2019 Q3 Quarterly Market Review

1. 2019 Q3 Quarterly Market Review

2. Reasons for Concern Positive Signals • Trade disputes impact on manufacturing output • Heightened political uncertainty, domestically and abroad • Inverted yield curve and recession fears • With low (or negative) rates, central banks have fewer options • Accommodative Fed • US economy on solid ground (though slowing) • Unemployment remains low • Consumers still additive

3. Fed isn’t forced to raise rates with inflation expectations falling Source: BLS, FactSet, J.P. Morgan Asset Management. CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations. Guide to the Markets – U.S. Data are as of September 30, 2019.

4. Unemployment moves lower still, wage growth picks up

5. Global Purchasing Managers’ Index for manufacturing, quarterly Slowing global growth? Source: Markit, J.P. Morgan Asset Management. Heatmap colors are based on PMI relative to the 50 level, which indicates acceleration or deceleration of the sector, for the time period shown. Heat map is based on quarterly averages, with the exception of the two most recent figures, which are single month readings. Data for Canada, Indonesia and Mexico are back-tested and filled in from December 2007 to November 2010 for Canada and May 2011 for Indonesia and Mexico due to lack of existing PMI figures for these countries. DM and EM represent developed markets and emerging markets, respectively. Guide to the Markets – U.S. Data are as of September 30, 2019.

6. The yield curve is awfully flat in most areas and inverted in others Source: FactSet, Federal Reserve, J.P. Morgan Asset Management. Guide to the Markets – U.S. Data are as of September 30, 2019.

7. US rates are attractive relative to the rest of the developed world

8. Global Fixed Income Returns Source: Morningstar, Bloomberg Barclays and ICE BoA ML benchmarks shown. Past performance is not indicative of future results.

9. US Equity returns by size and style Source: Morningstar, Russell benchmarks shown. Past performance is not indicative of future results.

10. International developed, Emerging and Frontier Equity returns Source: Morningstar, MSCI benchmark shown. Past performance is not indicative of future results.

11. The dollar continued to climb overall during the quarter Dollar strength is good for the US consumers but bad for owners of non-US investments Source: Wall Street Journal as of October 4, 2019. Past performance is not indicative of future results.

12. Are we headed for a recession?

13. But can our phones take us to the moon?

14. Consumer confidence by political affiliation Source: Pew Research Center, J.P. Morgan Asset Management. Pew Research Center, July 2019, “Public’s Views of Nation’s Economy Remain Positive and Deeply Partisan.” Question: Thinking about the nation’s economy, How would you rate economic conditions in this country today… as excellent, good, only fair, or poor? Guide to the Markets – U.S. Data are as of September 30, 2019.

15. A milestone for index funds

16. Maintain your focus on what really matters • Financial planning is a process, not an endpoint • Concentrate on long-term goals and objectives • Focus on reaching goals, not on beating benchmarks • Maintain a disciplined approach, in good and bad markets (and regardless of who the President is or what s/he says) • Invest broadly and globally; asset allocation is key • Reduce investment and tax costs where possible • Rebalance as necessary

17. Stocks vs. bonds Periods shown are monthly from January 1976 through September 2019. Stocks are represented by the S&P 500 while bonds are represented by the Bloomberg Barclays US Aggregate Total Return. Past performance is not indicative of future returns.

18. Spend time in the markets, not timing them Source: CRSP 1-10 benchmark, data from January 1926 through 2018, cumulative returns used in the calculation, past performance is not indicative of future results

19. Thank you