
3.1%
Global
Bonds
-3.2%
APAC
ex-JP
7.1%
Diversified
U.S. IG
-1.5%
Global
Bonds
0.6%
Global
Bonds
-2.6%
Global
Corp HY
0.2%
U.S. IG
-3.4%
6.1%
Global
Corp HY
-4.9%
Asian
Bonds
5.8%
Global
Bonds
2.1%
-6.6%
0.0%
APAC
ex-JP
-9.1%
EM exAsia
-9.3%
EM exAsia
-13.3%
EM exAsia
-25.1%
EMD
Cash
2019
2020
2021
1.8%
DM
Equities
28.4%
APAC
ex-JP
22.8%
DM
Equities
22.3%
EM exAsia
24.7%
Asian
Bonds
-0.8%
APAC
ex-JP
19.5%
DM
Equities
16.5%
EM exAsia
8.1%
DM
Equities
23.1%
Global
Bonds
-1.2%
EM exAsia
16.9%
Diversified
Diversified
Diversified
2018
Cash
U.S. IG
Diversified
16.4%
11.2%
U.S. IG
17.2%
-2.5%
Global
Corp HY
10.3%
Global
Corp HY
-3.5%
EMD
EMD
EMD
9.3%
-4.6%
14.4%
Global
Corp HY
8.2%
-6.0%
Global
Corp HY
13.4%
Asian
Bonds
6.3%
6.4%
DM
Equities
-8.2%
Asian
Bonds
11.3%
Asian
Bonds
5.8%
EM exAsia
-11.5%
Global
Bonds
6.8%
Global
Bonds
7.4%
U.S. IG
Cash
Cash
0.3%
0.8%
Diversified
APAC
ex-JP
-13.7%
U.S. IG
14.5%
Cash
2.2%
9.9%
Global
Bonds
9.2%
3.5%
Global
Corp HY
2.0%
2Q '23
YTD '23
10-yrs ('13 - '23)
Ann. Ret.
Ann. Vol.
1.5%
EM exAsia
7.4%
DM
Equities
15.4%
DM
Equities
10.1%
EM exAsia
21.4%
Asian
Bonds
-11.0%
DM
Equities
7.0%
EM exAsia
8.5%
APAC
ex-JP
4.8%
APAC
ex-JP
16.6%
Diversified
Diversified
Diversified
2022
Cash
Global
Corp HY
-12.7%
Diversified
-14.7%
1.9%
5.9%
4.7%
Global
Corp HY
1.7%
Global
Corp HY
5.4%
Global
Corp HY
3.7%
U.S. IG
EMD
EMD
0.0%
-15.8%
1.5%
3.8%
Cash
U.S. IG
U.S. IG
1.2%
3.2%
2.6%
Global
Corp HY
8.0%
Asian
Bonds
0.4%
APAC
ex-JP
3.2%
EMD
U.S. IG
U.S. IG
-1.0%
EMD
-1.5%
EM exAsia
-16.0%
Global
Bonds
-16.2%
U.S. IG
-16.5%
-0.3%
0.5%
APAC
ex-JP
-2.7%
APAC
ex-JP
-17.2%
APAC
ex-JP
-0.9%
EM exAsia
-9.7%
Global
Bonds
-4.7%
DM
Equities
-17.7%
Global
Bonds
-1.5%
Cash
9.2%
Cash
EMD
5.9%
Diversified
Asian
Bonds
3.0%
Asian
Bonds
-2.4%
EMD
DM
Equities
14.7%
Asian
Bonds
2.9%
2.6%
EMD
8.6%
6.4%
1.0%
Global
Bonds
5.7%
2.3%
Global
Bonds
0.2%
Asian
Bonds
4.9%
Global
Bonds
1.4%
EM exAsia
-0.2%
Cash
Source: Bloomberg, Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management.
The “Diversified” portfolio assumes the following weights: 20% in the MSCI World Index (DM Equities), 20% in the MSCI AC Asia Pacific ex-Japan (APAC ex-JP), 5% in the
MSCI EM ex-Asia (EM ex-Asia), 10% in the J.P. Morgan EMBIG Index (EMD), 10% in the Bloomberg Aggregate (Global Bonds), 10% in the Bloomberg Global Corporate
High Yield Index (Global Corporate High Yield), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in Bloomberg U.S. Aggregate Credit – Corporate Investment
Grade Index (U.S. IG) and 5% in Bloomberg U.S. Treasury – Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in
U.S. dollar terms for the stated period. 10-year total return data is used to calculate annualized returns (Ann. Ret.) and 10-year price return data is used to calculate
annualized volatility (Ann. Vol.) and reflects the period 30/06/13 – 30/06/23. Please see disclosure page at end for index definitions. Past performance is not a reliable
indicator of current and future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Cash
Cash
0.4%
Volatility
GTM ASIA 64
VIX index*
90
80
70
60
50
40
30
20
10
0
Recession
3
2
1
Other asset classes
4
7
5
8
9
10
10
11
13
Average: 19.6
'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 '19 '20 '21 '22 '23
VIX breaks 35 in six
months**
64
12
6
Related event
On the day
-3.0%
S&P 500 Performance
After 1 month
After 3 months
-4.2%
-5.9%
After 12 months
VIX returns to long-term
average***(days)
16.8%
218
113
1
06/08/90
Recession – oil price shock and rate hikes
2
30/10/97
Asian crisis
-1.7%
7.5%
9.1%
3
27/08/98
Long-Term Capital Management
21.6%
-3.8%
0.6%
13.8%
309
4
17/09/01
Recession – collapse of dot-com bubble
29.3%
-4.9%
2.9%
9.2%
172
5
15/07/02
Enron accounting scandal
-15.9%
-0.4%
1.3%
-8.3%
17/09/08
Recession – global financial crisis
9.0%
304
6
-4.7%
-14.8%
-21.8%
476
7
07/05/10
Greece bailout package, austerity imposed
-7.9%
-1.5%
-5.0%
1.0%
08/08/11
European debt crisis, U.S. credit downgrade
21.2%
157
8
-6.7%
5.9%
12.7%
165
9
24/08/15
Chinese yuan devaluation
25.2%
-3.9%
2.1%
10.2%
44
10
05/02/18
Bond market re-pricing growth and rate hikes
-4.1%
3.4%
0.9%
15.5%
3.4%
11
24/12/18
Global growth and market liquidity fears
-2.7%
12.4%
19.0%
37.1%
18
12
27/02/20
Recession – Coronavirus pandemic
-4.4%
-13.2%
1.7%
27.9%
383
13
07/03/22
Median
Average
Russia-Ukraine conflict and policy tightening
-3.0%
-3.8%
-3.5%
7.1%
2.1%
0.5%
-1.9%
1.7%
3.0%
-5.1%
16.8%
13.7%
21
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 after initial VIX spikes above 35. Past
performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
9
U.S. dollar
GTM ASIA 65
U.S. dollar and interest rate differential
Index
140
Yield spread
3.0%
Other asset classes
Recessions
130
2.5%
120
2.0%
110
1.5%
100
1.0%
90
0.5%
80
0.0%
70
-0.5%
60
'96
'98
'00
U.S. dollar index*
65
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
U.S. minus DM 10-year government bond yield**
Source: FactSet, OECD, Tullett Prebon, WM/Reuters, J.P. Morgan Asset Management. *The U.S. dollar index shown here is a nominal trade-weighted index of major
trading partners’ currencies. Major currencies are the British pound, Canadian dollar, euro, Japanese yen, Swedish kroner and Swiss franc.
**DM is developed markets and the yield is calculated as a GDP-weighted average of the 10-year government bond yields of Australia, Canada, France, Germany, Italy,
Japan, Switzerland and the UK.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
-1.0%
Currencies
GTM ASIA 66
Currency deviation from 10-year average in real effective exchange rate* terms
Number of standard deviations away from average
5
4
3
FX above
long-term
average
2
1
Max
Current
0
Other asset classes
-1
-2
-3
-4
-5
66
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 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.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Min
FX below
long-term
average
Emerging market external positions
GTM ASIA
67
Current account positions, currency movements and reserve adequacy
Currency
appreciation
25%
vs. USD
20%
Local currency vs. USD change, Last 12 months
Other asset classes
15%
Poland
Chile
Brazil
Philippines
5%
Vietnam
0%
-5%
Colombia
Thailand
-10%
Korea
Malaysia
Indonesia
India
China
-15%
South Africa
-20%
Key:
-25%
Asia
EM ex-Asia
-30%
-35%
Weaker position
Turkey
-40%
= Adequate reserves*
-45%
Stronger position
-50%
-55%
Currency
depreciation
vs. USD
67
10%
Mexico
-60%
-10%
Argentina
-8%
-6%
-4%
-2%
0%
2%
Current account as % of GDP, 2022
Source: FactSet, International Monetary Fund, J.P. Morgan Asset Management.
*Adequate reserves are stocks of a market’s foreign exchange reserves that can cover 3 months of imports (the amount of times available reserves can cover 3 months’
worth of imports) and cover short-term debt due in the next year (the amount of times available reserves can pay off debt maturing in the next 12 months and any
payments on longer-term debt due in the next 12 months). The larger the bubble, the larger the amount of reserve coverage.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
4%
6%
Commodities
GTM ASIA 68
Commodity prices
Returns
Z-scores for the past five years, USD per unit
-4
Commodity Index
-2
$1
Coal
$4
Other asset classes
$66
Wheat
$4
Gold
Agriculture
$9
$101
$458
$339
$37
$3,985
$220
$113
$13
$7
$1,187
$34
$8,210
$133
$10,730
$2,069
$1,929
$66
$80
Example Low level
High level
Current
68
8
10
12
$24
$3
$74
$4,618
6
$137
$1,422
$2,097
Iron Ore
Copper
4
$49
$128
Dutch Natural Gas
Oil
2
$59
Henry Hub Gas
Aluminum
0
2019
2020
2021
2022
2Q '23
YTD '23
2018 - 2023
Ann. Ret. Ann. Vol.
Gold (E)
M&M (E)
Energy (E)
Energy (E)
EM M&M
(FI)
Gold (E)
M&M (E)
Gold (E)
51.1%
27.6%
44.3%
42.6%
2.9%
5.2%
10.3%
33.6%
M&M (E)
Gold (E)
Comdty.
Comdty.
US M&M
(FI)
US M&M
(FI)
Agri. (E)
M&M (E)
17.1%
25.7%
27.1%
16.1%
0.9%
5.0%
9.4%
30.3%
EM M&M
(FI)
Agri. (E)
Agri. (E)
Agri. (E)
Energy (E)
EM M&M
(FI)
Gold (E)
Energy (E)
16.5%
19.5%
23.1%
7.2%
0.9%
4.1%
7.9%
29.6%
US M&M
(FI)
EM M&M
(FI)
M&M (E)
M&M (E)
Euro M&M
(FI)
Energy
(FI)
Energy (E)
Agri. (E)
14.0%
10.6%
23.0%
3.8%
0.6%
3.9%
5.2%
19.0%
Agri. (E)
US M&M
(FI)
US M&M
(FI)
US M&M
(FI)
Energy
(FI)
Euro M&M
(FI)
Comdty.
Comdty.
13.8%
8.5%
6.6%
-6.5%
0.0%
2.7%
4.7%
16.1%
Energy
(FI)
Energy
(FI)
EM M&M
(FI)
Euro M&M
(FI)
Comdty.
M&M (E)
US M&M
(FI)
EM M&M
(FI)
13.4%
6.0%
2.0%
-13.5%
-2.6%
0.4%
4.7%
13.8%
Energy (E)
Euro M&M
(FI)
Energy
(FI)
Gold (E)
M&M (E)
Energy (E)
Energy
(FI)
Energy
(FI)
9.5%
3.5%
-0.7%
-14.5%
-3.5%
-2.3%
0.5%
11.8%
Comdty.
Comdty.
Euro M&M
(FI)
Energy
(FI)
Agri. (E)
Agri. (E)
EM M&M
(FI)
US M&M
(FI)
7.7%
-3.1%
-0.7%
-16.5%
-4.8%
-6.5%
0.3%
8.7%
Euro M&M
(FI)
Energy (E)
Gold (E)
EM M&M
(FI)
Gold (E)
Comdty.
Euro M&M
(FI)
Euro M&M
(FI)
5.2%
-28.5%
-7.7%
-24.1%
-6.6%
-7.8%
-1.0%
7.2%
Source: Bloomberg, FactSet, J.P. Morgan Asset Management; (Left) CBOT, CME, CRB, LME; (Right) J.P. Morgan Economic Research, MSCI. Commodities represented by appropriate
Bloomberg Commodity sub-index priced in U.S. dollars. Aluminum and copper is priced on LME. Coal is the Newcastle Coal Closing Price (USD/t). Crude oil is Brent crude. Dutch Natural
Gas is Dutch TTF Gas Monthly Near Term (NDEX EUR/mwh). Henry Hub Gas is Natural Gas Henry Hub Spot Price (USD/Mmbtu). Iron Ore is iron ore 62% Fe -Cost and Freight China
Port. Other commodity prices represented by futures contracts. Z-scores calculated using daily prices over past five years. Based on Bloomberg Commodity Index (Comdty.); MSCI ACWI
Select – Energy Producers IMI, Metals & Mining Producers ex Gold & Silver IMI, Gold Miners IMI, Agriculture Producers IMI (Energy (E), M&M (E), Gold (E), Agri. (E)); Bloomberg Global
Agg, Credit – Corporate Energy Index (Energy (FI)); Bloomberg U.S. Agg. Credit – Corporate High Yield Metals & Mining Index (U.S. M&M (FI)); Bloomberg Euro Agg. Credit – Corporate
Metals & Mining Index (Euro M&M (FI)); J.P. Morgan Emerging Market Corporate Credit – Corporate Metals & Mining Index (EM M&M (FI)). 5-year total return data used to calculate
annualized returns (Ann. Ret.) and 5-year price return data used to calculate annualized volatility (Ann. Vol.), reflects the period 30/06/18 – 30/06/23. Past performance is not a reliable
indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Gold
GTM ASIA 69
Gold and real rates
USD / Troy oz
2000
U.S. 10-year Treasury inflation-protected security (TIPS)
-1.5
-1.0
Change in central bank gold holdings
Cumulative change since January 2002 in tonnes
3000
2500
2000
-0.5
1500
1500
0.0
Other asset classes
0.5
1.0
1000
1000
500
0
-500
1.5
-1000
2.0
500
'09
'11
Gold price
'13
'15
'17
'19
'21
TIPS yield (inverted)
'23
2.5
-1500
-2000
'02
'04
China
'06
'08
'10
South-east Asia
Latin America & Caribbean
69
Source: FactSet, J.P. Morgan Asset Management; (Right) World Gold Council.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'12
'14
South Asia
'16
'18
'20
Euro area
Central and Eastern Europe
'22
Oil: Short-term market dynamics
GTM ASIA 70
Global oil supply and demand
Price of oil
Million barrels / day
110
Forecast
105
Brent crude, USD / bbl
150
07/2008: $145.65
125
100
03/2022: $133.18
06/2014: $115.19
100
95
75
Other asset classes
90
06/2023:
$74.31
50
85
25
80
12/2008: $33.73
04/2020: $9.12
75
'18
'19
Demand
70
'20
'21
'22
'23
'24
0
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Supply
Source: FactSet, J.P. Morgan Asset Management; (Left) Global Trade Tracker, U.S. Energy Information Administration; (Right) Commodity Research Bureau.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Alternative sources of income
GTM ASIA
71
Asset class yields
14%
12.9%
12%
10.8%
10%
7.7%
8%
6.8%
6.5%
6%
5.5%
Other asset classes
4.5%
4%
4.2%
4.0%
3.9%
3.8%
3.7%
3.5%
3.2%
0%
3.0%
2.0%
2%
Asia HY
bonds
Equity
71
4.3%
Global
transport
USD
EMD
EM high APAC ex-JP Global
div. equity high div. HY bonds
equity
Fixed income
Global
REITs
Local cur.
EMD
APAC
Real
Estate
Infra.
assets
DM high
div. equity
U.S.
10-year
Europe
Real
Estate
U.S.
Real
Estate
1.5%
Eur.
APAC Convertibles U.S.
equity ex-JP equity
equity
Alternatives
Source: Alerian, Bank of America, Bloomberg, Clarkson, Drewry Maritime Consultants, FactSet, Federal Reserve, FTSE, MSCI, Standard & Poor’s, J.P. Morgan Asset
Management. Global transport: Levered yields for transport assets are calculated as the difference between charter rates (rental income), operating expenses, debt
amortization and interest expenses, as a percentage of equity value. Yields for each of the sub-vessel types above are calculated and respective weightings are applied to
each of the sub-sectors to arrive at the current levered yields for Global Transportation; asset classes are based on MSCI Global Property Fund Index – North America (U.S.
real estate), market weighted-average of MSCI Global Property Fund Indices – UK & Continental Europe (Europe real estate), MSCI Global Property Fund Index – Asia
Pacific (APAC real estate), FTSE NAREIT Global REITs (Global REITs), MSCI Global Infrastructure Asset Index (Infra. assets), Bloomberg U.S Convertibles Composite
(Convertibles), Bloomberg Global High Yield Index (Global HY bonds), J.P. Morgan Government Bond Index EM Global (GBI-EM) (Local currency EMD), J.P. Morgan
Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index Non-investment Grade (Asia HY bonds), MSCI Asia Pacific ex-Japan equities
(APAC ex-JP equity), MSCI Asia Pacific ex-Japan High Dividend Yield Index (APAC ex-JP high div. equity), Emerging Markets High Dividend Yield Index (EM high div.
equity), MSCI World High Dividend Yield Index (DM high div. equity), MSCI Europe (Eur. equity), MSCI USA (U.S. equity). Yields for Global transport, Infra. Assets, U.S.
real estate, Europe real estate and APAC real estate are as of 31/12/22. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Understanding alternatives
GTM ASIA
Alternatives and portfolio risk/return*
Public and private market correlations
Annualized volatility and returns, 1Q98 – 1Q23
7.5%
Correlation coefficient based on quarterly returns
Financial
assets
60% Stocks
20% Bonds
20% Alternatives
7.0%
40% Stocks
40% Bonds
20% Alternatives
2008 - 2022
70% Stocks
30% Bonds
Return
6.5%
Other asset classes
6.0%
50% Stocks
50% Bonds
5.5%
5.0%
72
20% Stocks
60% Bonds
20% Alternatives
30% Stocks
70% Bonds
2%
4%
6%
8%
Volatility
72
10%
12%
14%
Global
real estate
Other
real
assets
Private
markets
Hedge
funds
Crypto
Global
U.S.
U.S.
Equity
Global Global
U.S.
APAC
Relative
Macro Bitcoin
Core
Direct Private Long/S
Value
Bonds Equities Core RE Core RE
Infra Lending Equity
hort
Global Bonds
1.0
Global
Equities
0.4
1.0
U.S. Core RE
-0.2
0.0
1.0
APAC Core
RE
-0.2
0.0
0.8
1.0
Global Core
Infra
-0.1
0.1
0.4
0.5
1.0
U.S. Direct
Lending
0.0
0.7
0.3
0.3
0.3
1.0
U.S. Private
Equity
0.3
0.9
0.3
0.4
0.2
0.8
1.0
Equity
Long/Short
0.3
0.9
-0.1
0.0
0.1
0.7
0.9
1.0
Relative Value
0.2
0.9
-0.1
0.0
0.1
0.9
0.8
0.9
1.0
Macro
0.1
0.3
0.0
0.0
0.0
0.1
0.2
0.4
0.3
1.0
Bitcoin
0.1
0.1
0.2
0.1
0.2
0.1
0.2
0.1
0.1
0.0
Source: Bloomberg, FactSet, HFRI, NCREIF, J.P. Morgan Asset Management; (Left) Standard & Poor’s; (Right) Cambridge Associates, Cliffwater, MSCI. *Stocks: S&P
500. Bonds: Bloomberg U.S. Aggregate. Alternatives: equally weighted composite of hedge funds (HFR FW Comp.) and private real estate. The volatility and returns are
based on data from the period 31/12/97 – 31/03/23. RE – real estate. Global equities: MSCI AC World Index. Global bonds: Bloomberg Global Aggregate Index. U.S. core
real estate: NCREIF Property Index – Open End Diversified Core Equity component. Asia Pacific (APAC) core real estate: IPD Global Property Fund Index – Asia-Pacific.
Global infrastructure (infra.): MSCI Global Quarterly Infrastructure Asset Index (equal-weighted blend). U.S. direct lending: Cliffwater Direct Lending Index. U.S. private
equity: Cambridge Associates U.S. Private Equity Index. Hedge fund indices include equity long/short, relative value and global macro and are all from HFRI. All correlation
coefficients are calculated based on USD quarterly total return data for the period 30/06/08 – 31/12/22, except correlations with Bitcoin, which are calculated over the
period 31/12/2010 – 31/12/2022. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
1.0
Global energy transition
GTM ASIA
Global energy mix
73
Global investments in energy transition
Share of primary energy consumption
70%
USD billions, nominal
1,200
Forecast*
60%
1,000
50%
800
40%
600
30%
400
Investing principles
20%
200
10%
0%
‘70
‘80
Oil
73
Coal
‘90
‘00
Gas
‘10
Renewables
‘20
‘30
‘40
Other non-fossil fuels
‘50
0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Storage, electrification, carbon capture, other**
Source: J.P. Morgan Asset Management; (Left) BP Energy Outlook 2023; (Right) Bloomberg NEF, IEA. *Forecast is based on BP’s scenario for global net-zero emissions
by 2050. **Storage, electrification and other includes hydrogen, carbon capture and storage, energy storage, electrified transport and electrified heat. Past performance is
not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Renewable energy
New energy vehicles
GTM ASIA
BEV* and PHEV** in use
Electric vehicle charging points
30
3,000
Millions
Countries/Regions
China
Europe
U.S.
Rest of the world
25
74
Thousands, publicly accessible
2022
14.1
7.4
3.0
1.4
Charging points per
100 BEV and PHEV
vehicles in use in 2022
China
12.5
Europe
6.7
U.S.
4.3
Rest of the world
22.4
2,500
20
315
128
2,000
497
151
15
Investing principles
10
74
114
1,500
139
99
1,000
119
77
5
0
500
'15
'16
'17
'18
'19
'20
'21
22
Source: International Energy Agency (IEA) – Global EV Outlook 2023, J.P. Morgan Asset Management.
*BEV stands for battery electric vehicles. **PHEV stands for plug-in hybrid electric vehicles.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
0
69
43
115
75
54
141
57
38
99
141
213
270
'16
'17
'18
345
252
194
1760
1150
810
510
'19
'20
'21
'22
Global commodities and sustainable energy
Share of global commodities mining production* by region
2022
GTM ASIA 75
Commodity input for sustainable energy technologies
Relative importance of commodities
Copper
Rare earths
Cobalt
Nickel
Solar PV**
Zinc
Wind
Lithium*
Hydro
Copper
Investing principles
Nuclear
75
Nickel
EVs*** and
battery
storage
Cobalt
Electricity
networks
0%
20%
40%
China
APAC ex-China
Europe
Rest of the world
60%
South America
80%
100%
North America
High
Moderate
Low
Source: J.P. Morgan Asset Management; (Left) U.S. Geological Survey; (Right) International Energy Agency. Based on the report “The role of critical minerals in clean
energy transitions” where they elaborate further how the relative importance of commodities was determined. *U.S. lithium mining production is excluded in this analysis in
order to protect individual company information.**PV = photovoltaic. ***EVs = electric vehicles. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Lithium
Zinc
Equity annual returns and intra-year declines
GTM ASIA
76
MSCI AC Asia Pacific ex-Japan intra-year declines vs. calendar year returns
Despite average intra-year drops of -20% (median: -18%), annual returns are positive in 21 of 35 (60%) years
100%
80%
80%
68%
60%
47%
44%
40%
29%
27%
26%
19% 17%
17%
20%
6%
-20% -10%-14%-16%
-5%
-8%
-14%
-12%
Investing principles
-12%
-11%
-13%
-40%
-41%-40%
4%
-0.2%
-8%
-13%
-18%
-25%
-9%
-12%
-13%
-18%-16%-16%-13%
-19%
-21%
-27%
-30%
-18%-19%
-34%-34%
20%
16%
0.5%
-5%
-7%
YTD
19%
-31%
-36%
-21%
-24%
15%
9%
4%
0%
2%
-4%
-5%
-11%
-18%-20%
-16%-11%
-25%
-32%
-33%
'20
'22
-53%
-60%
-62%
-80%
'88
'90
'92
Calendar year return
76
34%
33%
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
Intra-year decline
Source: FactSet, MSCI, J.P. Morgan Asset Management.
Returns are price returns based on MSCI AC Asia Pacific ex-Japan Index in U.S. dollar terms. Intra-year decline is the largest peak to trough decline during the respective
year. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'18
Fixed income annual returns and intra-year declines
GTM ASIA
77
Bloomberg Global Aggregate USD intra-year declines vs. calendar year returns
Despite average intra-year drops of -4% (median: -3%), annual returns are positive in 17 of 21 (81%) years
15%
10%
7%
5%
4%
4%
5%
4%
6%
7%
9%
8%
YTD
8%
6%
5%
3%
2%
4%
2%
1%
0%
-5%
-2%
-5%
-2%
-2%
-2%
-5%
-3%
-2%
-1%
-2%
-1%
-3%
-5%
-5%
-1%
0%
-1%
-4%
-3%
-2%
-4%
-4%
-6%
Investing principles
-10%
-13%
-15%
-16%
-20%
'03
'04
'05
Calendar year return
77
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
Intra-year decline
Source: Bloomberg, FactSet, J.P. Morgan Asset Management.
Returns are total returns based on Bloomberg Global Aggregate USD Hedged Total Return Index. Intra-year decline is the largest peak to trough decline during the
respective year. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'19
'20
'21
'22
'23
U.S. market implied recession probabilities
GTM ASIA
78
Probability of a recession over the next 12 months
100%
90%
Recession
80%
79.3%
70%
60%
50%
Median:
40.2%
40%
Investing principles
30%
78
20%
10%
0%
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
Source: Bloomberg, National Bureau of Economic Research (NBER), J.P. Morgan Asset Management. Recession probabilities derived from a logistic regression model
with the U.S. 10 year – U.S. 2 year spread, U.S. 10 year – U.S. 3 month spread and Goldman Sachs Financial Conditions Index deviation from average as inputs.
Dependent variable is the binary classification of whether there is a recession in the next 12 months using NBER’s classification of U.S. recessions.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'16
'18
'20
'22
U.S. economic cycle and asset performance
GTM ASIA
79
S&P 500 Index across different phases of U.S. business cycle
Index
6,000
5,000
4,000
3,000
2,000
1,000
0
'79
'81
'83
Contraction
'85
'87
Early cycle
'89
'91
Mid cycle
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
'23
Late cycle
Investing principles
Annualized return of various asset classes during different phases of U.S. business cycle
79
Global IG
Global HY
EM
Sovereign
Debt
U.S. 10Y
Treasury
1.8%
(4.7%)
(4.9%)
(4.4%)
4.5%
13.0%
2.4%
5.9%
12.9%
8.0%
4.2%
(11.7%)
(7.6%)
3.1%
(2.1%)
1.8%
(1.5%)
(1.9%)
12.4%
9.3%
14.2%
1.3%
1.4%
3.1%
4.8%
5.9%
9.5%
5.0%
9.9%
1.8%
1.5%
3.8%
3.9%
4.3%
U.S.
Equities
Australian
Equities
European
Equities
Japanese
Equities
AxJ
Equities
Chinese
Equities
Contraction
(8.7%)
(12.5%)
(9.0%)
(9.4%)
1.8%
9.5%
(1.7%)
Early Cycle
21.3%
14.3%
14.4%
12.4%
13.6%
8.3%
Mid Cycle
5.5%
6.8%
5.9%
4.7%
(6.7%)
Late Cycle
10.7%
10.3%
9.0%
2.6%
Full Period
10.6%
8.3%
7.6%
4.1%
EM Equities U.S. MBS
Source: Bloomberg, J.P. Morgan Asset Management.
Regime analysis inception date: 31/01/78. K-Means Clustering applied to monthly data points of the following U.S. economic indicators – Core PCE Inflation, Private sector
financial balance as a % of GDP, Consumer confidence, ISM manufacturing new orders, Unemployment rate, OECD composite leading indicator. Latest data as of
31/03/23. Monthly return analysis inception date: 31/01/93 for all assets except for Global IG (start date: 31/10/00), AxJ Equities and EM Equities (start date: 31/01/01), EM
Sovereign Debt (start date: 28/02/02). Local returns are used. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Long-term returns of asset classes
GTM ASIA 80
Growth of a USD100 investment
Based on inflation-adjusted monthly returns from 31/12/91
$1,050
$950
$856
$850
$750
$650
$550
$450
$396
Investing principles
$350
$250
$191
$150
$96
$50
'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 '19 '20 '21 '22
U.S. equity
80
U.S. high yield
U.S. aggregate bonds
U.S. short-term Treasuries
Source: Bloomberg, FactSet, J.P. Morgan Asset Management. U.S. equity is based on S&P 500 Total Return Index; U.S. high yield is based on Bloomberg U.S. Corporate
High Yield Total Return Index; U.S. aggregate bonds is based on Bloomberg U.S. Aggregate Index; U.S. short-term Treasuries is based on Bloomberg Short-term Treasury
Total Return Index. Past performance is not indicative of current or future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
The compounding effect
GTM ASIA
S&P 500 cumulative price return since 1980**
MSCI World Index: Performance under different scenarios
Hypothetical investment of USD100,000
Index, 1970 = 100
16,000
4,400,000
Annualized return
14,000
12,000
Total return (dividends received and reinvested
back into equities)
9.6%
Total return (dividends received and reinvested
in cash)*
8.5%
Total return (dividends received but not
reinvested)
7.2%
Price return
6.5%
13,407
4,000,000
416,342
3,600,000
1,515,529
2,196,195
2,800,000
7,668
8,000
6,000
2,629,977
50,139
2,400,000
2,000,000
4,123,014
84,006
3,695,091
1,600,000
4,000
Investing principles
11,581
3,200,000
10,000
2,000
0
81
4,010
1,200,000
2,867
800,000
113,844
2,557,346
1,842,813
1,379,194
400,000
0
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
'20
Stay
invested
Missed top Missed top Missed top Missed top
1 day
5 days
10 days
15 days
Total return if remained invested since 1980
Total return from missing stated days
Implied compounding loss
Actual loss from missing days
81
Source: FactSet, J.P. Morgan Asset Management; (Left) MSCI; (Right) Standard & Poor’s. *Reinvestment in cash based on the same month U.S. three-month Treasury bill
(secondary market) yield. Past performance is not a reliable indicator of current and future results. **More than 10,000 trading days used to calculate the total cumulative
price return of S&P 500 since 01/01/80. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Portfolio construction, asset class returns and volatility
GTM ASIA 82
Annualized returns and volatility
Total returns in USD*
12%
Hypothetical portfolio construction
Conservative
DM equities
Annualized returns
10%
8%
Balanced
10%
30%
Aggressive
20%
5%
10%
40%
EM HD equities
10%
10%
15%
10%
APxJ HD equities
10%
U.S. bonds
25%
10%
5%
U.S. HY
20%
Cash
35%
10%
0%
EMD
15%
EMD
10%
15%
5%
Asian bonds
15%
REITs
5%
10%
20%
REITs
5%
U.S. HY
6%
Hedge fund - rel val
4%
Asian bonds
EMD
U.S.
25%
U.S. HY
DM
REITs
Private real estate
High yielding
Balanced
DM HD
AxJ HD
Gold
Aggressive
Hedge fund - distressed
APxJ HD
AxJ
APxJ
Europe
Conservative
Hedge fund - macro
Hedge fund - mkt neutral
2%
Investing principles
DM HD equities
EM equities
U.S. bonds
82
High yielding
EM HD
EM
Cash
0%
0%
5%
High dividend (HD) equities
10%
Annualized volatility
Equities
Bonds and cash
Alternatives
15%
20%
Portfolios
Source: Bloomberg, Dow Jones, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation.
U.S. dollar total return calculations are based on MSCI Total Return, Bloomberg and J.P. Morgan indices. AxJ stands for MSCI AC Asia ex-Japan and APxJ stands for
MSCI AC Asia Pacific ex-Japan. *Monthly total returns between 30/06/08 and 30/06/23 are used for all asset classes except hedge funds, where monthly total returns
between 31/05/08 and 31/05/23 are used, and private real estate, where quarterly returns between 31/12/08 to 31/03/23 are used.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
25%
60/40 stock-bond portfolio performance
GTM ASIA 83
Annual returns in a 60/40 stock-bond portfolio
50%
40%
19%
20%
18%
21%
17%
30%
15%
19%
16%
12%
20%
10%
3%
21%
11%
15%
13%
9%
15%
8%
13%
12%
9%
YTD
11%
9%
6%
7%
1%
0%
-10%
Investing principles
-20%
-5%
-8%
-5%
-7%
-16%
-40%
-50%
-0.2%
-7%
-30%
-22%
'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 '19 '20 '21 '22 '23
Stock total return
83
-1%
Bond total return
Portfolio total return
Source: Bloomberg, FactSet, MSCI, J.P. Morgan Asset Management. Returns are calendar year. Portfolio returns reflect allocations of 60% in the MSCI AC World Index
and 40% in the Bloomberg Aggregate Bond Index. Returns are total returns.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
Correlation between stocks and bonds
GTM ASIA 84
Correlations between stocks and sovereign bonds
Weekly rolling six-month correlation of equities and sovereign bond prices*
80%
Stocks and bonds moving
in the same direction
60%
40%
20%
0%
-20%
-40%
Investing principles
-60%
84
-80%
-100%
Stocks and bonds moving
in the opposite direction
'01
'02
'03
'04
'05
'06
S&P 500 / U.S. government bonds*
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
MSCI AC World / Global government bonds*
Source: Bloomberg, FactSet, MSCI, J.P. Morgan Asset Management.
*Rolling six-month pairwise correlations between weekly returns in equity (S&P 500 and MSCI All Country World Index price indices) and bond (Bloomberg U.S. Aggregate
Government Treasury and Bloomberg Global Aggregate Government Treasuries price indices) markets.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/23.
'20
'21
'22
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 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 Tokyo Stock Price Index ('TOPIX') is a composite index of all common stocks listed on the
First Section of Tokyo Stock Exchange (TSE).The index is basically a measure of the changes in
aggregate market value of TSE common stocks. The base for the index is the aggregate market
value of its component stocks as of the close on January 4, 1968. The aggregate market value is
calculated by multiplying the number of listed shares of each component stock by its price and
totaling the products derived there from.
The Bombay Exchange Sensitive Index (‘SENSEX’), first compiled in 1986, was calculated on a
"Market Capitalization-Weighted" methodology of 30 component stocks representing large, wellestablished and financially sound companies across key sectors. The base year of SENSEX was
taken as 1978-79. SENSEX today is widely reported in both domestic and international markets
through print as well as electronic media. It is scientifically designed and is based on globally
accepted construction and review methodology. Since September 1, 2003, SENSEX is being
calculated on a free-float market capitalization methodology.
The Korea Composite Stock Price Index (‘KOSPI’) is market capitalization based index on all
common stocks listed on the Stock Market Division of the Korea Exchange (KRX) and excludes
preferred stocks. The stock price index is calculated using the actual price traded on the market
and not the “base price” used for market management such as establishment of price change
limits. When no market price is available for issues that are not being traded or have halted trading,
the latest closing price is used. KOSPI was a assigned a base index of 100 set to January 4, 1980.
The China Shenzhen Composite Index is an actual market-cap weighted index that tracks the
stock performance of all the A-share and B-share lists on Shenzhen Stock Exchange. The index
was developed on April 3, 1991 with a base price of 100.
The Euro Stoxx 600 Index represents large, mid and small capitalization companies across 18
European countries.
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 markets 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 ACWI consisted of 45 country indices comprising 23
developed and 22 emerging market country indices.
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.
85
GTM ASIA 85
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 markets: Australia, Hong Kong, Japan, New
Zealand, and Singapore.
The MSCI Europe ex UK IndexSM is a free float-adjusted market capitalization weighted index that
is designed to measure the equity market performance of the developed markets in Europe,
excluding the United Kingdom. The
MSCI Europe ex UK Index consists of the following 15 developed market country indices: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway,
Portugal, Spain, Sweden, and Switzerland.
The MSCI Pacific ex Japan IndexSM is a free float-adjusted market capitalization index that is
designed to measure equity market performance in the Pacific region, excluding Japan. As of June
2007, the MSCI Pacific Index consisted of the following 4 Developed Markets: Australia, Hong
Kong, New Zealand, and Singapore.
The MSCI USA IndexSM is designed to measure the performance of the large and mid cap
segments of the U.S. market. With 586 constituents, the index covers approximately 84% of the
free float-adjusted market capitalization in the U.S.. The MSCI USA Index was launched on Dec
ember 31, 1969.
The MSCI China IndexSM captures large and mid cap representation across China H shares, B
shares, Red chips and P chips. With 148 constituents, the index covers about 84% of this China
equity universe. The MSCI China Index was launched on December 31, 1992.
The MSCI Indonesia IndexSM is designed to measure the performance of the large and mid cap
segments of the Indonesian market. With 25 constituents, the index covers about 84% of the
Indonesian equity universe. The MSCI Indonesia Index was launched on December 31, 1990.
The MSCI Korea IndexSM is designed to measure the performance of the large and mid cap
segments of the South Korean market. With 105 constituents, the index covers about 84% of the
Korean equity universe. The MSCI Korea Index was launched on December 31, 1989.
The MSCI India IndexSM is designed to measure the performance of the large and mid cap
segments of the Indian market. With 71 constituents, the index covers about 84% of the Indian
equity universe. The MSCI India Index was launched on December 31, 1993.
The MSCI Japan IndexSM is designed to measure the performance of the large and mid cap
segments of the Japan market. With 315 constituents, the index covers approximately 84% of the
free float-adjusted market capitalization in Japan. The MSCI Japan Index was launched on
December 31, 1969.
The MSCI Hong Kong IndexSM is designed to measure the performance of the large and mid cap
segments of the Hong Kong market. With 42 constituents, the index covers approximately 84% of
the free float-adjusted market capitalization of the Hong Kong equity universe. The MSCI Hong
Kong Index was launched on December 31, 1972.
The MSCI Taiwan IndexSM is designed to measure the performance of the large and mid cap
segments of the Taiwan market. With 113 constituents, the index covers approximately 84% of the
free float-adjusted market capitalization in Taiwan. The MSCI Taiwan Index was launched on
December 31, 1989.
The MSCI Environmental, Social and Governance (ESG) Universal Indices are designed to
address the needs of asset owners who may look to enhance their exposure to ESG while
maintaining a broad and diversified universe to invest in. By re-weighting free-float market cap
weights based upon certain ESG metrics tilting away from free-float market cap weights, the indices
enhance exposure to those companies that demonstrate both a higher MSCI ESG Rating and a
positive ESG trend, while maintaining a broad and diversified investment universe.
J.P. Morgan Asset Management: Index Definitions, Risks and
Disclosures
West Texas Intermediate (WTI) is the underlying commodity for the New York Mercantile
Exchange's oil futures contracts.
The Bloomberg Commodity Index is calculated on an excess return basis and reflects commodity
futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3
by world production and weight-caps are applied at the commodity, sector and group level for
diversification. Roll period typically occurs from 6th-10th business day based on the roll schedule.
The Bloomberg Commodity Subindexes represent commodity groups and sectors, as well as
single commodities, that make up the Bloomberg Commodity Index. The subindexes track
exchange-traded futures of physical commodities, and the commodity groups and sectors, like in
the case of the broad index, are weighted to account for economic significance and market liquidity.
The various subindexes include Agriculture, Energy, Livestock, Grains, Industrial Metals, Precious
Metals and Softs.
The Bloomberg 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 Bloomberg 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 and non convertible.
The Bloomberg Corporate Bond Index is the Corporate component of the U.S. Credit index.
The Bloomberg 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 GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate,
domestic currency government bonds to which international investors can gain exposure. The
weightings among the countries are more evenly distributed within this index.
The J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total
returns of US dollar-denominated debt instruments issued by corporate entities in Emerging
Markets countries, and consists of an investable universe of corporate bonds.
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 VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by
S&P 500 Index (SPX) option prices.
The MOVE-Merrill Lynch Option Volatility Index is a blended implied normal volatility for
constant one-month at-the-money options on U.S. Treasuries.
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 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.
Bonds 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.
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Small-capitalization investing typically carries more risk than investing in well-established "bluechip" 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 the value of real estate, risks related to
general and economic conditions, changes in the value of the underlying property owned by 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 can raise or lower
returns. Also, some markets may not be as politically and economically stable as other nations.
Investments in emerging markets can be more volatile. The normal risks of international investing
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.
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.
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. Investing 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.
Forecasts, projections and other forward looking statements are based upon current beliefs
and expectations. They are for illustrative purposes only and serve as an indication of what may
occur. Given the inherent uncertainties and risks associated with forecast, projections or other
forward statements, actual events, results or performance may differ materially from those reflected
or contemplated. Positive yield does not imply positive return.
J.P. Morgan Asset Management (JPMAM) Global Market Insights Strategy Team as of 30/06/23.
There can be no assurance that the professionals currently employed by JPMAM will continue to
be employed by JPMAM or that the past performance or success of any such professional serves
as an indicator of such professional's future performance or success.
J.P. Morgan Asset Management: Risks and Disclosures
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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
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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 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, hypothetical 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 investing 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 own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant
information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set 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 is considered 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 investment involves 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 amount invested. Both past performance and yields are not reliable indicators of current and future results.
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This communication is issued by the following entities:
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intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio
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and Labrador. 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 Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia
Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong;
JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset
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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 wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080)
(AFSL 376919). For all other markets in APAC, to intended recipients only.
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Copyright 2023 JPMorgan Chase & Co. All rights reserved.
Prepared by: David Kelly, Tai Hui, Marcella Chow, Kerry Craig, Agnes Lin, Shogo Maekawa, Chaoping Zhu, Ian Hui, Adrian Tong and Jennifer Qiu.
Unless otherwise stated, all data are as of June 30, 2023 or most recently available.
MI-GTMASIA-E Jun 2023
Material ID: 0903c02a823a5888
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