FOR PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION Taking an income approach to US equity pays dividends
INVESTING IN THE US Share in the growth of the world s largest economy HOME TO SOME OF THE WORLD S BIGGEST COMPANIES AND MOST RECOGNISABLE BRANDS, THE US STOCK MARKET PROVIDES DIRECT ACCESS TO THE GROWTH OF THE WORLD S LARGEST ECONOMY AND THE CHANCE TO BENEFIT FROM THE STRENGTH OF CORPORATE AMERICA. Invest in a dynamic growing economy Renewed growth in the US economy provides a positive backdrop for investors. A healthy labour market, high consumer confidence and an ongoing recovery in the housing market suggest that US economic growth is sustainable and that the risk of recession is low. Initial jobless claims vs. consumer confidence JOBLESS CLAIMS IN THOUSANDS (LHS), INDEX LEVEL (RHS) A strong labour market and rising consumer confidence point to continued US economic expansion. 700 600 00 Jobless claims Consumer confidence 160 140 120 100 80 400 60 300 40 20 200 '84 '94 '04 '14 0 Source: Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns represent recessions determined by the The National Bureau of Economic Research (NBER). Guide to the Markets UK. Data as of 31 March 2017. Benefit from US corporate strength The US stock market is supported by a healthy corporate sector. Although corporate profits have been held back in recent years by falling oil prices, earnings per share growth is now expected to rise as companies benefit from rising sales, driven by strong consumer demand. S&P 00 earnings and performance The US stock market is testing new highs as corporate earnings recover. INDEX LEVEL, NEXT 12 MONTHS EARNINGS ESTIMATES (LHS), INDEX LEVEL (RHS) 140 130 120 110 100 90 80 70 60 S&P 00 EPS S&P 00 index level 0 '08 '09 '10 '11 '12 '13 '14 '1 '16 '17 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. Guide to the Markets UK. Data as of 31 March 2017. 2
JPM US EQUITY INCOME FUND Capture US equity returns using an income approach THE JPM US EQUITY INCOME FUND SEEKS OUT HIGH QUALITY US STOCKS THAT ARE ATTRACTIVELY VALUED AND HAVE SUSTAINABLE DIVIDEND YIELDS, HELPING PROVIDE INVESTORS WITH A CONSERVATIVE WAY TO GAIN EXPOSURE TO THE FUTURE GROWTH OF THE US STOCK MARKET. Strong and consistent returns in most market environments Stocks with a high dividend yield and low payout ratio have the ability to pay compelling dividends, while also having sufficient cashflow to reinvest in their business with the potential for dividend growth over time. This type of high quality dividend paying company has outperformed over the past 20 years through the ups and downs of the US stock market, and is the type of stock that the targets. Growth of 1 US dollar based on dividend yield & payout ratio High Yield, High Payout High Yield, Low Payout S&P 00 Index No Dividend Low Yield, High Payout Low Yield, Low Payout High quality dividend paying stocks have outperformed over the last 26 years. Portfolio Value (USD) 2 1 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: J.P. Morgan Asset Management Quantitative Equity Research. The lines illustrate the growth of 1 U.S. dollar from 01.01.1990 to 31.03.2017. The Y-axis illustrates the portfolio values with a log scale. Each yield/payout combination illustrates compounded total returns: price appreciation + dividend payment. The benchmark is the equal weighted S&P 00 Index. Past performance is not an indication of current and future performance. *Morningstar Rankings/Universe and Morningstar Quartile : Morningstar. All Rights Reserved. Trailing three-year returns as of 31.03.2017 based on the NAV of the share class A Net (acc) in GBP with income (Net) reinvested including actual ongoing charges excluding any entry and exit fees. Competitive performance with attractive risk characteristics The fund s focus on high quality dividend paying stocks is designed to help it capture the US stock market s strong long-term return potential, while limiting downside capture. Since inception, the fund has fallen less in down markets compared to the market and competitor funds, and an enhanced total return thanks to its dividend yield. Falls less in down markets has generated lower volatility returns than the market. JPM US Equity Income Fund Market Average fund 89% 100% 108% Source: Morningstar Rankings/Universe and Morningstar Quartile. Based on downside capture since inceptions; data as of 31 December 2016. Performance is NAV share class C (Inc) GBP net of fees and expenses with income reinvested. Sector average = IA North America Average; Market = S&P 00. 3
JPM US EQUITY INCOME FUND Benefit from high quality exposure to the US stock market BY SEEKING OUT US COMPANIES WITH HEALTHY AND SUSTAINABLE DIVIDEND YIELDS, THE JPM US EQUITY INCOME FUND AIMS TO PROVIDE HIGH QUALITY, CONSERVATIVE ACCESS TO THE FUTURE GROWTH POTENTIAL OF THE WORLD S BIGGEST STOCK MARKET. Seeking out the highest quality dividend payers The s three-stage bottom-up stock selection is focused on quality, valuation and dividend. The aim is to identify quality companies with consistent earnings, strong management teams and a dividend yield of 2% or more. J.P. MORGAN S VIEW We believe that quality companies, at attractive valuations, that consistently pay a dividend, will outperform over time. CLARE HART Portfolio Manager, Quality Valuation Dividend We focus on quality first: Companies with durable franchises Consistent earnings Strong management teams Valuation is critical: Quantitative and qualitative judgements Potential vs. current market value Dividend yields: Enhance total return Generate income We look for companies that have a low payout ratio, not just a high headline dividend yield, as these stocks have the potential to maintain dividend payouts even in difficult markets. We also look for stocks that are attractively valued and have the potential for future growth. This focus on attractively valued, high quality dividend payers has historically produced lower volatility returns than the market and less exposure to market downside. Managed by an experienced team of US-based investment specialists The fund has been managed since launch by Clare Hart, a specialist equity income investor with 24 years investment experience. Clare is supported by two analysts dedicated to income investing, and also has access to the fundamental insights of J.P. Morgan s team of over 2 US equity career analysts. There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management will continue to be employed by J.P. Morgan Asset Management or that the past performance or success of any such professional serves as an indicator of such professional s future performance or success. 4
INVESTING IN THE US Focus on value and dividends to boost returns and reduce volatility STRONGER ECONOMIC GROWTH MAY FAVOUR CHEAPER PARTS OF THE US MARKET, WHICH COULD BENEFIT AS BOND YIELDS RISE. CHEAPER STOCKS ALSO OFFER ATTRACTIVE DIVIDEND YIELDS, WHICH HISTORICALLY HAVE BEEN THE MOST STABLE COMPONENT OF TOTAL RETURN. Seek out value as the economy heats up Higher growth and inflation may lead to higher bond yields. In a rising bond yield environment, value stocks have historically outperformed growth stocks, while sectors that benefit from higher interest rates, such as banks, tend to outperform defensive sectors, such as consumer staples. It can therefore pay to be selective. US bond yield vs. value/growth performance RELATIVE INDEX LEVEL (LHS); % (RHS) 1. 6 1.4 1.3 US 10-year yield Value stocks tend to outperform growth when bond yields rise. 1.2 4 1.1 1.0 0.9 Value/growth 0.8 '04 '06 '08 '10 '12 '14 '16 3 2 1 Source: FactSet, Russell, Tullett Prebon, J.P. Morgan Asset Management. Value index is the Russell 1000 Value Index and Growth index is the Russell 1000 Growth Index. Guide to the Markets UK. Data as of 31 March 2017. Use dividends to reduce volatility While many investors seek capital appreciation through a rising share price, it is important not to ignore the power of dividends. Historically, dividends have been a major contributor to overall equity returns, helping to provide a more stable and cautious way to access the growth potential of the US stock market. S&P 00 total return index: Dividends and capital appreciation % average annualised returns 20 1 10 0 4.2 1.6 4.4 12.6 2. 1.3 1.8-2.7 Capital appreciation Dividends 4.0.8 Dividends are the most stable component of total return. - 1970s 1980s 1990s 2000s 1926-2016 Source: Standard & Poor s, Ibbotson, J.P. Morgan Asset Management. Data as of 31.03.2017. Past performance is not necessarily an indicator of current and future performance.
Expertise Managed by a strong investment team, leveraging the insights of over 2 US equity research analysts. Portfolio Invests in high-quality US companies with attractive valuations and healthy dividends. Success Top-quintile risk-adjusted returns with bottom-quintile volatility over three years.* *Morningstar Rankings/Universe and Morningstar Quartile. PERFORMANCE (%) C Net (Inc) GBP 3M YTD 1Y 3Y Y Since Inception 2.24 2.24 33.73 19.80 17.91 16.70 S&P 00 Index* 4.73 4.73 34.2 21.09 18.61 17.47 Excess return (arithmetic) -2.38-2.38-0.39-1.06-0.9-0.42 C Net (Inc) GBP 2016 201 2014 2013 2012 36.72 2.33 21.3 29.61.74 S&P 00 Index* 33.11 6.92 20.38 29. 10.2 Excess return (arithmetic) 2.71-4.28 0.80 0.08-4.31 Source: J.P. Morgan Asset Management. Data as at 31.03.17. Fund performance is shown based on the NAV of the share class C Net (Inc) in GBP with income (Net) reinvested including actual ongoing charges excluding any entry and exit fees. Past performance is not an indication of current and future performance. Performance over one year is annualised. Share class inception date is 1.01.2009. *Benchmark is the S&P 00 Index (net of 1% withholding tax). NEXT STEPS To learn more about how the can help your clients gain access to the long-term growth potential of the US stock market, visit jpmorgan.co.uk/usei FOR PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION This is a promotional document and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that 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. Changes in exchange rates may have an adverse effect on the value, price or income of the product(s) or underlying overseas investments. Both past performance and yield may not be a reliable guide to current and future performance. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co and its affiliates worldwide. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy. Investment is subject to documentation which is comprised of the Prospectus, Key Investor Information Document (KIID) and either the Supplementary Information Document (SID) or Key Features/ Terms and Condition, copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 2883. Registered address: 2 Bank St, Canary Wharf, London E14 JP. LV JPM0971 03/18 a01360e0-4780-11e7-a23f-0006960c63