MARKET INSIGHTS. Guide to the Markets. Europe 1Q 2018 As of 31 December 2017

MARKET INSIGHTS Guide to the Markets Europe 1Q 18 As of 31 December 17

Global Market Insights Strategy Team Dr. David Kelly, CFA New York Samantha Azzarello New York Alex Dryden, CFA New York David Lebovitz New York Gabriela Santos New York Jordan Jackson New York John Manley New York Tyler Voigt New York Abigail Yoder, CFA New York Karen Ward London Michael Bell, CFA London Nandini Ramakrishnan London Ambrose Crofton London Jai Malhi London Manuel Arroyo Ozores, CFA Madrid Lucia Gutierrez Mellado Madrid Tilmann Galler, CFA Frankfurt Maria Paola Toschi Milan Vincent Juvyns Luxembourg Tai Hui Hong Kong Marcella Chow Hong Kong Ian Hui Hong Kong Hannah Anderson Hong Kong Dr. Jasslyn Yeo, CFA Singapore Chaoping Zhu, CFA Shanghai Yoshinori Shigemi Tokyo Shogo Maekawa Tokyo Kerry Craig, CFA Melbourne

Page reference Europe economy. Eurozone: GDP and inflation 5. Eurozone growth monitor 6. Eurozone credit conditions 7. Eurozone: Unemployment and labour costs 8. Eurozone government debt and ECB bond purchases 9. European politics 1. UK economic indicators 11. Brexit: UK trade Global economy 1. World economic data 13. Global Purchasing Managers Index (PMI) for manufacturing 1. Global growth 15. Unemployment and spare capacity 16. Global inflation dynamics 17. Core inflation 18. Global central bank policy 19. Global currency trends. US: GDP and inflation 1. US profits and the business cycle. US: Cyclical sectors 3. US labour market. US inflation and wages 5. US Federal Reserve outlook 6. US corporate environment 7. Japan: GDP and inflation 8. Japan economic indicators 9. China: GDP and inflation 3. China economic indicators 31. EM aggregate: GDP and inflation 3. Emerging market adjustments 33. Emerging markets structural dynamics 3. Global trade Equities 35. World stock market returns 36. European sector returns and valuations 37. Relative equity earnings and valuations 38. MSCI Europe Index at inflection points 39. European equities: Macro correlations. European equities: Earnings fundamentals 1. European equities: Earnings. European equities: Large vs. mid/small capitalisation 3. European equities: Valuations. UK equities 5. US S&P 5 at inflection points 6. US equities: Macro correlations 7. US equities: Earnings and performance 8. US equities: Valuations 9. US corporate fundamentals and activity 5. US bull and bear markets 51. Interest rates and equities 5. Japanese equities: Earnings and performance 53. Japanese equities: Corporate governance 5. Developed market equity valuations by country 55. Emerging market equity valuations by country 56. Emerging markets: Macro correlations 57. Emerging markets: Flows, earnings and income 58. Emerging markets: Valuations 59. Equity income 6. Correlation, dispersion and volatility Fixed income 61. Global fixed income: Yields and returns 6. Government bonds 63. Inflation expectations and real yields 6. Fixed income interest rate risk 65. Historical impact of Fed tightening 66. Global investment-grade bonds 67. Global investment-grade bond market 68. US high yield bonds 69. European high yield bonds 7. Emerging market bonds Other assets 71. Commodities 7. Gold 73. Risk-adjusted returns and downside protection 7. Alternative strategies 75. Correlation of returns (EUR) 76. Asset markets in coming years Investing principles 77. Life expectancy 78. Cash investments 79. The power of compounding 8. Annual returns and intra-year declines 81. Impact of being out of the market 8. US asset returns by holding period 83. Asset class returns (EUR) 3

Eurozone: GDP and inflation GTM Europe Europe economy Contribution to eurozone real GDP growth Contribution to eurozone CPI inflation % contribution to GDP growth, change year on year % contribution to headline inflation, change year on year 3 3,5 Average since 3Q17 3, 1,3%,6%,5 1, 1,5 ECB inflation target 1, -1 Government Change in inventories,5, - -3 Net exports Investment Consumption GDP '1 '11 '1 '13 '1 '15 '16 '17 -,5-1, -1,5 Food, alcohol, tobacco Core rate Energy CPI* '1 '11 '1 '13 '1 '15 '16 '17 Source: (Left) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food, alcohol, tobacco and energy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Eurozone growth monitor 5 Europe economy Unemployment rate % 13 1 11 Recession Retail sales and industrial production Index level Industrial production (LHS) 1 115 Retail sales (RHS) 11 15 1 95 9 1 115 11 15 1 95 85 ' ' ' '6 '8 '1 '1 '1 '16 9 1 9 Composite PMI and GDP Index level (LHS); % change year on year (RHS) 65 PMI 6 GDP 6 55 8 5 5 - - 7 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 35 ' ' ' '6 '8 '1 '1 '1 '16-6 Source: (Left and top right) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) Bloomberg, Eurostat, Markit, J.P. Morgan Asset Management. Light grey columns in all charts indicate recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 5

Eurozone credit conditions GTM Europe 6 Europe economy Eurozone lending rates Eurozone loan growth % interest % change year on year 7 16 Eurozone loan rate for house purchases Loan growth to households 6 Eurozone loan rate for non-financial corporations Loan growth to non-financial corporations ECB main refinancing rate 1 5 8 3 1 '7 '9 '11 '13 '15 '17 - '7 '9 '11 '13 '15 '17 Source: (All charts) ECB, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 6

Eurozone: Unemployment and labour costs GTM Europe 7 Europe economy Unemployment rate % Rebased to 1 as of Dec 1998 1 Average of Portugal, Spain, Italy Greece 18 15 France Eurozone Germany Unit labour costs France Spain Germany Ireland 1 9 6 3 ' ' ' '6 '8 '1 '1 '1 '16 Source: (Left) Eurostat, FactSet, J.P. Morgan Asset Management. (Right) ECB, FactSet, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. '18 7

Eurozone government debt and ECB bond purchases GTM Europe 8 Europe economy Eurozone debt and ECB PSPP* purchases Eurozone net bond supply in 18** EUR billions EUR billions. 1.8 1.6 1. Total outstanding debt Cumulative ECB PSPP purchases 33% limit 3 5 Gross bond issuance Gross bond issuance minus redemptions PSPP purchases in 18 Net bond supply 1. 15 1. 8 6 1 5-5 -1 Source: (Left) ECB, Eurostat, J.P. Morgan Asset Management. *PSPP is Public Sector Purchase Programme. 33% is the ECB purchase limit. (Right) ECB, J.P. Morgan Securities Research, J.P. Morgan Asset Management. **Gross issuance and gross minus redemptions and PSPP are estimates for 18. Net bond supply is gross bond issuance minus redemptions minus PSPP purchases estimated for 18. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 8

European politics 9 Europe economy Eurozone real GDP levels Index level rebased to 1 at 1Q7 115 11 15 Germany Eurozone France Spain Italy Survey results: Do you support the euro? % answering yes as of November 17 9 8 7 6 5 Nov 13 Nov 16 Nov 17 Italy France Spain Germany 1 95 Italian election polling %, monthly average 5 M5S PD FI LN FdI 3 9 1 85 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '13 '1 '15 '16 '17 '18 Source: (Left) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) Eurobarometer survey, J.P. Morgan Asset Management. (Bottom right) Termometropolitico.it, Scenaripolitici.com, J.P. Morgan Asset Management. M5S is 5 Star Movement, PD is Democratic Party, FI is Forza Italia, LN is Lega Nord, Fdl is Brothers of Italy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 9

UK economic indicators GTM Europe 1 Europe economy Real GDP growth comparison Index level, rebased to 1 at 1Q8 US UK Germany France Japan UK unemployment rate and consumer confidence Index level (LHS); % (RHS) 1 Consumer confidence -1 - -3 9 8 7 6 - Unemployment rate -5 '7 '9 '11 '13 '15 '17 5 UK current account % of GDP Investment income Trade balance Current account balance UK real wage growth % change year on year 6 3 Nominal wage growth* Headline CPI Real wage growth - - -6-3 -8 '5 '7 '9 '11 '13 '15 '17-6 ' ' '6 '8 '1 '1 '1 '16 Source: (Top left) FactSet, OECD, J.P. Morgan Asset Management. (Bottom left) ONS, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) GFK, ONS, Thomson Reuters Datasteam, J.P. Morgan Asset Management. (Bottom right) Bloomberg, ONS, J.P. Morgan Asset Management. *Nominal wages include bonuses. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 1

Brexit: UK trade 11 Europe economy UK exports and imports of goods and services GBP billions EU7 US Switzerland Exports: Services Goods China Imports: Services Goods Japan Australia Singapore Hong Kong Canada India UK export share EU7 3% US 17% Asia 1% Middle East 5% Saudi Arabia 5 1 15 5 3 35 Source: UK ONS Pink Book, J.P. Morgan Asset Management. Data is latest available, measured at end of 16. Middle East includes Israel, Saudi Arabia, residual Gulf Arabian countries and other near and middle eastern countries. Asia includes China, Hong Kong, India, Indonesia, Iran, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 11

World economic data 1 Selected countries Gross domestic product (GDP) Real GDP % Inflation % Policy rate % Unemployment % Global economy 1 EUR per capita EUR billions 17* 18* 17* 18* Switzerland 69.91 588,9 1,8,5,6 -,75 3,1 United States 51.199 16.95,3,6,1,1 1,5,1 Sweden 7.93 63 3,,6 1,8 1,9 -,5 5,8 Netherlands 3.9 731 3,1, 1,3 1,5 -, 7, Finland.73,8,,9 1,1 -, 7,1 Germany 39.989 3.76,5, 1,7 1,7 -, 5,5 France 35.75.83 1,8 1,8 1, 1,3 -, 9, United Kingdom 3.36.6 1,5 1,,7,5,5,3 Eurozone 33.16 11.18,3,1 1,5 1,5 -, 8,8 Japan 3.77.187 1,6 1,3,5,8,1,7 Italy 8.755 1.79 1,6 1, 1,3 1, -, 11, Spain 5.96 1.163 3,1,5, 1,5 -, 16, Greece 16.96 189 1,,1 1, 1, -,, Russia 9.578 1.379 1,8 1,9 3,7 3,7 7,75 5, Brazil 8.6 1.757,9,5 3, 3,8 7, 8, China 7.65 1.7 6,8 6,5 1,6,3,35, India 1.599.117 6,3 6,7,5 3,5 6, 8, Source: Bloomberg, various national statistical agencies, J.P. Morgan Asset Management. Table ordered by GDP per capita. Nominal GDP figure is latest quarter annualised. *Forecasts are Bloomberg consensus estimates. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Global Purchasing Managers Index (PMI) for manufacturing 13 16 17 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Global economy Dec Eurozone Developed Emerging Global Developed Emerging Eurozone France Germany Italy Spain Greece Ireland Sweden Switzerland UK US Australia Japan China Indonesia Korea Taiwan India Brazil Mexico Russia 5,9 5, 5,6 5, 5,1 5, 51, 5,8 51,1 5, 5,1 5,7 5,8 53, 53, 5,7 5,6 5,6 5,8 53, 53,3 53,5 5,1 5,5 5,1 5,8 5,9 5,5 5, 51, 51,5 51, 51,5 5,6 53, 53,8 5, 5,1 53,9 5,1 5,1 53,9 5, 5, 5,6 55, 55,8 56,3 9, 8,9 5, 9,5 9,5 9,3 5,3 5,1 5, 51, 5,8 51,1 5,8 51,3 51,6 5,9 5,6 5,8 51, 51,7 51, 51, 51,7 5, 5,3 51, 51,6 51,7 51,5 5,8 5, 51,7 5,6 53,5 53,7 5,9 55, 55, 56, 56,7 57, 57, 56,6 57, 58,1 58,5 6,1 6,6 5, 5, 9,6 8, 8, 8,3 8,6 8,3 9,7 51,8 51,7 53,5 53,6 5, 53,3 55,1 53,8 5,8 5,9 55,8 56,1 56,1 57,7 58,8 5,3 5,5 5,7 51,8 5,1 5,5 53,8 53,6 5,3 55, 5,3 55,6 56, 56,8 58,3 58, 59,5 59,6 58,1 59,3 6,6 6,6 6,5 63,3 53, 5, 53,5 53,9 5, 53,5 51, 9,8 51, 5,9 5, 53, 53, 55, 55,7 56, 55,1 55, 55,1 56,3 56,3 57,8 58,3 57, 55, 5,1 53, 53,5 51,8 5, 51, 51, 5,3 53,3 5,5 55,3 55,6 5,8 53,9 5,5 55, 5,7 5, 5, 5,3 55,8 56,1 55,8 5, 8, 9, 9,7 8, 5, 8,7 5, 9, 8,6 8,3 9,3 6,6 7,7 6,7 8, 9,6 5,5 5,5 5, 5,8 5,1 5, 53,1 5,3 5,9 5,9 5,6 51,5 53, 5, 51,7 51,3 5,1 53,7 55,7 55,5 53,8 53,6 55, 55,9 56, 5,6 56,1 55, 5, 58,1 59,1 55,3 51,7 53,1 53,9 5,1 5,9 55, 51, 5,9 58,6 57,3 6,3 6,1 61, 65, 6,5 58,8 6,3 6,3 5,7 63,7 59,3 63,3 6, 5, 51,1 53, 53,1 55,3 51,5 51,5 51,6 5, 55, 55,9 56, 5,6 57,8 58,6 57, 55,6 6,1 6,9 61, 61,7 6, 65,1 65, 5,3 5,9 51,3 9,6 5,5 53, 8,5 53,1 55,7 5, 53,1 55,9 55, 5,6 5,3 57,1 56, 5, 55,3 56,8 56,1 56,3 58, 56,3 5, 51,3 51,5 5,8 5,7 51,3 5,9 5, 51,5 53, 5,1 5,3 55, 5, 53,3 5,8 5,7 5, 53,3 5,8 53,1 5,6 53,9 55,1 51,5 53,5 58,1 53, 51, 51,8 56, 6,9 9,8 5,9 5, 55, 51, 59,3 57,5 59, 5,8 55, 56, 59,8 5, 51,1 57,3 56, 5,3 5,1 9,1 8, 7,7 8,1 9,3 9,5 5, 51, 51,3 5, 5,7 53,3 5, 5,7 53,1 5, 5,1 5, 5,9 5,8 53,6 5, 8, 8, 9,7 9, 9, 8,6 5,6 5, 5,1 51, 5,9 51,9 51, 51,7 51, 5,3 9,6 5, 51,1 51,6 51, 51, 5,8 51,5 8,9 8,7 5,6 5,9 5,6 51,9 8, 5, 5,9 8,7 9,7 9, 5, 9,3 5,5 51, 5,6 9,5 8,6 5,7 5, 5,1 5, 9,3 9,5 8,7 9,5 5, 5,1 5,5 5,1 8,6 7,6 8, 8, 9, 9, 9, 8, 9, 9, 5,1 9,1 9,9 5,6 5, 51, 9,9 5,6 9, 51,1 9,7 8,5 5,5 51, 51,8 5, 5,7 5,7 56, 55,6 5,5 56, 5, 53,1 53,3 53,6 5,3 5, 53,6 56,3 56,6 51,1 51,1 5, 5,5 5,7 51,7 51,8 5,6 5,1 5, 5,3 9,6 5, 5,7 5,5 5,5 51,6 5,9 7,9 51, 51, 5,3 5,6 5,7 7,,5 6,,6 1,6 3, 6, 5,7 6, 6,3 6, 5,, 6,9 9,6 5,1 5, 5,5 5, 5,9 5,9 51, 53,5 5, 5, 53,1 53, 5, 53,6 51,1 5,6 5,9 51,9 51,8 51,1 5, 5,8 5,6 51,5 5,7 51, 5,3 51, 5, 5,8 9, 5, 51,7 9,8 9,3 8,3 8, 9,6 51,5 9,5 5,8 51,1 5, 53,6 53,7 5,7 5,5 5, 5,8 5, 5,3 5,7 51,6 51,9 51,1 51,5 5, Lowest relative to 5 PMI 5 Highest relative to 5 PMI 13 Source: FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers Index (PMI) assesses the economic health of the manufacturing sector by surveying output and employment intentions. The results are rebased such that a score of 5 means that economic conditions are neither accelerating nor deteriorating. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Global growth GTM Europe 1 Real GDP growth Real GDP growth expectations % change year on year % change year on year 6 3, Current estimate for 17 Current estimate for 18 Global economy,5, Last year s estimate for 17 Last year s estimate for 18 1,5 - - -6 Eurozone US UK Japan 1,,5-8 ' ' ' '6 '8 '1 '1 '1 '16, Japan UK Eurozone US Source: (Left) BEA, Eurostat, Japan Cabinet Office, ONS, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) IMF World Economic Outlook, J.P. Morgan Asset Management. GDP growth expectations are from the IMF World Economic Outlook October 16 and October 17. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 1

Unemployment and spare capacity GTM Europe 15 Global economy Unemployment rates Actual GDP minus potential GDP (output gap) % % of potential GDP 13 6 Eurozone Eurozone US US 11 UK UK Japan Japan 9 7-5 - 3-6 1 ' ' ' '6 '8 '1 '1 '1 '16 '18-8 ' ' ' '6 '8 '1 '1 '1 '16 '18 15 Source: (Left) BLS, Eurostat, Japan Ministry of Internal Affairs & Communications, ONS, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) IMF World Economic Outlook October 17, J.P. Morgan Asset Management. 17 and 18 are IMF estimates. Output gap is a measure of the difference between actual GDP of an economy and its potential GDP. IMF output gap is calculated using actual GDP minus potential GDP expressed as a percentage of potential GDP. Spare capacity is the extent to which an economy is operating below the maximum sustainable level of employment and production, therefore showing the amount of slack in the economy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Global inflation dynamics 15 16 17 16 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Global economy Eurozone Developed Emerging Global Developed Emerging Eurozone France Germany Italy Spain Greece Ireland Sweden Switzerland UK US Australia Japan China Indonesia Korea Taiwan India Brazil Mexico Russia 1,6 1,8 1,7 1,6 1,6 1,5 1,6 1,5 1,5 1,7 1,7 1,8 1,9,3,1 1,9, 1,8 1,7 1,7 1,9,,1,,5,8,5,5,5,5,6,5,6,9 1,1 1, 1,5,,1 1,8 1,9 1,6 1, 1,5 1,7 1,8 1,6 1,8 3,5 3,5 3,7 3, 3, 3, 3, 3,,9 3, 3,1 3,1 3, 3,,,5,6,6,5,,7,6,8,8,,3 -,, -, -,1,1,,,,5,6 1,1 1,8, 1,5 1,9 1, 1,3 1,3 1,5 1,5 1, 1,5,3,3 -,1 -,1 -,1,1,3,,,5,5,7,8 1,6 1, 1, 1,,9,8,8 1, 1,1 1, 1,,, -,,1 -,3,,,,3,5,7,7 1,7 1,9, 1,5, 1, 1,5 1,5 1,8 1,8 1,5 1,8,1, -, -, -, -,3 -, -, -,1,1 -,1,1,5 1, 1,6 1,, 1,6 1, 1, 1, 1,3 1,1 1,1 -,1 -, -1, -1, -1, -1,1 -,9 -,7 -,3,,5,5 1,,9 3,,,6, 1,6 1,7, 1,8 1,7 1,8, -,1,1 -,7 -, -,,,, -,1,6 -,,3 1,5 1, 1,7 1,7 1,5,9,9,6 1,,5 1,1,, -, -,6 -, -,,1,1 -, -,3 -, -, -,,,3,6,7, -,6 -,,,,5,5,7 1,3,8 1, 1,,8 1, 1,1 1,,8 1,1 1,3 1,7 1,5 1,9 1,, 1,8 1,8,3,, 1,7 1,9-1, -1,5 -,9-1, -,5 -,5 -,6 -,5, -,3 -,3 -, -,,3,7,5,7,,,6,5,8,8,8,,3,3,5,3,3,5,6,6 1,,9 1, 1,6 1,8,3,3,7,9,6,6,9 3, 3, 3,1,7 1, 1,,9 1,1 1, 1,,8 1,1 1,5 1,6 1,7,1,5,7,, 1,9 1,6 1,7 1,9,,,,,3,1 1,7 1,5 1, 1,5 1, 1, 1,3 1,5 1,5 1,8,1,1,,6,8,3,7,6,,6,7, -,1,, -,3 -,5 -, -, -,5 -,5,1,5,3,,3,,,,,,7,7,,6 1,6 1,8,3,3,3, 1,9 1,8 1,3 1,9,1,3,1,5,8,9 1, 1,5 1,5 1, 1,8 1,6 1,9 1,7 3,,1,,5 3,6 3,3 3,5 3,,8 3,1 3,3 3,6 3, 3,5 3,8 3,6,,3, 3,9 3,8 3,7 3,6 3,3 1,1,6 1,1,8 1,,8,7,,5 1, 1,5 1,5 1,3, 1,9, 1,9, 1,9,3,6,1 1,8 1,3,1,8,, 1,9 1,,9 1,,6,3 1,7, 1,7, -,1,,1,6 1,,8 1,,5 -,3, 5,6 5,7 5,3,8 5,5 5,8 5,8 6,1 5,,, 3,6 3, 3, 3,7 3,9 3,, 1,5, 3,3 3,3 3,6,9 1,7 1,7 1, 9, 9,3 9,3 8,8 8,7 9, 8,5 7,9 7, 6,3 5,,8,6,1 3,6 3,,7,5,5,7,8,1,6,9,6,5,6,5,7,7 3, 3,1 3,3 3,,7,9 5, 5,8 6, 6,3 6, 6,7 6, 6, 6,6 1,9 9,8 8,1 7,3 7,3 7,3 7,5 7, 6,9 6, 6,1 5,8 5, 5,1,6,3,1,1, 3,9 3,3 3,,7,5 16 Source: Bank of Mexico, DGBAS, ECB, FactSet, Federal Reserve, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, Japan Ministry of Internal Affairs & Communication, Korean National Statistical Office, Melbourne Institute, National Bureau of Statistics China, Riksbank, Statistics Indonesia, Swiss National Bank, UK Office for National Statistics (ONS), J.P. Morgan Asset Management. Figures are % change year on year. Heatmap colours are based on the respective central bank target inflation rates. Blue is below target, white is at target and red is above target. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Core inflation 17 Core inflation % change year on year Eurozone US Average since Latest 1,%,9%,% 1,7% UK 1,7%,7% Global economy 3 Japan -,1%,3% 1-1 - ' ' ' '6 '8 '1 '1 '1 '16 '18 Source: Bank of Japan, BLS, Eurostat, ONS, Thomson Reuters Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core inflation for the US and Japan is defined as CPI excluding food and energy. Core inflation for the UK and the eurozone is defined as CPI less energy, food, alcohol and tobacco. Japan core CPI has been adjusted down by % from April 1 to March 15 to remove the estimated impact of the consumption tax hike over this period. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 17

Global central bank policy GTM Europe 18 Market expectations for policy rate Central bank balance sheets % USD billions,5 18. Forecast* Global economy, 1,5 1, US UK 16. 1. 1. 1. Switzerland UK Japan Eurozone US,5 Eurozone 8., Japan 6. Switzerland. -,5. -1, Dec 17 Dec 18 Dec 19 Dec Dec 1 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 '19 18 Source: (Left) Bloomberg, J.P. Morgan Asset Management. Expectations calculated using OIS forwards. (Right) Bank of England (BoE), Bank of Japan (BoJ), European Central Bank (ECB), US Federal Reserve (Fed), Thomson Reuters Datastream, J.P. Morgan Asset Management. *Balance sheet forecast assumptions: BoE to have zero net purchases until the end of 19; BoJ to have an ann. purchase pace of 5tn yen, then a reduction in the ann. monthly purchase rate by 1tn yen each quarter until Oct 18, when purchases continue at an ann. monthly pace of tn yen; ECB to have net purchases of EUR 3bn per month from Jan 18 to Sep 18 and then reduce monthly purchases to EUR 15bn in Oct 18 and to zero asset purchases after Mar 19; Fed forecast is based on a monthly reduction of USD bn and then stepping up the monthly reduction by a further USD 1bn in each subsequent quarter until reaching a maximum of USD 5bn reduction per month, depending on the monthly maturity schedule of the balance sheet. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Global currency trends 19 US dollar real effective exchange rate Index level, broad real effective exchange rate (REER) 13 1 Global economy 11 1 9 8 7 '73 '77 '81 '85 '89 '93 '97 '1 '5 '9 '13 '17 Euro real effective exchange rate Index level, broad real effective exchange rate (REER) 11 15 1 95 9 85 8 '99 ' '5 '8 '11 '1 '17 GBP real effective exchange rate Index level, broad real effective exchange rate (REER) 11 1 9 8 7 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 Source: (Top) Thomson Reuters Datastream, US Federal Reserve, J.P. Morgan Asset Management. (Bottom left) European Central Bank, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) Bank of England, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 19

US: GDP and inflation GTM Europe Global economy Contribution to US real GDP growth US inflation % contribution to GDP growth, change year on year Average % change year on year since 3Q17 Government 7 5 Change in inventories,%,3% Net exports 6 Investment Consumption 5 GDP 3 3 Average since November 17 Headline CPI*,%,% Core CPI,% 1,7% 1 1-1 -1 - '1 '11 '1 '13 '1 '15 '16 '17 - ' ' ' '6 '8 '1 '1 '1 '16 Source: (Left) BEA, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) BLS, Thomson Reuters Datastream, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

US profits and the business cycle 1 US corporate profits, business investment and employment growth % change year on year 6 Recession Profits Business investment Employment 1 Global economy 7 - -3 - '8 '88 '9 '96 ' ' '8 '1 '16 Source: BEA, Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns indicate recessions determined by NBER. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. -8 1

US: Cyclical sectors GTM Europe US light vehicle sales Millions, seasonally adjusted annual rate US real capital goods orders Non-defense capital goods orders ex-aircraft, USD billions, SA 8 Global economy Average: 15,6 December 17: 17,9 75 7 65 Average: 6,3 6 55 November 17: 61,3 5 5 '98 ' ' ' '6 '8 '1 '1 '1 '16 '18 Source: (Left) BEA, FactSet, J.P. Morgan Asset Management. (Right) Census Bureau, FactSet, J.P. Morgan Asset Management, Capital goods orders deflated using the producer price index for capital goods with a base year of 9. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

US labour market 3 US unemployment rate and wage growth %, wage growth is year on year 1 Global economy 1 8 Unemployment 6 November 17:,1% Wage growth '67 '7 '77 '8 '87 '9 '97 ' '7 '1 '17 Source: BEA, Thomson Reuters Datastream, J.P. Morgan Asset Management. Wage growth is average hourly earnings of total private production and nonsupervisory employees. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. November 17:,3% 3

US inflation and wages US ISM Manufacturing and core inflation Index level, advanced 18 months (LHS); absolute change in year on year core CPI in % (RHS) 7 ISM Manufacturing 6 Recession 1,8,8 Global economy 5 Change in core CPI 3 '89 '93 '97 '1 '5 '9 '13 '17 -, -1, -, US wage growth and companies planning to raise wages % change year on year (LHS); % of businesses (RHS) 5 NFIB companies planning to raise wages 17 US wage growth and US quit rate % change year on year (LHS); % of total employment (RHS) 5 US quit rate,6, 3 1 7 3 1,8 Wage growth 1 '1 '3 '5 '7 '9 '11 '13 '15 '17-3 Wage growth 1 '1 '3 '5 '7 '9 '11 '13 '15 '17 1, 1, Source: (Top) BLS, ISM, Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns indicate recessions determined by NBER. (Bottom left) BLS, NFIB, Thomson Reuters Datastream, J.P. Morgan Asset Management. NFIB companies planning to raise wages is a 1-month moving average. Wage growth is average hourly earnings of total private production and non-supervisory employees. (Bottom right) BLS, Thomson Reuters Datastream, J.P. Morgan Asset Management. US quit rate is a three-month moving average. Wage growth is average hourly earnings of total private production and non-supervisory employees. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

US Federal Reserve outlook 5 Federal funds rate expectations % Fed funds rate, FOMC and market expectations 7 FOMC December 17 forecasts* 17 18 19 Change in real GDP, Q to Q,5,5,1, Global economy 6 5 3 Unemployment rate, Q,1 3,9 3,9, PCE inflation, Q to Q 1,7 1,9,, Federal funds rate US Fed FOMC forecasts (median) Market forecast on 31 December 17 (mean) 1 ' ' ' '6 '8 '1 '1 '1 '16 '18 ' Source: Bloomberg, Federal Reserve Bank of New York, US Federal Reserve, J.P. Morgan Asset Management. *Forecasts are median estimates of Federal Open Market Committee (FOMC) participants. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 5

US corporate environment 6 Global economy Tax rates on corporate income % 5 35 3 5 35 1 3 3 8 17 rate, including local and state taxes 17 central government headline rate 18 central government headline rate 3 7 19 US future capex intentions and business investment Index level (LHS); % change year on year (RHS) Future capex intentions 3 1-1 - Business investment -3 '5 '7 '9 '11 '13 '15 '17 US productivity % change year on year Recession 6 3 1-1 - 19 15 15 15 6 1 US Japan Italy Germany Canada UK -3 '81 '86 '91 '96 '1 '6 '11 '16 Source: (Left) Germany Federal Ministry of Finance, OECD, J.P. Morgan Asset Management. (Top right) BEA, Dallas Fed, Kansas City Fed, New York Fed, Philadelphia Fed, Richmond Fed, Thomson Reuters Datastream, J.P. Morgan Asset Management. Capex intentions is an average index level of the five aforementioned Fed districts equally weighted displayed using a three-month moving average. (Bottom right) BEA, Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns indicate recessions determined by NBER. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Japan: GDP and inflation GTM Europe 7 Japan real GDP growth 3 Real GDP,%,6% 5 Japan inflation Average % change quarter on quarter since 3Q17 % change year on year Average since November 17 Headline CPI*,%,6% Core CPI -,1%,3% Global economy 1 Average 3-1 1 - -3-1 - - -5 '1 '3 '5 '7 '9 '11 '13 '15 '17-3 '1 '3 '5 '7 '9 '11 '13 '15 '17 Source: (Left) Japan Cabinet Office, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) Japan Ministry of Internal Affairs & Communications, Thomson Reuters Datastream, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 7

Japan economic indicators GTM Europe 8 Global economy Japan Tankan business conditions Index level 8 6 - - - Manufacturing Non-manufacturing -6 '8 '8 '88 '9 '96 ' ' '8 '1 '16 Japan wage growth and unemployment % change year on year, six-month moving average (LHS); % (RHS) Unemployment rate (inverted) - Wage growth -6 '8 '85 '9 '95 ' '5 '1 '15 1 3 5 6 Japan bank lending and job-to-applicant ratio % lending growth year on year (LHS); ratio of number of jobs to applicants (RHS) 8 1,6 Job-to-applicant ratio - Bank lending (y/y) -8, '9 '96 '98 ' ' ' '6 '8 '1 '1 '1 '16 '18 Source: (Top left) Bank of Japan, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom left) Thomson Reuters Datastream, J.P. Morgan Asset Management. Wage growth is the nominal Japan wage index for all industry cash earnings. (Right) Bank of Japan, Japan Institute for Labour Policy and Training, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 1, 1, 1,,8,6,, 8

China: GDP and inflation GTM Europe 9 Global economy Contribution to China real GDP growth China inflation Average % change year on year 199-16 3Q17 % change year on year GDP growth 9,7% 6,8% 15 Investment Consumption 15 Net exports 1 1 5 Average since 6 November 17 Headline CPI*,7% 1,7% Core CPI 1,%,3% Headline PPI** 1,1% 5,8% 5-5 -5 '9 '9 '9 '96 '98 ' ' ' '6 '8 '1 '1 '1 '16-1 '6 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 Source: (All charts) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and energy. **PPI is the Producer Price Index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 9

China economic indicators GTM Europe 3 Global economy China credit growth % change year on year 6 RMB bank lending 5 3 Augmented credit 1 Total social financing '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 China fixed asset investment (FAI) % change year on year 5 3 1 Public Overall Private '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 China policy rate, interbank rate and reserve requirement ratio % rate 7 PBoC 1-year deposit rate RRR 5 China industrial production and retail sales % change year on year 5 5 SHIBOR 15 15 Retail sales 3 3 1 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 1 5 1 5 Industrial production '96 ' ' '8 '1 '16 Source: (Top left) People s Bank of China (PBoC), J.P. Morgan Asset Management. The augmented credit measure consists of all reported bank claims on the domestic economy, plus bankers acceptances, entrusted loans, trust loans, new net corporate bond and non-financial equity financing, issuance of asset-backed securities and interbank loans. Total social financing is a measure of total funds provided to the economy, tabulated from bank loans to individuals and corporations, as well as equity and bond financing to non-financial corporations. RMB bank lending is the sum of all bank-reported claims on domestic borrowers. (Bottom left) PBoC, Thomson Reuters Datastream, J.P. Morgan Asset Management. Average RRR for large and small banks. (Top right) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Bottom right) National Bureau of Statistics of China, Thomson Reuters Datastream, J.P. Morgan Asset Management. Industrial production is a three-month moving average and retail sales is a six-month moving average. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

EM aggregate: GDP and inflation GTM Europe 31 EM GDP growth EM inflation % change year on year % change year on year 1 1 Forecast Forecast Global economy 8 6 1 8 6 - Manufacturing countries Commodity countries - ' ' ' '6 '8 '1 '1 '1 '16 '18 Manufacturing countries Commodity countries ' ' ' '6 '8 '1 '1 '1 '16 '18 31 Source: (All charts) IMF, national statistics agencies, J.P. Morgan Global Economic Research, J.P. Morgan Asset Management. Manufacturing countries are China, India, Malaysia, Mexico, Philippines, Poland, Romania, Thailand, Turkey, Vietnam. Commodity countries are Argentina, Brazil, Chile, Colombia, Indonesia, Kazakhstan, Peru, Russia, South Africa, Venezuela. GDP and inflation aggregates are calculated using the mid-weight average, which is the mean of GDP-weighted average and simple average. Forecasts are from J.P. Morgan Global Economic Research. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

Emerging market adjustments GTM Europe 3 Global economy EM currencies vs. US dollar % from fair value, relative to US dollar % of GDP 3 1 EM currencies expensive relative to USD Average +1 std. dev. Fragile Five current account balance 1-1 - -1-1 std. dev. -3 - EM currencies cheap relative to USD - -3 '9 '96 ' ' '8 '1 '16-5 '96 '98 ' ' ' '6 '8 '1 '1 '1 '16 Source: (Left) J.P. Morgan Asset Management. Based on nominal exchange rates relative to PPP exchange rates and adjusted for GDP per capita. EM currencies used are a weighted average of JPM GBI-EM Global Diversified Index countries. (Right) IMF World Economic Outlook October 17, J.P. Morgan Asset Management. 17 is an IMF forecast. Fragile Five are Brazil, India, Indonesia, South Africa and Turkey. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 3

Emerging markets structural dynamics GTM Europe 33 Global economy Urbanisation and economic growth Urbanisation rates, % and GDP per capita, USD, 196-16 7. 6. 5. GDP per capita. 3. US South Korea Contribution to global real GDP growth % of overall growth 6 Global economic growth EM growth 5 DM growth 3 1. 1. China India -1 6 8 1 Urbanisation rate - '9 '9 '9 '96 '98 ' ' ' '6 '8 '1 '1 '1 '16 '18 Source: (Left) IMF, J.P. Morgan Asset Management. Urbanisation ratio refers to the proportion of the total population living within an urban area defined by national statistical offices. (Right) IMF World Economic Outlook October 17, J.P. Morgan Asset Management. 17 and 18 are forecasts from the IMF World Economic Outlook October 17. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 33

Global trade GTM Europe 3 Global economy Exports of goods Global export volumes % of GDP, 16 % change year on year, three-month moving average 8 US US China Eurozone 7 EM ex-china EM Canada Eurozone Global 6 Other DM UK 5 Brazil India China Russia Mexico 3 1 Japan Korea 1 3 5-1 - '1 '13 '1 '15 '16 '17 Source: (Left) IMF Direction of Trade, IMF World Economic Outlook October 17, J.P. Morgan Asset Management. (Right) CPB Netherlands, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 3

World stock market returns 35 EUR Local 8 9 1 11 1 13 1 15 16 17 Q17-3,% TOPIX -,6% 73,% MSCI EM 6,8% 35,% Small Cap,% 5,5% US S&P 5,1%,8% Asia ex-jp 19,7% 7,% Sm all Cap 35,8% 9,5% US S&P 5 13,7%,% TOPIX 1,1% 16,6% Small Cap 1,5%,8% Asia ex-jp 35,9% 6,9% TOPIX 8,7% 1-yr ann. 1,7% US S&P 5 8,5% -33,7% US S&P 5-37,% 67,% Asia ex-jp 67,% 8,3% Asia ex-jp 15,6% 3,5% HDY Equity 1,5% 18,1% Europe 16,% 6,7% US S&P 5 3,% 19,7% Asia ex-jp 7,7% 1,9% US S&P 5 1,% 15,3% US S&P 5 1,% 1,% MSCI EM 31,% 6,6% Asia ex-jp 6,3% 1,3% Small Cap 8,7% -37,9% HDY Equity -3,%,% Sm all Cap,8% 7,5% MSCI EM 1,% -5,7% Small Cap -8,7% 16,8% MSCI EM 17,% 1,5% TOPIX 5,% 16,5% Sm all Cap 6,7% 11,5% Small Cap,8% 1,9% MSCI EM 1,1% 1,% Portfolio 1,% 5,8% MSCI EM 5,7% 6,8% Portfolio 5,8% Equities -38,6% Small Cap -,% -,3% Portfolio -,1% 37,6% Portfolio 35,8% 3,% HDY Equity 3,% 3,9% TOPIX 1,% 3,1% US S&P 5 15,1% -5,8% Portfolio -7,5% -7,5% Europe -8,8% 16,3% Sm all Cap 18,% 15,6% Portfolio 17,1%,5% Europe,3% 15,3% Portfolio 3,6% 16,% HDY Equity 8,7% 15,3% Portfolio 8,% 8,8% Europe 5,% 8,3% Portfolio 1,9% 1,3% HDY Equity 13,1% 1,1% Portfolio 9,% 11,% TOPIX,% 1,9% Europe 13,7% 5,% US S&P 5 6,6% 3,8% Portfolio,7% 6,8% HDY Equity 6,% 6,% TOPIX,% -3,3% Europe -38,5% 3,5% Europe 8,6%,9% Portfolio 11,1% -9,6% TOPIX -17,% 1,% US S&P 5 16,% 13,9% HDY Equity,5% 11,8% MSCI EM 5,6% 6,3% HDY Equity,% 8,9% Asia ex-jp 6,% 8,% Sm all Cap 19,1% 3,7% Small Cap 5,1% 6,% Asia ex-jp,9% -9,8% Asia ex-jp -7,7%,5% US S&P 5 6,5% 16,% HDY Equity 8,% -1,3% Asia ex-jp -1,6% 13,6% HDY Equity 1,% -1,1% Asia ex-jp 6,% 1,1% TOPIX 1,3% 1,5% Asia ex-jp -5,3% 6,6% TOPIX,3% 7,% US S&P 5 1,8%,3% HDY Equity 3,5%,1% MSCI EM,5% -5,8% MSCI EM -5,7% 1,5% TOPIX 7,6% 11,7% Europe 7,5% -15,% MSCI EM -1,5% 5,9% TOPIX,9% -6,5% MSCI EM 3,8% 7,% Europe 5,% -,9% MSCI EM -5,% 3,% Europe 7,9% 5,3% HDY Equity 1,7%,7% Europe 1,3%,% Europe,% Source: FactSet, MSCI, Standard & Poor s, TOPIX, J.P. Morgan Asset Management. Annualised return covers the period 8 to 17. HDY Equity: MSCI AC World High Dividend Yield Index; Small Cap: MSCI The World Small Cap Index. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 3% Europe; % S&P 5; 15% EM; 1% Asia ex-japan; 1% TOPIX; 1% HDY equity and 5% small cap. All indices are total return. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 35

European sector returns and valuations 36 MSCI Europe Index Financials* Health care Cons. staples Cons. disc. Industrials Materials Energy Telecom Utilities Tech Europe Europe weight Growth weight Value weight 1,% 1,% 13,7% 1,5% 13,% 8,% 7,% 3,8% 3,6% 5,% 1% 6,% 15,8% 3,3% 1,8% 19,% 9,3% 1,%,7% 1,% 9,7% 1% 36,% 8,6%,3% 8,% 7,1% 6,9% 13,% 6,9% 6,%,3% 1% Weights Q17 -, -,8,9 1,3,7 6,5 7,8, -,7 1, 1,3 Equities 17 Since market peak** Since market low*** 15,5 7,9 13, 1,1 18,1 1,9 8,8, 1,6 1,7 13,7-16,6 116,7 1,8 98,7 63,5 3,8 5, 8,3 3,8,5,7 5,6 1,9 57,9 339,5 83,5 19,6 18,9 1,7 8,7 65,3 1,3 Return Beta to Europe 1,36x,65x,6x,95x 1,11x 1,8x 1,1x,81x,86x,98x 1,x β Forward P/E ratio 11,8x 15,9x 19,8x 1,7x 17,x 1,6x 15,x 15,3x 1,3x,9x 15,x 15-year average Trailing P/E ratio 1,x 1,8x 16,3x 13,x 1,x 1,6x 11,3x 6,x 1,7x 17,9x 1,9x 13,x 16,8x,9x 13,7x 19,x 15,6x 17,1x 16,x 1,x,x 16,x P/E 15-year average 1,x 15,7x 16,7x 15,x 15,5x 1,5x 1,3x 1,x 1,8x 8,x 13,8x Dividend yield 15-year average 3,9%,9%,7%,7%,%,5% 5,3%,6%,7% 1,3% 3,%,%,9%,8%,8%,8%,8%,5%,8% 5,% 1,8% 3,% Source: FactSet, MSCI, Thomson Reuters Datastream, J.P Morgan Asset Management. All calculations are total return in local currency, not annualised. Technology and Telecomms have 1-year rather than 15-year numbers on forward and trailing P/E due to data availability. *Financials no longer includes real estate, which is now a separate section making up,3% of the MSCI Europe Value index and,3% of the MSCI Europe growth index. It is not included in the chart due to a lack of historical data for the sector. ** Since market peak represents period 9 October 7 to end of latest quarter. *** Since market low represents period 9 March 9 to end of latest quarter. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. Div 36

Relative equity earnings and valuations GTM Europe 37 Global earnings NTM USD earnings per share estimates, rebased to 1 in Jan 9 Global valuations Current and 5-year historical valuations Axis 18 16 US Japan EM x 75x 35x 3x 5x Current 31 Dec 16 5-year range 5-year average 5,x,8x,x,x 3,6x 3,x Equities 1 1 1 Price-to-earnings x 15x,8x,x,x 1,6x Price-to-book 8 6 Europe 1x 5x 1,x,8x,x '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 x US Europe UK Japan EM ex-uk,x Source: (Left) FTSE, IBES, MSCI, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. NTM is next twelve months. (Right) MSCI, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. Valuations refer to NTM aggregate P/E for Europe ex-uk, US, Japan, UK and P/B for emerging markets. Valuation and earnings charts use MSCI indices for all regions/countries, except for the US, which is the S&P 5. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 37

MSCI Europe Index at inflection points 38 MSCI Europe Index Characteristic Sep Jul 7 Dec 17 Index level 1.63 1.61 1.616 1.8 Sep : P/E =,x 1.63 P/E ratio (fwd),x 13,3x 15,x Dividend yield 1,8%,8% 3,% German 1-year 5,3%,6%,% 16 Jul 7: P/E = 13,3x 1.61 31 December 17: P/E = 15,x 1.616 1. Total return: +133% Equities -55% +18% -5% +1% 1. 31 Dec 1996: P/E = 1,6x 71 1 Mar 3: P/E = 1,x 676 9 Mar 9: P/E = 9,x 71 6 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 Source: FactSet, MSCI, J.P. Morgan Asset Management. Local currency returns. P/E ratios are forward P/E ratios. Return calculations shown in green are based on the total return index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 38

European equities: Macro correlations GTM Europe 39 MSCI Europe and composite PMI Index level MSCI Europe and consumer confidence Index level Equities 65 6 55 5 MSCI Europe 1.8 1.6 1. 1.. 1.8 1.6 1. 1. 1. European consumer confidence 5-5 -1-15 5 EU composite PMI 35 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 1. 8 6 8 6 MSCI Europe '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 - -5-3 -35 Source: (Left) Bloomberg, Markit, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. The composite Purchasing Managers Index (PMI) assesses the economic health of the manufacturing and services sector by surveying output and employment intentions. Dashed line at 5 indicates the level of the PMI where economic conditions are neither accelerating nor deteriorating. (Right) European Commission, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 39

European equities: Earnings fundamentals Europe earnings per share (EPS) and nominal GDP % change year on year 1 EU8 nominal GDP 8 6 18 GDP forecast: 3,8% 5 3 Europe vs. US operating profit margins %, earnings per share / sales per share 1 11 1 9 S&P 5 MSCI Europe 1 8 7 Equities - - -1-3 13 11 6 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 European earnings vs. the euro Last 1 months earnings per share, euros (LHS); US dollars per euro (RHS) MSCI Europe EPS 1,7 1,5-6 -8 MSCI Europe trailing EPS -1-7 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 '19-5 9 7 5 EURUSD 3 '98 ' ' ' '6 '8 '1 '1 '1 '16 '18 1,3 1,1,9,7 Source: (Left) Bloomberg, Eurostat, IBES, IMF World Economic Outlook, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Trailing EPS is last 1 months earnings per share. Nominal GDP forecast is calculated as the sum of 18 forecasts for real GDP from the IMF World Economic Outlook October 17, and inflation from the Bloomberg contributor composite. (Top right) MSCI, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

European equities: Earnings 1 Equities MSCI Europe earnings and performance Next 1 months earnings per share estimates (LHS); index level (RHS) 13 1.8 MSCI Europe EPS MSCI Europe index level 1 1.6 11 1. 1 1. 9 1. 8 Eurozone yearly earnings EPS, % change year on year 18 1 1 6 - -6-1 '11 '1 '13 '1 '15 '16 '17 '18 European 3Q17 earnings by sector EPS, % change year on year 5 15 Expected earnings growth Delivered earnings growth 7 8 1 5 5 1 18 17 1 9 6 6 6 1 6 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 6 1 Source: (Left) IBES, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. EPS is earnings per share. (Top right) IBES, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Expected earnings growth and delivered earnings growth are calculated using IBES consensus estimates for next 1 months EPS and last 1 months EPS respectively. Year on year growth rates are calculated using year end data. (Bottom right) J.P. Morgan Securities Research, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

European equities: Large vs. mid/small capitalisation Equities Small cap relative performance and economic performance % change year on year, relative performance (LHS); % (RHS) 3 1 MSCI small cap minus large cap performance 1 Risk-adjusted returns by company size and holding period Sharpe ratio level* 3,,5, 1,5 1,,5, European small cap: Price-to-book ratio x, multiple Small caps Mid caps Large caps 1-year 5-year 1-year -1 - -1 Average: 1,8x 31 December 17:,x 1-month percentage change in -3 eurozone composite PMI - ' '6 '8 '1 '1 '1 '16 '18 Source: (Left) Markit, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) Bloomberg, MSCI, J.P. Morgan Asset Management. *Risk-adjusted returns are calculated assuming the risk-free rate is equal to zero. (Bottom right) Citibank, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.

European equities: Valuations GTM Europe 3 MSCI Europe forward P/E ratio x, multiple 7 MSCI Europe dividend yield and 1-year bond yield % yield 7 17 1 Average: 1,7x 31 December 17: 15,x 6 5 Dividend yield Equities 7 '93 '95 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 MSCI Europe cyclically adjusted P/E ratio x, adjusted using trailing 1-year average inflation-adjusted earnings 3 31 December 17: 3,% 3 1 Average: 17,7x 31 December 17: 18,x '8 '8 '88 '9 '96 ' ' '8 '1 '16 1 1-year German Bund yield 31 December 17:,% -1 '98 ' ' ' '6 '8 '1 '1 '1 '16 '18 Source: (Top left) IBES, MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom left) FactSet, MSCI, J.P. Morgan Asset Management. (Right) MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 3

UK equities FTSE All-Share earnings and performance Next 1 months earnings per share estimates (LHS); index level (RHS) 3 FTSE All-Share.5 FTSE All-Share EPS index level Commodities weights in global equity markets % of index 3. 15 Equities 8 6 3.5 3. 1 5 FTSE All-Share MSCI Europe ex-uk S&P 5 Dividend yield and ex-energy dividend yield % yield MSCI Japan.5 UK Eurozone 18 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 1 3 5 Source: (Left) FTSE, IBES, Thomson Reuters Datastream, J.P. Morgan Asset Management. EPS is earnings per share. (Top right) FactSet, FTSE, MSCI, Standard & Poor s, J.P. Morgan Asset Management. (Bottom right) IBES, MSCI, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17.. 1.5 EM World Japan US Dividend yield Dividend yield ex-energy

US S&P 5 at inflection points 5 S&P 5 Index.8.6. Characteristic Mar Oct 7 Dec 17 Index level 1.57 1.565.67 P/E ratio (fwd),6x 1,8x 18,5x Dividend yield 1,1% 1,7% 1,9% US 1-year 6,%,6%,% 31 December 17: P/E = 18,5x.67.. Equities 1.8 1.6 1. Total return: +116% Mar : P/E =,6x 1.57-7% +11% 9 Oct 7: P/E = 1,8x 1.565 +376% 1. -55% 1. 31 Dec 1996: 9 Oct : 9 Mar 9: 8 P/E = 15,7x P/E = 15,x P/E = 1,8x 71 777 677 6 '97 '98 '99 ' '1 ' '3 ' '5 '6 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. The P/E ratios are forward P/E ratios. Return calculations shown in green are based on the total return index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 5

US equities: Macro correlations 6 ISM manufacturing and S&P 5 performance Index level Initial jobless claims vs. S&P 5 performance Thousands, three-month moving average (LHS); index level (RHS) 65 ISM manufacturing S&P 5 index level 3. 7 6 Initial jobless claims S&P 5 index level 3..5 6 55.5. 5 3. 1.5 1. 5 Equities 5 5 1.5 1. '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 Leading economic indicator vs. S&P 5 performance Index level 13 1 Leading economic indicator S&P 5 index level 3..5. 35 5 11 1 1.5 1. 9 5 3 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 8 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 '17 Source: (Left) ISM, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. The Institute for Supply Management (ISM) survey assesses the economic health of the manufacturing sector by surveying output and employment intentions. Dashed line at 5 indicates the level of the ISM survey where economic conditions are neither accelerating nor deteriorating. (Top right) BLS, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) Conference Board, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. 6

US equities: Earnings and performance 7 Equities US earnings forward estimates USD, S&P 5 end-of-year earnings per share estimates (EPS) 165 155 15 135 19e EPS 18e EPS Next 1 month EPS 17e EPS 15 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 US bond yield vs. value/growth performance* Relative index level (LHS); % (RHS) 13 1 11 1 11 1 9 8 7 6 1 ' '5 '6 '7 '8 '9 '1 '11 '1 '13 '1 '15 '16 '17 '18 Relative index level (LHS); % (RHS) 13 Banks/staples 1 9 8 7 Value/growth US bond yield vs. banks/staples performance** 6 1, '15 '16 '17 '18 Source: (Left) IBES, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) Russell, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. *Value index is the Russell 1 value index. The growth index is the Russell 1 growth index. **MSCI USA index used for both banks and consumer staples indices. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 December 17. US 1-year yield US 1-year yield 6 5 3,8,, 1,6 7