Economy & Markets

Bear Market Barometers


A bottom for equities is likely to coincide with a peak in inflation, since that will signify how much central banks have to tighten. A lot of Wall Street research claims that inflation is peaking now, and a recent IMF report came to similar conclusions1. As per the first chart, the IMF sees US inflation peaking around current levels. Even so, I don’t think we’re there yet. Inflation has already blown past the IMF forecast for Europe, and as shown below, there’s evidence of a wage-price spiral in the US in low wage industries2; US labor markets are still at their tightest levels in the post-war era; and supply chain pressures which spiked last year have yet to abate (some of which is due to the China lockdowns). On top of all that, rising food and energy prices are now feeding into airlines, restaurant and lodging prices3Bottom line: there’s a lot riding on when inflation peaks. Even if that happens now (which I doubt), the Fed has a ways to go before it can stop tightening.

Line chart shows US, Europe, and Emerging Market IMF projections for inflation as of October 2021, January 2022 and April 2022, with dots to show current inflation levels. The IMF sees US inflation peaking around current levels, and current inflation has already blown past the IMF forecast for Europe
Line chart shows wage growth in low wage sectors vs price increases by companies with low wage workers. The chart is meant to indicate that companies that hire a lot of lower wage workers are paying large wage increases which they are passing along to customers
Line chart shows job openings plus employment as a percent of the labor force. Chart is meant to indicate that companies that hire a lot of lower wage workers are paying large wage increases which they are passing along to customers
Line chart shows the time required for producers to acquire raw materials and intermediate inputs from 2000 to now. The number of days required has increased from 40-50 to about 100, indicating that supply chain pressures which spiked last year have yet to abate

Inflation, central banks and P/E multiples. As shown in the next chart, when real Treasury yields went negative in 2020 (i.e., Treasury rates fell below inflation), that’s when P/E multiples shot up over 20x. Now that real yields are moving into positive territory again, P/E multiples are declining. And the more positive real yields become, the more equity multiples are likely to fall. That’s why I am less focused on earnings right now; this correction (so far) is all about overpriced multiples finally coming down. 

The market barometers on the following page show how valuations have declined. Before we get into that, see the second chart: while the premium investors pay for growth has come down a lot, it’s still high vs history. The barometers tell a similar story: the COVID stimulus boost to valuations has now been unwound, but for the most part, investors are still paying a large premium for companies with high expected earnings growth, at least relative to history. US equity markets are also not pricing in a recession yet: according to Goldman Sachs, S&P 500 pricing for cyclicals vs defensives implies an ISM reading of 49 and GDP growth of 0%-1%.

Economic growth is likely to fall as central banks tighten. Leading indicators point to a decline in manufacturing activity this fall (third chart), and the lean inventory positions of a year ago are gone. As shown in the last chart, rising inventory levels in the US have now converged with falling sales. Large declines in manufacturing and bloated inventory conditions usually result in large earnings declines. For anyone looking to add risk to portfolios this year, more bad news is now in the price for equities (the S&P selloff of 18% from its peak is ~70% of the average selloff during the prior 11 recessions), but still I think you can be patient.

Line chart shows the S&P 500 price to earnings ratio vs real interest rates. When real Treasury yields went negative in 2020 (i.e., Treasury rates fell below inflation), that’s when P/E multiples shot up over 20x. Now that real yields are moving into positive territory again, P/E multiples are declining
Line chart shows the price to earnings ratio spread between growth and value. While the spread has decreased recently, growth stocks are still expensive relative to history
Line chart shows leading indicators which have served as a proxy for manufacturing activity from 2007 to now. These indicators point to a decline in manufacturing this fall.
Line chart shows retail sales vs retail inventories. Real inventories have recovered from declines last year, catching up with retail sales as they steeply decline

This cycle is reminiscent of 2001 and 1987: extended valuations finally coming back down to earth alongside what might be a shallow recession.  It’s quite different than 2008 and 1991 when the primary issues were banking sector solvency, overleveraged households and a housing crash.  That’s why most of the damage is seen in equities rather than in credit spreads.  

The line chart shows the forward P/E ratios for the Russell 1000 Index, Russell 1000 Growth Index, Russell 1000 Value Index and Megacap 8 from 2006 to 2022. The chart shows the Megacap 8 are close to their pre-pandemic peak in late-2019(~29.0), while the Russell indexes are declining as well. Additionally, the Russell 1000 Growth Index is experiencing a sharp decline, nearing ~21.0.
The line chart shows the forward P/E ratios for the US by market cap (S&P500 Index, S&P Midcap 400 Index and S&P Small Cap 600 Index) and Europe (EURO STOXX Index) from 2006 to 2022. The chart shows a decrease in each forward P/E ratio, with the S&P Small Cap 600 Index declining the furthest to ~11.8.
The histogram shows the percent of stocks in the NASDAQ and Russell 1000 Growth Indexes which have experienced drawdowns from 0-100% from 2021 to May 2022. As of May 16th, half of the NASDAQ stocks were down 45% from their prior peaks, while one third of the NASDAQ stocks were down 70% from their prior peaks.
The line chart shows the basis points increase in the option adjusted spread for fixed rate preferred securities. The chart shows that spreads are at their highest levels since early 2020 at ~250 basis points.
Line chart shows a comparison between the return on the NASDAQ from 1999 to 2004 and China internet stocks since Sept. 2019. The chart shows that the China internet correction is close to matching the drawdown of the NASDAQ post-tech bubble.
Line chart shows that the MSCI China equity index is down 49% from its peak.

Line chart shows the high yield credit spreads in both the US and emerging market since 1987 and 1997. The chart shows that both credit spreads have widened at relatively the same pace. However, spreads are nowhere near levels seen in previous recessions (i.e., 2020, 2008, etc.)
Line chart which shows the US investment grade credit spread since 1987. The chart shows that the spread has slightly widened and is now at 2.1%.
Line chart which plots the S&P 500 leveraged loan price index since 2000. The index has fallen approximately 5% from 2021 highs.
Line chart which shows US 10 year municipal bond yields since 1990. The chart highlights both the yield to worst and the tax equivalent yield assuming the top federal rate. The chart shows that yields have started to spike upwards towards 3% YTW and 5% tax equivalent yield.
Line chart which plots the US commercial paper spread vs 3 month Treasury for financial CP and asset backed CP since 2007. The chart shows that the spread has widened for both types of CP to ~50 basis points. This is significantly lower than during early 2020 when the spread spiked to over 250 basis points.
Line chart which shows AAA asset backed securities spread for prime auto, credit cards and commercial real estate versus Treasury since 1998. All three spreads have started to widen.

COVID vaccines continue to yield massive public health benefits. Data from multiple states show a large gap between vaccinated and unvaccinated hospitalizations and deaths during the Omicron variant surge last winter4. These benefits are critical now that Omicron variants are becoming more transmissible, more resistant to monoclonal antibodies and more prone to “immunity escape” (i.e., lower cross-immunity for unvaccinated people who had BA.1)5. Still, some people do not believe that vaccines work based on theories which have been described by my science advisory group as unsubstantiated and false (and those are their kinder words).

That said, I have an apology to make. On two occasions this year in the Eye on the Market, I disparagingly mentioned how someone I’ve known for 20 years has differing views on COVID vaccines based on research he published and some personal correspondence we had. I was wrong to do that; I described his views rather than pointing people to where they could read them for themselves; I did not allow him to articulate his point of view in these pages in a point-counterpoint discussion; and I did not acknowledge that his primary focus was not epidemiology but the impact on markets if the vaccines are as ineffective as he believes they are.

As things stand now, each of us believes that the other is hopelessly lost in a sea of disinformation. I am still not sure how to deal with that, but preserving the relationship has turned out to be more important to me than rupturing it over our inability to see things the same way. As shown in the bar chart, COVID has done this to a lot of people: lost tempers, damaged relationships and a lot of stress. So, no more judgments from me; just the data and the latest research on our portal which everyone can interpret for themselves.

XY scatter plot which shows hospital admissions and deaths per million between November 2021 and April 2022 by vaccination status across Virginia, Utah, California, and Minnesota. The charts illustrates the gap between vaccinated and unvaccinated populations. For example in Minnesota, more than 12,000 per million unvaccinated residents were hospitalized compared to ~2,000 per million fully vaccinated residents.
Bar chart which shows the percent of COVID Family Impact Survey respondents that say COVID-19 has caused relationship stress, them to stop socializing, damaged family relationships, or caused them to lose their temper.
Bar chart which shows the return since November 2021 of various crypto currencies and crypto related projects. The chart highlight 18 securities that are down at least 35%.

Crypto update since our “Maltese Falcoin” piece: Fortune may not favor the brave after all

Tales from the Crypt: returns since November 2021

Return     Description
-37% SANDBOX: Gaming token used by people buying virtual land, possibly to plant tulips on
-44% BINANCE COIN: Token/exchange; welcome to France, global epicenter of entrepreneurship (see p7)
-49% BITCOIN: Store of value? Volatility 5x S&P, 0.8 correlation with NASDAQ, zero inflation hedge
-51% ETHEREUM: DeFi application platform; Ethereum 2.0 is coming, may improve speed/scale and reduce fees
-55% BITCOIN MINER ETF: Each Bitcoin transaction consumes energy to power typical US home for 6 weeks
-59% RIPPLE: Used for currency remittances, also Fred Sanford's favorite drink; SEC lawsuit finally underway
-60% SILVERGATE: Crypto lending bank down more than double KBW Bank Index
-61% DECENTRALAND: Gaming token; Less than 1,000 active daily users according to CoinDesk
-64% BITCOIN CASH: Faster and cheaper than Bitcoin due to larger block sizes, same awful price/volatility characteristics
-66% DOGECOIN: This dog has fleas
-69% ROBINHOOD: Brokerage firm with 25% of transaction based revenue from crypto
-70% CARDANO: DeFi application platform; You could have owned CarMax instead, which is down half as much
-72% SOLANA: DeFi application platform; Seven outages in 2022 as bots crash network
-79% UNISWAP: Token/exchange; its share of decentralized crypto trading activity fell from 80% in Oct 2020 to 30% in Mar 2022
-79% COINBASE: Crypto brokerage; ARK Innovation ETF continues to accumulate shares as its largest holder
-82% TERRA: Algorithmic stablecoin; collapsed when unsustainable 20% yields to holders were about to expire
-85% AXIE INFINITY: Gaming token; how could something ever go wrong with a token linked to digital pets
-100% LUNA: Whatever it was, rest in peace

Crypto valuation theories

  • “Store of Value” argument continues to disintegrate given Bitcoin volatility that is 5x the S&P 500, and its 0.8 correlation with the NASDAQ
  • “Crypto as an inflation hedge” repudiated as crypto prices plummet while inflation rises
  • Bitcoin as a means of exchange? Not yet; confirmed transactions per day still below 2018-2020 levels
  • DeFi lending use case also crumbling as expected: since most DeFi lending is collateralized by crypto, DeFi lending activity has declined 25% YTD along with declining crypto prices
  • Gaming tokens financed by venture capitalists plummet as Metaverse user base falls short of expectations. Decentraland, Axie Infinity and Sandbox tokens have higher valuations and fewer users than non-blockchain games like Fortnite, Candy Crush, etc. Sandbox and Decentraland average daily users were around 1,000 people in late April. I think that’s the number of people still using Lotus 1-2-3
  • Some crypto collapses can be linked to unsustainably high “staking” yields paid to crypto holders that eventually reset closer to prevailing short term interest rates
  • Growing list of developing countries with full or partial bans on crypto as a means of payment
  • Coinbase claimed to have 3 million users on its NFT waitlist but since launch has yet to see more than 200 NFT transactions on any given day
  • Increase in daily verified Ethereum contracts per day since February report (i.e., a scarce positive)
  • Stablecoins Tether and USDC continue to trade close to par. As explained in our piece, stablecoin valuations have little relevance for directional crypto prices when they are collateralized by liquid reserves. The adoption of blockchain applications using stablecoins also has no relevance for directional crypto prices. On Tether, the company has reportedly disclosed it holds $40 billion in government bonds and cash out of its $79 billion in total reserves; the rest of its reserve composition is a mix of commercial paper, CDs, money market funds, loans, corporate bonds, precious metals and other digital tokens

Regulatory

  • Terra’s CEO reportedly founded another stablecoin called Basis Cash (using a pseudonym from the animated Rick & Morty show) which failed when it lost its peg in 2021 and is now trading at 1 cent on the dollar. Some believe that the Terra collapse resulted from a coordinated attack or manipulation, which I find strange since “pump and dump” schemes and other activities that would be prohibited in regular securities markets are by definition not illegal on decentralized blockchains
  • Cryptocurrency investors are not paying the IRS at least half of the taxes they owe on their virtual-currency trades according to Barclays. The IRS has begun to crack down on tax evasion among crypto investors and in 2023 will begin requiring brokers to report transactions worth at least $10,000
  • Fidelity announced plans to allow customers to put some of their retirement savings into Bitcoin, which was immediately met by “statements of concern” and reminders of “fiduciary care” by the Department of Labor
  • Crypto exchange Binance reportedly shared information with the Russian gov’t on its users that donated to imprisoned Putin opponent Alexei Navalny, raising questions about how anonymous crypto holders are depending on where and how they transact. This also raises questions about the decision by France to be the first European country to give Binance a regulatory stamp of approval
  • Gensler/SEC highlights problems in crypto market due to insufficient Chinese walls across custody, market making and trading at crypto exchanges
  • Cryptocurrency crime hit a new all-time high in 2021 with illicit addresses receiving $14 billion over the course of the year, up from $7.8 billion in 2020. As of early 2022, illicit addresses held at least $10 billion of cryptocurrency with the vast majority held by wallets associated with cryptocurrency theft

Sources: Bloomberg, Fortune, Forbes, Blockchain.com, Etherscan, DeFi Pulse, TechCrunch, Cointelegraph, Reuters, Chainalysis, CoinDesk, Barron’s, CNBC. “Fortune Favors the Brave” refers to a Crypto.Com commercial which aired during the Super Bowl in 2022. Tales from the Crypt refers to a US television show which aired from 1989 to 1996.

1 “War Dims Global Economic Outlook as Inflation Accelerates”, IMF, April 19, 2022

2 The wage-price spiral chart is meant to indicate that companies that hire a lot of lower wage workers are paying large wage increases which they are passing along to customers. On inflation, we show the equal-weighted wage growth in industries such as restaurants, hotels, casinos, nursing homes, child care, hair salons and laundry services. For wages, we show average hourly earnings for leisure and retail. For more information, see “Are major advanced economies on the verge of a wage-price spiral?”, BIS, May 4, 2022

3 The more cyclical service industries (airlines, restaurants) are experiencing 10% inflation, a figure not seen since the Volcker era in the early 1980’s.

4 NYC: the unvaccinated hospitalization rate was 16x higher than the vaccinated rate from February to April.

5 Pfizer has tested a vaccine/booster based on BA.1. Results are expected by the end of June after which the FDA will make vaccine recommendations for the fall. The limited protection that BA.1 infection provides against new subvariants in lab studies has raised questions about how useful new Omicron-specific vaccines might be. The virus may be evolving too quickly for strain-specific vaccines to keep up.

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FEMALE VOICE: This podcast has been prepared exclusively for institutional wholesale professional clients and qualified investors only, as defined by local laws and regulations. Please read other important information which can be found on the link at the end of the podcast episode.

MR. MICHAEL CEMBALEST: Good morning, welcome to another Eye on the Market podcast. This one is for our Bear Market Barometers piece. We’ve done two podcasts so far on the energy piece. I’ll have a couple more on residential heating and hydrogen coming up in the weeks ahead. But I wanted to make sure and do a quick podcast on this week’s piece.

The bottom line is the slowdown that will eventually be induced by the central banks raising policy rates is just starting. And I think you can be patient when adding risk to portfolios. A good amount of damage has been done in terms of lower multiples in a bunch of different markets, but earnings are going to eventually come down, and markets are pricing in maybe a 30 to 40% chance of a recession. And if you’re looking for a bottom at which to add risk, you’d normally want to do that when the chance of a recession is priced in at least 50 or 60%. That bottom is likely to coincide with a peak in inflation, because that’s going to tell us how much the central banks are going to have to tighten. A lot of Wall Street research and the IMF thinks that’s happening now. They think the peak in inflation is happening now, but I don’t think we’re there yet.

We’ve got a couple of charts in this piece. The US labor markets are at their tightest levels in the post-war era. The supply chain pressures, which are still pretty intense, have yet to come down. And most importantly, there’s evidence at least in part of the US economy, specifically in low-wage industries, that there’s a wage price spiral going on. In other words, wages are going up, companies are passing along those price increases to customers, and that wage price spiral is kicking in in ways we haven’t seen it in at least 30 years, maybe 40. So there’s a lot riding on when inflation peaks. But even if that happens now, which I doubt the Fed has got a ways to go before it can stop raising policy rates. And I think along the way, there may be some better entry points in equity markets even than the ones that we see right now.

There’s a chart in here. Sometimes, we talked about this a lot over the years, and we all knew, you knew that this was going to change one day. The only question is when. And what I’m referring to is negative policy rates, in other words, policy rates and ten-year Treasuries below the rate of inflation. And we had never lived through, I had never lived through a period where we had such sustained low policy rates. And then in 2020, the ten-year went deeply negative in real terms, and that’s when PE multiples really took off and rose.

And now that Treasury rates are on their way towards rising above the rate of inflation, or at least inflation expectations, PE multiples are declining. So I think that process has more to go. And I’m so focused on earnings right now. This correction so far is mostly about overpriced multiples finally coming down, which is why we have a couple of pages showing you what’s happened to PE multiples in a number of different markets.

Before I get into that, I just want to mention that there is a chart in here that looks at two different ways of the value versus growth question. No matter how you look at it, markets are not “back to normal” yet. We’re nowhere near where we were from let’s say 2010 to 2018, where there was some kind of stable equilibrium between value and growth. Growth stocks, even though they’ve come down a bunch on an earnings yield basis, are still pretty expensive. And some of the leading indicators that we looked at tell us that there’s likely to be a pretty sharp drawdown in global manufacturing sometime this fall. And usually when global manufacturing takes a dive down, global corporate earnings do as well.

And the cushion that we had last year in the US was that inventory levels are very low. Well now they’ve caught up, and one of the charts in here shows you that inventories have actually risen quite sharply and that sales have come down to that level of inventory. So some of the cushions that we had in terms of an understocked and undersupplied corporate sector that existed last year are not in place right now.

There’s a page in here that has PE multiples for equities, just some charts and monitors that we’re following. And what you’ll see is certainly amongst the growth stocks and amongst the big mega-cap eight stocks, the largest eight by market cap, the surge in valuations that took place because of COVID stimulus, that’s been completely reversed. So if you’re looking for an entry point that has to do with erasing the premium that was put on these stocks because of all the stimulus from COVID, that’s now been erased and eliminated. But that still puts you at 2018/2019 multiples, which are on the expensive side of history.

What looks a little bit cheaper here is US small cap and Europe, but I don’t have a ton of confidence in either one of those right now as a bottom fishing expedition. The NASDAQ looks tempting. Half of the NASDAQ is down at least 50%, but in the correction that took place in 2001, it was much worse than that. And so it still feels like there could be a little bit to come as well in terms of NASDAQ weakness.

And then there’s a page on fixed income, which is a mixed bag. The opportunities in emerging markets government bonds have gotten pretty attractive, whereas US high yield has only just begun to widen. And there really hasn’t been much activity at all in terms of investment-grade credit spreads, leveraged loans, commercial paper, and asset-backed securities. And I think that makes sense because this to me, this feels more like 2001 than 2008. In other words, this is a multiple and valuation story, and this is not a story about credit risk or the security and safety of the banking system. So I think that’s a pretty important distinction. So bottom line, there should be some cheaper entry points over the next few months because the Fed still has a lot of work to do to catch up to the wage and price inflation that’s percolating in the system.

There’s a couple of follow-ups here. I have some information on COVID, including an apology from me to somebody. You can read about why I’m doing that. And then there’s a chart in here called Tails from the Crypt. I thought it would be interesting to look at an update on what’s gone on in the crypto markets since our Maltese Falcon piece last February. Look, I mean when I wrote this paper, I got a lot of grief for it as an old guy, I’m turning 60 this week, who doesn’t understand the future. All I can tell you is that since I wrote that piece, the value proposition and valuation theories for crypto, in my opinion, just keep getting worse and worse and worse. I’ll tick through a few of them. The concept of a store of value for Bitcoin, I mean, Bitcoin’s volatility remains five times the volatility of the S&P 500. It’s got a 0.8 correlation with the NASDAQ. Crypto as an inflation hedge doesn’t make sense. Crypto prices are plummeting while inflation is going up. Bitcoin, its number of confirmed transactions per day is still below where it was in 2018. So Bitcoin as a means of exchange isn’t going anywhere.

For Ethereum and the kind of blockchain application-based tokens and exchanges platforms, as we expected, DeFi lending is crumbling, because most DeFi lending is collateralized by crypto, and DeFi lending is down 25% along with declining crypto prices. This wasn’t very difficult to anticipate.

And then the gaming tokens, a lot of very smart venture capital people put a ton of money into some of these metaverse gaming things. Decentraland, Axie Infinity, Sandbox, they all have very high valuations and fewer users than the non-blockchain games like Fortnight and Candy Crush and Grand Theft Auto. I read a report that at the end of April, Sandbox and Decentraland were averaging around 1,000 users a day. I mean, I think that’s still the number of people that use Lotus 1-2-3. So as far as I can tell, the value proposition and the valuation theories for crypto have gotten worse rather than better since our February piece. So that’s it for this week. I will be back next week with a part three podcast on our energy paper. Thank you for listening.

FEMALE VOICE: Michael Cembalest’s Eye on the Market offers a unique perspective on the economy, current events, markets and investment portfolios, and is a production of J.P. Morgan Asset and Wealth Management. Michael Cembalest is the Chairman of Market and Investment Strategy for J.P. Morgan Asset Management and is one of our most renowned and provocative speakers. For more information, please subscribe to the Eye on the Market by contacting your J.P. Morgan representative. If you’d like to hear more, please explore episodes on iTunes or on our website.

This podcast is intended for informational purposes only and is a communication on behalf of J.P. Morgan Institutional Investments Incorporated. Views may not be suitable for all investors and are not intended as personal investment advice or a solicitation or recommendation. Outlooks and past performance are never guarantees of future results. This is not investment research. Please read other important information, which can be found at www.JPMorgan.com/disclaimer-EOTM.

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In Germany, this material is issued by J.P. Morgan SE, with its registered office at Taunustor 1 (TaunusTurm), 60310 Frankfurt am Main, Germany, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB). In Luxembourg, this material is issued by J.P. Morgan SE – Luxembourg Branch, with registered office at European Bank and Business Centre, 6 route de Treves, L-2633, Senningerberg, Luxembourg, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Luxembourg Branch is also supervised by the Commission de Surveillance du Secteur Financier (CSSF); registered under R.C.S Luxembourg B255938. In the United Kingdom, this material is issued by J.P. Morgan SE – London Branch, registered office at 25 Bank Street, Canary Wharf, London E14 5JP, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – London Branch is also supervised by the Financial Conduct Authority and Prudential Regulation Authority. In Spain, this material is distributed by J.P. Morgan SE, Sucursal en España, with registered office at Paseo de la Castellana, 31, 28046 Madrid, Spain, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE, Sucursal en España is also supervised by the Spanish Securities Market Commission (CNMV); registered with Bank of Spain as a branch of J.P. Morgan SE under code 1567. In Italy, this material is distributed by J.P. Morgan SE – Milan Branch, with its registered office at Via Cordusio, n.3, Milan 20123, Italy, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Milan Branch is also supervised by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB); registered with Bank of Italy as a branch of J.P. Morgan SE under code 8076; Milan Chamber of Commerce Registered Number: REA MI 2536325. In the Netherlands, this material is distributed by J.P. Morgan SE – Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1135, 1077 XX, Amsterdam, The Netherlands, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM) in the Netherlands. Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 72610220. In Denmark, this material is distributed by J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39-41, 1560 København V, Denmark, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 29010. In Sweden, this material is distributed by J.P. Morgan SE – Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 11147, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SEIn France, this material is distributed by JPMCB, Paris branch, which is regulated by the French banking authorities Autorité de Contrôle Prudentiel et de Résolution and Autorité des Marchés Financiers. In Switzerland, this material is distributed by J.P. Morgan (Suisse) SA, with registered address at rue de la Confédération, 8, 1211, Geneva, Switzerland, which is authorised and supervised by the Swiss Financial Market Supervisory Authority (FINMA), as a bank and a securities dealer in Switzerland. Please consult the following link to obtain information regarding J.P. Morgan’s EMEA data protection policy: https://www.jpmorgan.com/privacy.

In Hong Kong, this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request. In Singapore, this material is distributed by JPMCB, Singapore branch. JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. For materials which constitute product advertisement under the Securities and Futures Act and the Financial Advisers Act, this advertisement has not been reviewed by the Monetary Authority of Singapore. JPMorgan Chase Bank, N.A. is a national banking association chartered under the laws of the United States, and as a body corporate, its shareholder’s liability is limited.

With respect to countries in Latin America, the distribution of this material may be restricted in certain jurisdictions. We may offer and/or sell to you securities or other financial instruments which may not be registered under, and are not the subject of a public offering under, the securities or other financial regulatory laws of your home country. Such securities or instruments are offered and/or sold to you on a private basis only. Any communication by us to you regarding such securities or instruments, including without limitation the delivery of a prospectus, term sheet or other offering document, is not intended by us as an offer to sell or a solicitation of an offer to buy any securities or instruments in any jurisdiction in which such an offer or a solicitation is unlawful. Furthermore, such securities or instruments may be subject to certain regulatory and/or contractual restrictions on subsequent transfer by you, and you are solely responsible for ascertaining and complying with such restrictions. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund’s securities in compliance with the laws of the corresponding jurisdiction. Public offering of any security, including the shares of the Fund, without previous registration at Brazilian Securities and Exchange Commission— CVM is completely prohibited. Some products or services contained in the materials might not be currently provided by the Brazilian and Mexican platforms.

JPMorgan Chase Bank, N.A. (JPMCBNA) (ABN 43 074 112 011/AFS Licence No: 238367) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Material provided by JPMCBNA in Australia is to “wholesale clients” only. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Corporations Act 2001 (Cth). Please inform us if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.

JPMS is a registered foreign company (overseas) (ARBN 109293610) incorporated in Delaware, U.S.A. Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as J.P. Morgan Securities LLC (JPMS), to hold an Australian Financial Services Licence (AFSL), unless an exemption applies. JPMS is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (Cth) (Act) in respect of financial services it provides to you, and is regulated by the SEC, FINRA and CFTC under U.S. laws, which differ from Australian laws. Material provided by JPMS in Australia is to “wholesale clients” only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Act. Please inform us immediately if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.

This material has not been prepared specifically for Australian investors. It:

  • May contain references to dollar amounts which are not Australian dollars;
  • May contain financial information which is not prepared in accordance with Australian law or practices;
  • May not address risks associated with investment in foreign currency denominated investments; and
  • Does not address Australian tax issues.
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JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states. Please read the Legal Disclaimer in conjunction with these pages.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

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