Guide to the Markets MARKET INSIGHTS UK
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MARKET INSIGHTS Guide to the Markets UK | Q4 2021 | As of 30 September 2021
Global Market Insights Strategy Team
Dr. David Kelly, CFA
New York
Karen Ward
London
Dr. Cecelia Mundt
New York Tilmann Galler, CFA
Chaoping Zhu, CFA
Frankfurt Tai Hui
David Lebovitz Shanghai
Hong Kong
New York
Michael Bell, CFA
London
Meera Pandit, CFA
New York Maria Paola Toschi
Milan
Marcella Chow
Gabriela Santos
Hong Kong Shogo Maekawa
New York
Hugh Gimber, CFA Tokyo
London
Jordan Jackson Vincent Juvyns
New York Luxembourg
Agnes Lin
Ian Hui
Taipei
Hong Kong
Jack Manley Ambrose Crofton, CFA
New York London
Sahil Gauba
Mumbai
Stephanie Aliaga
Lucia Gutierrez Mellado
New York
Madrid
Jai Malhi, CFA
Nimish Vyas London Dr. Jasslyn Yeo, CFA
New York
Singapore
Kerry Craig, CFA
Melbourne
Olivia Schubert Elena Domecq
New York Madrid
Max McKechnie
2 London
Page reference
Global economy Equities ESG
4. Global growth 46. Global earnings expectations and equity valuations 80. Impact of climate concerns on consumer choices
5. Global Purchasing Managers’ Index (PMI) for manufacturing 47. Global equity market correlations with Treasury yields 81. Emissions targets and labour share of income
6. Global inflation 48. Global equity sector weights 82. Carbon pricing
7. Global inflation expectations 49. Global income 83. Global CO2 emissions by country
8. Global government debt 50. Equity net issuance and dividend revision ratios 84. Global greenhouse gas emissions and energy costs
9. Global monetary policy 51. Equity market factors 85. Global energy mix and energy transition investment
10. Global consumer 52. US earnings 86. Importance of governance and social issues
11. Global currencies 53. US equity valuations 87. ESG and capital markets
12. Global trade 54. US valuations and subsequent returns 88. Sustainable investment flows and assets under management
13. US GDP 55. US bull and bear markets
14. US Economic Monitor 56. Europe ex-UK earnings
15. US business surveys 57. Europe ex-UK equity valuations Investing principles
16. US business investment 58. UK earnings
17. US consumer 59. UK equity valuations 89. Life expectancy
18. US labour market 60. UK large, mid and small capitalisation equities 90. The effect of compounding
19. US Conference Board indicators 61. European stocks and currencies 91. Cash investments
20. US debt 62. Japan equity market and currency 92. Long-term asset returns
21. US inflation 63. Emerging market equity drivers 93. Annual returns and intra-year declines
22. US Federal Reserve policy 64. Emerging market equity valuations and subsequent returns 94. Asset class risk-return trade-off
23. US focus: Labour shortages and inflation uncertainty 65. Equity focus: Equity styles, Treasury yields and margins 95. S&P 500 and fund flows
24. Eurozone GDP 66. World stock market returns 96. US asset returns by holding period
25. Eurozone business investment 97. Asset class returns (GBP)
26. Eurozone consumer
27. Eurozone labour market Fixed income
28. Eurozone inflation
29. European Central Bank policy 67. Fixed income yields
30. Eurozone debt 68. Global government bond yields
31. Eurozone focus: Recovery fund 69. Investment-grade bonds
32. UK GDP 70. High yield bonds
33. UK consumer 71. Emerging market bonds
34. UK labour market 72. Fixed income diversifiers and yield cushion
35. UK inflation 73. Fixed income focus: Government bond supply and central bank
36. UK Bank of England policy demand
37. UK focus: Labour shortages 74. Global fixed income spreads and returns
38. Japan GDP
39. China GDP
40. China economic activity by sector Other assets
41. China debt and credit dynamics
42. China inflation and policy rates 75. Oil
43. Emerging market structural dynamics 76. Commodities
44. Emerging market growth 77. Alternative sources of diversification
45. Emerging market focus: China’s focus on ‘common prosperity’ 78. Alternative investments: Real assets
79. Asset return expectations
3
Global growth GTM – UK | 4
Real GDP growth Q4 2021 real GDP forecasts relative to pre-pandemic trend*
Global economy
Index level, rebased to 100 at Q1 2006 % difference
150 400
Forecast US
China
China Developed markets
140 340 Japan
Emerging markets
South Korea
Germany
130 280
Eurozone
Brazil
120 US 220 Italy
UK Russia
Eurozone France
110 160
UK
Mexico
100 100 Canada
Spain
India
90 40
'06 '08 '10 '12 '14 '16 '18 '20 '22 -7 -6 -5 -4 -3 -2 -1 0
Source: (Left) BEA, Bloomberg, Eurostat, National Bureau of Statistics of China, ONS, J.P. Morgan Asset Management. Forecasts are from Bloomberg
contributor composite. (Right) Bloomberg, IMF, Refinitiv Datastream, J.P. Morgan Asset Management. *Pre-pandemic trend is calculated from IMF forecasts from
before the pandemic. Q4 2021 real GDP forecasts are from Bloomberg contributor composite. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - UK. Data as of 30 September 2021.
4
Global Purchasing Managers’ Index (PMI) for manufacturing GTM – UK | 5
'21
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Global economy
Aug Sep
Global 54.1 54.1
Developed 58.3 57.1
Emerging 49.6 50.8
Eurozone 61.4 58.6
France 57.5 55.0
Eurozone
Germany 62.6 58.4
Italy 60.9 59.7
Spain 59.5 58.1
Greece 59.3 58.4
Ireland 62.8 60.3
Sweden 60.1 64.6
Developed
Switzerland 67.7 68.1
UK 60.3 57.1
US 61.1 60.7
Japan 52.7 51.5
China 49.2 50.0
Indonesia 43.7 52.2
Korea 51.2 52.4
Emerging
Taiwan 58.5 54.7
India 52.3 53.7
Brazil 53.6 54.4
Mexico 47.1 48.6
Russia 46.5 49.8
Source: Markit, J.P. Morgan Asset Management. The Global Purchasing Managers’ Index (PMI) for manufacturing assesses the economic health of the sector by
surveying manufacturing businesses regarding output, new orders, stocks of purchases, supplier delivery times and employment. A score of 50 indicates that
economic activity is neither expanding nor contracting, above 50 indicates expansion. The colours range from red to yellow to green, where red is below 50, yellow is
at 50 and green is above 50. Quarterly averages are shown, except the two most recent monthly data points. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - UK. Data as of 30 September 2021.
5
Global inflation GTM – UK | 6
2019 2020 2021
Global economy
May
May
Aug
Aug
Nov
Nov
Sep
Dec
Dec
Sep
Feb
Feb
Mar
Jun
Jun
Mar
Jan
Jan
Apr
Apr
Oct
Oct
Jul
Jul
Global 1.9 2.1 2.4 2.7 3.0 2.8 2.2 1.4 1.1 1.4 1.6 1.5 1.4 1.1 0.9 1.0 1.3 1.4 2.0 2.7 3.3 3.3 3.4 3.5
Developed 1.3 1.3 1.5 1.7 1.9 1.7 1.1 0.3 0.1 0.5 0.7 0.6 0.6 0.5 0.4 0.5 1.0 1.1 1.7 2.5 3.1 3.3 3.4 3.7
Emerging 2.9 3.3 3.8 4.2 4.7 4.4 3.8 3.2 2.6 2.8 2.9 2.8 2.6 2.1 1.7 1.9 1.7 1.9 2.5 2.9 3.5 3.3 3.3 3.3
Eurozone 0.8 0.7 1.0 1.3 1.4 1.2 0.7 0.3 0.1 0.3 0.4 -0.2 -0.3 -0.3 -0.3 -0.3 0.9 0.9 1.3 1.6 2.0 1.9 2.2 3.0
France 1.1 0.9 1.2 1.6 1.7 1.6 0.8 0.4 0.4 0.2 0.9 0.2 0.0 0.1 0.2 0.0 0.8 0.8 1.4 1.6 1.8 1.9 1.5 2.4
Eurozone
Germany 1.2 1.1 1.1 1.5 1.7 1.7 1.4 0.9 0.6 0.9 -0.1 0.0 -0.2 -0.2 -0.3 -0.3 1.0 1.3 1.7 2.0 2.5 2.3 3.8 3.9
Italy 0.2 0.2 0.2 0.5 0.4 0.2 0.1 0.1 -0.3 -0.4 0.8 -0.5 -1.0 -0.6 -0.3 -0.3 0.7 1.0 0.6 1.0 1.2 1.3 1.0 2.5
Spain 0.2 0.2 0.5 0.8 1.1 0.9 0.1 -0.7 -0.9 -0.3 -0.7 -0.6 -0.6 -0.9 -0.8 -0.6 0.4 -0.1 1.2 2.0 2.4 2.5 2.9 3.3
Greece 0.2 -0.3 0.5 1.1 1.1 0.4 0.2 -0.9 -0.7 -1.9 -2.1 -2.3 -2.3 -2.0 -2.1 -2.4 -2.4 -1.9 -2.0 -1.1 -1.2 0.6 0.7 1.2
Ireland 0.6 0.6 0.8 1.1 1.1 0.9 0.5 -0.3 -0.8 -0.6 -0.6 -1.1 -1.2 -1.5 -1.0 -1.0 -0.1 -0.4 0.1 1.1 1.9 1.6 2.2 3.0
Sweden 1.3 1.6 1.8 1.7 1.5 1.3 0.8 -0.2 0.1 0.9 0.7 1.0 0.6 0.4 0.2 0.6 1.9 1.8 2.1 2.8 2.4 1.8 1.8 2.5
Developed
Switzerland 0.1 -0.3 -0.3 -0.1 0.2 -0.2 -0.4 -1.0 -1.0 -1.3 -1.2 -1.4 -1.1 -0.9 -0.8 -1.0 -0.6 -0.4 -0.2 -0.1 0.3 0.5 0.5 0.8
UK 1.7 1.5 1.5 1.3 1.8 1.7 1.5 0.8 0.5 0.6 1.0 0.2 0.5 0.7 0.3 0.6 0.7 0.4 0.7 1.5 2.1 2.5 2.0 3.2
US 1.7 1.8 2.1 2.3 2.5 2.3 1.5 0.3 0.1 0.6 1.0 1.3 1.4 1.2 1.2 1.4 1.4 1.7 2.6 4.2 5.0 5.4 5.4 5.3
Japan 0.2 0.2 0.5 0.8 0.7 0.4 0.4 0.1 0.1 0.1 0.3 0.2 0.0 -0.4 -0.9 -1.2 -0.7 -0.5 -0.4 -1.1 -0.8 -0.5 -0.3 -0.4
China 3.0 3.8 4.5 4.5 5.4 5.2 4.3 3.3 2.4 2.5 2.7 2.4 1.7 0.5 -0.5 0.2 -0.3 -0.2 0.4 0.9 1.3 1.1 1.0 0.8
Indonesia 3.1 2.9 2.7 2.6 2.7 3.0 3.0 2.7 2.2 2.0 1.5 1.3 1.4 1.4 1.6 1.7 1.6 1.4 1.4 1.4 1.7 1.3 1.5 1.6
Emerging
Korea -0.4 0.0 0.2 0.7 1.5 1.1 1.0 0.1 -0.3 0.0 0.3 0.7 1.0 0.1 0.6 0.5 0.6 1.1 1.5 2.3 2.6 2.4 2.6 2.6
Taiwan 0.4 0.4 0.6 1.1 1.9 -0.2 0.0 -1.0 -1.2 -0.7 -0.5 -0.3 -0.6 -0.3 0.1 0.0 -0.2 1.4 1.2 2.1 2.4 1.8 1.9 2.4
India 4.0 4.6 5.5 7.4 7.6 6.6 5.8 7.2 6.3 6.2 6.7 6.7 7.3 7.6 6.9 4.6 4.1 5.0 5.5 4.2 6.3 6.3 5.6 5.3
Brazil 2.9 2.5 3.3 4.3 4.2 4.0 3.3 2.4 1.9 2.1 2.3 2.4 3.1 3.9 4.3 4.5 4.6 5.2 6.1 6.8 8.1 8.3 9.0 9.7
Mexico 3.0 3.0 3.0 2.8 3.2 3.7 3.3 2.2 2.8 3.3 3.6 4.1 4.0 4.1 3.3 3.2 3.5 3.8 4.7 6.1 5.9 5.9 5.8 5.6
Russia 4.0 3.8 3.5 3.0 2.4 2.3 2.5 3.1 3.0 3.2 3.4 3.6 3.7 4.0 4.4 4.9 5.2 5.7 5.8 5.5 6.0 6.5 6.5 6.7
Source: Bank of Mexico, DGBAS, ECB, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, Japan Ministry of Internal Affairs &
Communication, Korean National Statistical Office, National Bureau of Statistics China, ONS, Refinitiv Datastream, Riksbank, Statistics Indonesia, Swiss National
Bank, US Federal Reserve, J.P. Morgan Asset Management. Figures shown are for headline inflation and 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 - UK. Data as of 30 September 2021.
6
Global inflation expectations GTM – UK | 7
Headline inflation Market-based inflation expectations
Global economy
% change year on year %, 5y5y inflation swap
6 Forecast 5
US
5
UK 4 UK
Eurozone
4
Headline inflation Japan 3
target US
3
2 Eurozone
2
1
1 Japan
0
0
-1
-1
-2 -2
'15 '16 '17 '18 '19 '20 '21 '22 '23 '15 '16 '17 '18 '19 '20 '21
Source: (Left) Bank of Japan, Bloomberg, BLS, Eurostat, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Headline inflation is measured using Consumer
Price Index (CPI). Japan CPI has been adjusted down by two percentage points from April 2014 to March 2015 to remove the estimated impact of the consumption tax
hike over this period. Forecasts are from Bloomberg contributor composite. (Right) Bloomberg, J.P. Morgan Asset Management. 5y5y inflation swap represents the
market’s expectation of five-year average inflation, starting in five years’ time. UK 5y5y inflation uses RPI rather than CPI as the reference point, which partly explains
why the UK line is significantly above other regions. Strong demand for index-linked Gilts from defined benefit UK pension funds is another factor driving UK inflation
expectations higher. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
7
Global government debt GTM – UK | 8
Global government debt-to-GDP ratios Government gross debt-to-GDP ratios by country
Global economy
% of nominal GDP, forecast after 2019 % of nominal GDP
WWI WWII Global financial crisis Covid-19
140
Russia
Indonesia
120 Mexico Emerging market
Developed markets historical range*
China
Developed market
100 S. Africa historical range*
India 2022 IMF forecast
Brazil
80
Switzerland
Germany
60
Eurozone
UK
40 France
Spain
Emerging markets US
20
Italy
Japan
0
1880 1900 1920 1940 1960 1980 2000 2020 0 50 100 150 200 250 300
Source: (Left) IMF Fiscal Monitor October 2020, J.P. Morgan Asset Management. (Right) IMF, Refinitiv Datastream, J.P. Morgan Asset Management. *Historical
ranges are since 1990 or more recent, depending on data availability up until the end of 2020. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - UK. Data as of 30 September 2021.
8
Global monetary policy GTM – UK | 9
Market expectations for policy rates Central bank balance sheets
Global economy
% USD trillions
2.0 US 10 12-month change in Global central bank 30
balance sheet balance sheet
28
26
1.5 8
24
UK
22
1.0 6 20
18
0.5 Eurozone 16
4
14
Japan 12
0.0
2 10
8
-0.5 6
0
4
-1.0 2
Forecast*
+0 +1 +2 +3 +4 +5 +6 +7 +8 +9 +10 -2 0
Years '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Source: (Left) Bloomberg, J.P. Morgan Asset Management. Expectations are calculated using OIS forwards. (Right) BoE, BoJ, ECB, Fed, Refinitiv Datastream, J.P.
Morgan Asset Management. Global central bank balance sheet is the sum of the balance sheets of the BoE, BoJ, ECB and Fed. *Balance sheet forecast assumptions
for September 2021 to the end of 2022: BoE to have net asset purchases totaling GBP 50 bn to be completed by the end of 2021; BoJ to have net asset purchases
totaling JPY 20 tn over the forecast period; ECB to have net asset purchases totaling EUR 920 bn over the forecast period; Fed to have net asset purchases totaling
USD 840 bn to be completed by the end of July 2022. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
9
Global consumer GTM – UK | 10
Estimates of excess household savings from the pandemic Job vacancies
Global economy
% of nominal GDP, Q1 2020 – Q3 2021 Indexed to 100 at pre-pandemic peak
12 160
US
140
10
UK
120
8
100
Germany
6 80
60
4
40
2
20
0 0
US UK Eurozone '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (Left) BEA, Bloomberg, Eurostat, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Excess household savings are defined as the aggregate
amount that the consumer saved in 2020 and the first three quarters of 2021, in excess of typical savings for a given economy. Estimates are from J.P. Morgan Asset
Management. (Right) BLS, Deutsche Bundesbank, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. UK vacancy data is a three-month average as
published. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
10Global currencies GTM – UK | 11
USD real effective exchange rate and interest rate differential Global real effective exchange rate valuations
Global economy
Index level (LHS); % point (RHS) % premium / discount relative to its average since 1999
135 3.5
USD broad real effective US minus DM 10-year China
exchange rate government bond yield Emerging markets
India
130 3.0
US Developed markets
125 2.5 Switzerland
Australia
120 2.0 Canada
South Korea
115 1.5 Eurozone
Russia
110 1.0 UK
South Africa
105 0.5 Sweden
Norway
100 0.0
Mexico
Japan
95 -0.5
Brazil
Turkey
90 -1.0
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 -40 -30 -20 -10 0 10 20
Source: (All charts) J.P. Morgan Securities Research, Refinitiv Datastream, J.P. Morgan Asset Management. 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 - UK. Data as of 30 September 2021.
11Global trade GTM – UK | 12
Exports of goods Global export volumes
Global economy
% of nominal GDP, 2020 % change year on year, three-month moving average
US 30
US
China
25
Eurozone EM ex-China
Canada Eurozone 20
Other
UK 15
10
Brazil
5
India
0
China
Russia -5
Mexico -10
Emerging markets
-15
Developed markets
Japan
-20
Korea
-25
0 5 10 15 20 25 30 35 40 45 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) IMF Direction of Trade, IMF World Economic Outlook, J.P. Morgan Asset Management. (Right) CPB Netherlands, Refinitiv Datastream,
J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
12US GDP GTM – UK | 13
Contribution to US real GDP growth US real GDP growth and ISM composite
Global economy
% change year on year % change year on year (LHS); index level (RHS)
15 15 80
Real GDP ISM composite
10 10 70
5 5 60
0 0 50
Net exports
-5 Change in inventories -5 40
Investment
Government
-10 -10 30
Consumption
Real GDP
-15 -15 20
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) BEA, Bloomberg, ISM, Refinitiv Datastream, J.P. Morgan Asset Management. The Institute for Supply Management (ISM) composite is an
economy-weighted average of the manufacturing and non-manufacturing surveys. A score of 50 indicates that economic activity is neither expanding nor contracting,
above 50 indicates expansion. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
13US Economic Monitor GTM – UK | 14
US economic indicators Key:
Global economy
Percentile rank relative to historic data since 1990 Elevated
Broad indicators Consumer and services Manufacturing Labour market recession risk
100 Lower
recession risk
90
80
70
60
50 Latest
40
30
20
10
Higher
recession risk
0
Conference Conference Consumer ISM non- ISM Non-farm
Board Leading Board Leading confidence: manufacturing manufacturing: payrolls
Economic Index Credit Index Present New orders
situation
Source: BLS, Conference Board, ISM, Refinitiv Datastream, 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: % change year
on year for the Leading Economic Index and consumer confidence present situation, index level for Leading Credit Index, ISM non-manufacturing 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 - UK. Data as of 30 September 2021.
14US business surveys GTM – UK | 15
Source: (All charts) ISM,
US ISM manufacturing: New orders Refinitiv Datastream, J.P.
Global economy
Index level Morgan Asset
Recession Management.
75
Periods of “recession” are
defined using US National
65 Bureau of Economic
Research (NBER)
business cycle dates.
55
Elevated recession risk line
is shown as the highest
45 Elevated value of the underlying
recession risk indicator observed at the
35 start of the three
recessions prior to the
Covid-19 recession.
25
Past performance is not a
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 reliable indicator of current
and future results.
US ISM non-manufacturing
Guide to the Markets - UK.
Index level Data as of 30 September
65 2021.
60
55
50 Elevated
recession risk
45
40
35
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
15US business investment GTM – UK | 16
US real business investment and future capex intentions US real business investment
Global economy
% change year on year (LHS); index level (RHS) Index level, rebased to 100 at start of US recession
20 Business investment Future capex intentions 40 130
GFC
15
120 Dot com
30
Current cycle
10
110
20
5
100
0 10
-5 90
0
-10
80
-10
-15
70
-8 -4 0 4 8 12 16 20 24 28 32 36 40
-20 -20
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Quarters before/after start of recession
Source: (Left) BEA, Dallas Fed, Kansas City Fed, New York Fed, Philadelphia Fed, Refinitiv Datastream, Richmond Fed, J.P. Morgan Asset Management. Future
capex intentions is an average index level of the five aforementioned Fed districts equally weighted, displayed using a three-month moving average. (Right) BEA,
Bloomberg, J.P. Morgan Asset Management. Dotted line represents forecasts from Bloomberg contributor composite. GFC is Global Financial Crisis. Periods of
“recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Past performance is not a reliable indicator of current and
future results. Guide to the Markets - UK. Data as of 30 September 2021.
16US consumer GTM – UK | 17
US consumer confidence: Present situation US goods and services consumer spending
Global economy
% change year on year Index level, rebased to 100 in January 2018
Recession
125 140
100 Goods
130
75
50 120
25
110
0
Elevated Services
-25 recession risk 100
-50
90
-75
-100 80
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '18 '19 '20 '21
Source: (Left) Conference Board, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic
Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the three
recessions prior to the Covid-19 recession. (Right) BEA, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - UK. Data as of 30 September 2021.
17US labour market GTM – UK | 18
US non-farm payroll employment US unemployment rate and wage growth
Global economy
Millions of people Recession %, wage growth is year on year
160 16
14
150
12
140
10
130 8
Unemployment
6 Sep 2021:
4.8%
120
4
110
2
Sep 2021:
Wage growth 5.5%
100 0
'90 '94 '98 '02 '06 '10 '14 '18 '90 '94 '98 '02 '06 '10 '14 '18
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research
(NBER) business cycle dates. 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 - UK. Data as of 30 September 2021.
18US Conference Board indicators GTM – UK | 19
Source: (All charts)
US Leading Economic Index Conference Board,
Global economy
% change year on year Recession Refinitiv Datastream, J.P.
Morgan Asset
20 Management.
15
Periods of “recession” are
10 defined using US National
5 Bureau of Economic
Research (NBER)
0 business cycle dates.
-5 Elevated
Elevated recession risk line
recession risk
-10 is shown as the highest
value for the Leading
-15 Economic Index and
-20 lowest for the Leading
Credit Index at the start of
-25 the three recessions prior
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 to the Covid-19 recession.
Past performance is not a
US Leading Credit Index reliable indicator of current
and future results.
Index level
10 Guide to the Markets - UK.
Data as of 30 September
8 Lending 2021.
conditions
6
tightening
4
Elevated
2 recession risk
0
-2
-4
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
19US debt GTM – UK | 20
US debt to GDP ratios US nominal GDP growth and 10-year Treasury yield
Global economy
% of nominal GDP %, nominal GDP growth is % change year on year
110 16
Households
100 14
90
12
80
10
70 Non-financial corporates
8
US nominal GDP
60
10-year moving
6 average
50
4
40
30 2
Government
US 10-year Treasury yield
20 0
'40 '50 '60 '70 '80 '90 '00 '10 '20 '40 '50 '60 '70 '80 '90 '00 '10 '20
Source: (Left) Bank for International Settlements, BEA, Congressional Budget Office (CBO), Refinitiv Datastream, J.P. Morgan Asset Management. (Right) BEA,
Haver Analytics, Robert Shiller, J.P. Morgan Asset Management. US 10-year Treasury yield is as of 31 December 2020 due to annual frequency of the chart. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
20US inflation GTM – UK | 21
US headline and core inflation Selected components of US headline inflation
Global economy
% change year on year % change year on year (with 2021 CPI weights in parentheses)
6 10
Core goods (20%)
Headline inflation
Services ex-shelter (30%)
5 Core inflation
8 Shelter (33%)
4 Headline inflation
target
6
3
2 4
1
2
0
0
-1
-2 -2
'07 '09 '11 '13 '15 '17 '19 '21 '07 '09 '11 '13 '15 '17 '19 '21
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core inflation is defined as CPI excluding food and
energy. Core goods CPI is defined as goods CPI excluding food and energy. For the CPI weights, the remaining 17% weight not shown in the right chart is allocated to
food and energy within the goods sector. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
21US Federal Reserve policy GTM – UK | 22
Federal funds policy rate expectations Headline personal consumption expenditure inflation
Global economy
% Fed funds rate and market expectations % change year on year
7 4.5
4.0
6
Federal funds rate
Market expectations on 3.5
30 September 2021 (mean)
5
Federal Reserve median
expectations 3.0
Hypothetical
4 2.5 3-year avg.:
2.2%
Fed’s 2% target
3 2.0
Longer run
Last 3-year
1.5 avg.: 1.8%
2
1.0
1
0.5
0 0.0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24 '26 '28 '30 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Source: (Left) Bloomberg, US Federal Reserve, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. The longer-run projection
represents the committee’s median assessment of where the Fed funds rate would be expected to converge to under the appropriate monetary policy and in the
absence of further shocks to the economy. (Right) BEA, Refinitiv Datastream, J.P. Morgan Asset Management. Following the Federal Reserve's (Fed’s) shift to an
average inflation targeting framework, a period of above-target inflation will be tolerated to compensate for a period of below-target inflation. We illustrate this by
showing the hypothetical required rate in the coming three years to achieve a 2% inflation rate on average given inflation over the past three years. Past performance
is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
22US focus: Labour shortages and inflation uncertainty GTM – UK | 23
US unemployment and job openings US headline CPI forecasts
Global economy
Millions % change year on year, quarterly average
25 6
5.2 5.2
Unemployed persons
4.9 4.7
Job openings
5
20
4
3.1
15
3 2.2
2.2
10
2
1.9
Range of economists’ forecasts
5
1
Median forecast
Actual
0 0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22
Source: (Left) BLS, JOLTS, J.P. Morgan Asset Management. (Right) Bloomberg, BLS, J.P. Morgan Asset Management. CPI is consumer price index. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
23Eurozone GDP GTM – UK | 24
Contribution to eurozone real GDP growth Eurozone real GDP and composite PMI
Global economy
% change year on year % change year on year (LHS); index level (RHS)
16 16 90
Real GDP
12 12 80
8 8 70
4 4 60
0 0 50
-4 Net exports -4 40
Change in inventories
Investment
-8 -8 30
Government
Consumption
-12 -12 20
Real GDP Composite PMI
-16 -16 10
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Eurostat, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that
economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable
indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
24Eurozone business investment GTM – UK | 25
Eurozone investment and investment confidence Eurozone non-residential investment
Global economy
% change year on year (LHS); index level (RHS) Index level, rebased to 100 at start of eurozone recession
25 40 115
Non-residential investment
20 30 110 GFC/
Sovereign Debt Crisis
15 20 105
Current cycle
10 10
100
5 0
95
0 -10
90
-5 -20
85
-10 -30
80
-15 -40
Investment goods 75
industry confidence -8 -4 0 4 8 12 16 20 24 28 32 36 40
-20 -50
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 Quarters before/after start of recession
Source: (All charts) Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Dotted line represents forecasts from Bloomberg contributor composite. Both non-
residential measures shown are in real terms and include both public and private investment. GFC is Global Financial Crisis. Past performance is not a reliable
indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
25Eurozone consumer GTM – UK | 26
Eurozone consumer confidence Eurozone retail sales volumes
Global economy
Index level Real index level, rebased to 100 at Jan 2010
Recession
0 350
Internet or
mail orders
300
-5
250
-10
200
150
-15
Total retail sales
100
-20
50
Clothing, textiles
and footwear
-25 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: (Left) European Commission, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns indicate recession in the eurozone. (Right) Eurostat,
Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
26Eurozone labour market GTM – UK | 27
Eurozone unemployment rate and wage growth Eurozone business surveys: Labour limiting production
Global economy
%, wage growth is year on year % of respondents
14 4 25
Unemployment Wage growth
13
Manufacturing
20
12 Services
3
11
15
10
2
9
10
8
1
7
5
6
5 0 0
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21
Source: (Left) ECB, Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is based on negotiated wages. (Right) European Commission,
Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
27Eurozone inflation GTM – UK | 28
Eurozone headline and core inflation Eurozone core goods and services inflation
Global economy
% change year on year % change year on year
4 4
Headline inflation Core goods inflation
Core inflation Services inflation
3 Headline inflation 3
target
2 2
1 1
0 0
-1 -1
'07 '09 '11 '13 '15 '17 '19 '21 '07 '09 '11 '13 '15 '17 '19 '21
Source: (All charts) Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food,
alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - UK. Data as of 30 September 2021.
28European Central Bank policy GTM – UK | 29
European Central Bank policy rate expectations European 10-year government bond spreads over Germany
Global economy
% deposit rate and market expectations % point spread
4.0 7
3.5
6
3.0
Italy
2.5 5 Spain
France
ECB deposit rate
2.0
Market expectations on 4
30 September 2021 (mean)
1.5
3
1.0
0.5 2
0.0
1
-0.5
-1.0 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24 '26 '28 '30 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: (Left) Bloomberg, European Central Bank, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. (Right) Refinitiv
Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
29Eurozone debt GTM – UK | 30
Eurozone debt to GDP ratios France, Germany, Italy and Spain government debt to GDP
Global economy
% of nominal GDP % of nominal GDP
120 180
Non-financial corporates Italy Forecast
Spain
110 160
France
Germany
140
100
Government
120
90
100
80
80
70
60
60
40
Households
50 20
40 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '07 '09 '11 '13 '15 '17 '19 '21 '23
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. (Right) Bank for International
Settlements, IMF, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. Italy and France data are four-quarter moving averages. Dotted
lines represent the IMF forecasts for government debt to GDP in 2021 and 2022. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - UK. Data as of 30 September 2021.
30Eurozone focus: Recovery fund GTM – UK | 31
EU recovery fund grants to selected EU countries EU recovery fund distribution over time
Global economy
EUR billions, labels are % of EU27 Q2 2021 annualised nominal GDP % of EU27 Q2 2021 annualised nominal GDP
90 1.2
5% 7%
80 Loans approved
1.0 Grants
70
60
0.8
50
2%
40 0.6
1% 5%
30
12% 0.4
20 8%
10 1% 1%
1%
0.2
0
0.0
'21 '22 '23 '24 '25 '26
Source: (All charts) European Commission, J.P. Morgan Asset Management. Distribution over time is based on currently approved national plans and J.P. Morgan
Asset Management estimates for countries where approvals have not been completed. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - UK. Data as of 30 September 2021.
31UK GDP GTM – UK | 32
Contribution to UK real GDP growth UK real GDP and composite PMI
Global economy
% change year on year % change year on year (LHS); index level (RHS)
30 30 100
Real GDP Composite PMI
90
20 20
80
70
10 10
60
0 0 50
40
Net exports
-10 -10
Change in inventories 30
Investment
Government 20
-20 -20
Consumption
Real GDP 10
-30 -30 0
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Markit, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that
economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable
indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
32UK consumer GTM – UK | 33
UK consumer confidence UK housing market
Global economy
Index level, three-month moving average Index level (LHS); % change year on year (RHS)
20 70 30
Recession UK house prices
60
10
20
50
0
10
40
-10
30
0
-20
20
-10
-30 RICS sales to stock ratio
10
-40 0 -20
'87 '90 '93 '96 '99 '02 '05 '08 '11 '14 '17 '20 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) GfK, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) Nationwide, Refinitiv Datastream, Royal Institute of Chartered Surveyors (RICS),
J.P. Morgan Asset Management. Light grey columns indicate recession. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - UK. Data as of 30 September 2021.
33UK labour market GTM – UK | 34
UK unemployment rate and wage growth Proportion of UK workforce on furlough
Global economy
%, wage growth is year on year % of private sector employees, bi-weekly ONS survey
12 15 40
Wage growth
35
10
10 30
8
25
6 5 20
15
4
5.3%
0 10
2
5
Unemployment
0 -5 0
'85 '89 '93 '97 '01 '05 '09 '13 '17 '21 May '20 Aug '20 Dec '20 Apr '21 Jul '21
Source: (Left) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is a three-month moving average of average weekly earnings for the whole
economy, including bonuses and arrears. (Right) ONS, J.P. Morgan Asset Management. Based on the ONS Business Insights and Conditions Survey. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
34UK inflation GTM – UK | 35
UK headline and core inflation UK core goods and services inflation
Global economy
% change year on year % change year on year
6 6
Headline inflation Core goods inflation
Core inflation 5 Services inflation
5
4
4 3
Headline inflation
target
2
3
1
2
0
1 -1
-2
0
-3
-1 -4
'07 '09 '11 '13 '15 '17 '19 '21 '07 '09 '11 '13 '15 '17 '19 '21
Source: (All charts) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food,
alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - UK. Data as of 30 September 2021.
35UK Bank of England policy GTM – UK | 36
Bank of England policy rate expectations
Global economy
% base rate and market expectations
7
6
5
BoE base rate
4
Market expectations on
30 September 2021 (mean)
3
2
1
0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24 '26 '28 '30
Source: Bank of England (BoE), Bloomberg, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. Past performance is not a
reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
36UK focus: Labour shortages GTM – UK | 37
UK vacancies and employment by selected sectors Bank of England Agents’ survey: Recruitment difficulties
Global economy
Thousands Survey score
5
Health and social work
4
Public admin, defence, social
security
3
Professional, scientific and technical
2
Job vacancies
Transportation and storage
Jobs lost since
1
Q1 2020
Education
0
Construction
-1
Wholesale and retail
-2
Manufacturing
-3
Accommodation and food services
-4
Arts, entertainment and recreation
-5
-100 0 100 200 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) Bank of England, J.P. Morgan Asset Management. Past performance is not a
reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
37Japan GDP GTM – UK | 38
Contribution to Japan real GDP growth Japan real GDP and manufacturing PMI
Global economy
% change year on year % change year on year (LHS); index level (RHS)
12 12 75
Net exports Real GDP Manufacturing PMI
Change in inventories
70
Investment
8 8
Government 65
Consumption
60
4 Real GDP 4
55
0 0 50
45
-4 -4
40
35
-8 -8
30
-12 -12 25
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Japan Cabinet Office, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50
indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is
not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
38China GDP GTM – UK | 39
Contribution to China real GDP growth 2021 China industrial production and retail sales
H1 2021
Global economy
forecast
% change year on year % change year on year
20 GDP growth 12.7% 8.4% 25
Investment
Consumption
20
Net exports
15
15
Retail sales
10
10
5
5
Industrial production
0
0
-5
-5 -10
'90 '93 '96 '99 '02 '05 '08 '11 '14 '17 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (Left) Bloomberg, National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. GDP forecast is from Bloomberg contributor
composite. (Right) National Bureau of Statistics of China, Refinitiv 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 - UK.
Data as of 30 September 2021.
39China economic activity by sector GTM – UK | 40
China economic sector weights China manufacturing and services PMIs
Global economy
% of nominal GDP Index level
60 60
Services
55
50
50
40
Manufacturing Services
45
Manufacturing
30
40
20
35
10 Agriculture
30
0 25
'76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20 Jan '19 Jul '19 Jan '20 Jul '20 Jan '21 Jul '21
Source: (Left) National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) Markit, J.P. Morgan Asset Management. PMI is
Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
40China debt and credit dynamics GTM – UK | 41
China debt to GDP ratios China credit growth
Global economy
% of nominal GDP % of nominal GDP
180 45
Non-financial corporates
160
40
140
120 35
100
30
80
Government
60 25
40
Households
20
20
0 15
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. (Right) Bloomberg, People’s Bank
of China (PBoC), J.P. Morgan Asset Management. Credit growth is the 12-month change in the credit stock to the real economy as a percent of nominal GDP. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
41China inflation and policy rates GTM – UK | 42
China inflation China interbank rate and reserve requirement ratio (RRR)
Global economy
% change year on year % rate
12 7 30
Headline inflation
SHIBOR RRR
Core inflation
9 Producer price inflation 6
25
6 5
20
3 4
0 3
15
-3 2
10
-6 1
-9 0 5
'07 '09 '11 '13 '15 '17 '19 '21 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) Bloomberg, Refinitiv Datastream, 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. (Right) People’s Bank of China, Refinitiv Datastream, J.P. Morgan Asset Management. Average RRR for large and small
banks. SHIBOR is the three-month interbank rate. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
42Emerging market structural dynamics GTM – UK | 43
Urbanisation, real GDP per capita and population size Urbanisation rates over time
Global economy
Urbanisation rates, %, and GDP per capita, USD, bubble size is population % of population
60,000 AUS 100 Forecast
USA NLD US
90
CAN
50,000 Developed markets JPN
DEU 80
Emerging markets
GBR China
FRA
40,000 HKG 70
ITA
GDP per capita
ESP 60
30,000
KOR
50
India
20,000 SAU
TUR 40
BRA
CHN RUS 30
10,000 THA MEX ARG
20
IDN ZAF
IND
0 10
0
0 20 40 60 80 100
0
-10,000 Urbanisation rate 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Source: (All charts) World Bank, J.P. Morgan Asset Management. Urbanisation rate refers to the proportion of the total population living within an urban area defined
by national statistical offices. Countries are labelled using three-letter International Organisation of Standardisation country codes. Forecasts are from World Bank for
2020 onwards. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
43Emerging market growth GTM – UK | 44
Share of global real GDP Estimated change in the ‘consumer class’ by 2030
Global economy
% Millions of people
30 450
400
25 US
350
300
20 Eurozone
250
15 200
China
150
10
100
Japan
50
5
0
India India China Other US Eurozone UK Japan
Asia big 4
0 -50
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20
Source: (Left) Refinitiv Datastream, World Bank, J.P. Morgan Asset Management. (Right) Brookings Institute, J.P. Morgan Asset Management. Change in ‘consumer
class’ is the change in the number of people from 2020 to 2030 living in a household and spending at least USD 11 per day per person. Other Asia includes
Bangladesh, Indonesia, Pakistan, Philippines and Vietnam. Eurozone big 4 includes France, Germany, Italy and Spain. Past performance is not a reliable indicator of
current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
44Emerging market focus: China’s focus on ‘common prosperity’ GTM – UK | 45
‘Common prosperity’ mentions by President Xi Jinping Average annual income
Global economy
Number of mentions in speeches CNY thousands
70 350
60 300
Top 10%
50 250 Middle 40%
Bottom 50%
40 200
30 150
20 100
10 50
0 0
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 '18
Source: (Left) Bloomberg, J.P. Morgan Asset Management. 2021 is year to date. (Right) The World Inequality Database, J.P. Morgan Asset Management. Income
data estimated from 2015 onwards. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
45Global earnings expectations and equity valuations GTM – UK | 46
Consensus estimates for global earnings per share growth Global forward price-to-earnings ratios
% change year on year x, multiple
77
18 40
80
16 Avg. 2011-2019 2022 2023 Current
35
Range since 1990
Equities
14
30 Average since 1990
12
25
10
20
8
15
6
10
4
2 5
0 0
US Europe UK Japan EM China US Europe UK Japan EM China
ex-UK ex-UK
Source: (Left) FTSE, IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. MSCI indices are used for Europe ex-UK, EM
and China. UK is FTSE All-Share, US is S&P 500 and Japan is TOPIX. (Right) IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management.
MSCI indices are used for all regions/countries (due to data availability), except for the US, which is represented by the S&P 500. Range and average for China is
since 1996, due to data availability. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK.
Data as of 30 September 2021.
46Global equity market correlations with Treasury yields GTM – UK | 47
Correlation of MSCI ACWI sectors to US 10y Treasury yield Correlation of regions and styles to US 10y Treasury yield
10y correlation of sector rel. performance with US 10y Treasury yield 10y correlation of rel. performance with US 10y Treasury yield
Financials Sectors tending to Small cap Regions/styles tending to
outperform MSCI ACWI outperform MSCI ACWI
when yields are rising when yields are rising
Industrials Value
Equities
Energy
Japan
Materials
Eurozone
Cons. Discr.
UK
IT Country/region
China
Health Care Large/small
EM Value/growth
Real Estate
US
Comm. Services
Sectors tending to Regions/styles tending to
Utilities underperform MSCI ACWI Growth underperform MSCI ACWI
when yields are rising when yields are rising
Cons. Staples Large cap
-1.0 -0.5 0.0 0.5 1.0 -1.0 -0.5 0.0 0.5 1.0
Source: (All charts) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Correlation of sectors is calculated between the six-month change in US 10-year
Treasury yields and the six-month relative performance of each sector to MSCI All-Country World Index. Correlation of regions and styles is calculated between the
six-month change in US 10-year Treasury yields and the six-month relative performance of each region and style to MSCI All-Country World Index. All indices used
are MSCI. Value and growth as well as size indices used are for the MSCI All-Country World universe. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - UK. Data as of 30 September 2021.
47Global equity sector weights GTM – UK | 48
Global equity sector weights
% of total market cap
30 US Europe ex-UK UK EM
25
20
15
Equities
10
5
0
IT Health Care Cons. Discr. Financials Comm. Serv. Industrials Cons. Staples Energy Materials Utilities
MSCI World Growth and Value sector weights
% of total market cap
40
35 MSCI World Growth MSCI World Value
30
25
20
15
10
5
0
IT Health Care Cons. Discr. Financials Comm. Serv. Industrials Cons. Staples Energy Materials Utilities
Source: (Top) MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Indices are all MSCI, except for US, which is S&P 500. (Bottom)
MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Real estate is not included in these sector breakdowns due to the small size of the weight in each index.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
48Global income GTM – UK | 49
Income from equities in a 60:40 global stock/bond portfolio Global dividend yields
% of total portfolio income % yield
90 4
80 Country/region
Equities
Large/small
3
Value/growth
70
60
2
50
1
40
30
0
20
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (Left) Bloomberg Barclays, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Based on dividend yield of MSCI ACWI and yield to maturity of
Bloomberg Barclays Global Aggregate. (Right) MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Value and growth as well as size indices used are for the
MSCI All-Country World universe. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
49Equity net issuance and dividend revision ratios GTM – UK | 50
US and Europe net equity issuance US and Europe dividend revision ratios
USD billions, 12-month rolling % net upgrades as a proportion of total dividend estimate revisions
400 40
200
20
Equities
0
0
-200
-20
-400
-40
-600
US US
UK UK
-60
-800 Europe ex-UK Europe ex-UK
-1,000 -80
'07 '09 '11 '13 '15 '17 '19 '21 '07 '09 '11 '13 '15 '17 '19 '21
Source: (Left) Bernstein, Bloomberg, J.P. Morgan Asset Management. Net equity issuance is equity issuance minus buybacks. (Right) FTSE, IBES, MSCI, Refinitiv
Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Europe ex-UK is MSCI Europe ex-UK, UK is the FTSE All-Share and US is the S&P 500. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
50Equity market factors GTM – UK | 51
S&P 500 Quality/S&P 500 relative performance MSCI World Growth and Value forward P/E ratios
Relative total return index level, rebased to 100 in 1990 x, multiple
160 36
Recession
Growth
150 32
Equities
140 28
130 24
120 20
110 16 Value
100 12
90 8
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: (Left) J.P. Morgan Asset Management Quantitative Beta Solutions, Standard & Poor’s, J.P. Morgan Asset Management. S&P 500 Quality index is the top
quartile quality stocks in the S&P 500 determined by JPMAM Quantitative Beta Strategies based on measures of profitability, financial risk and earnings quality.
Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. (Right) MSCI, Refinitiv Datastream, J.P. Morgan
Asset Management. Forward P/E ratio is the price to 12-month forward earnings ratio, as published by MSCI. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - UK. Data as of 30 September 2021.
51US earnings GTM – UK | 52
S&P 500 earnings and performance US inflation and earnings growth
Next 12 months’ earnings per share estimates (LHS); index level (RHS) % change year on year
260 7 50
S&P 500 forward EPS US inflation S&P 500 trailing EPS
4,400
240
6 40
4,000
220 Country/Region % of revenues
Equities
US 60% 5
200 3,600 30
Asia/Pacific 18%
180 Europe 15% 3,200 4
20
160 2,800 3
10
140
2,400
2
120
2,000 0
100 1
1,600 -10
80 0
1,200
60 -20
-1
800
40
-2 -30
S&P 500 index level 400
20
0 0 -3 -40
'86 '90 '94 '98 '02 '06 '10 '14 '18 '22 '86 '90 '94 '98 '02 '06 '10 '14 '18 '22
Source: (Left) FactSet, IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is based on 12-month forward estimates.
(Right) BLS, IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is last 12 months’ earnings per share. Past performance
is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 30 September 2021.
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