Investment Strategy

Japan: Is this time different?

Feb 28, 2024

Authors: Julia Wang, Cameron Chui, Yuxuan Tang, Weiheng Chen

On the last trading day of 1989, the Nikkei 225 closed at a record high of 38,915.87, bookending Japan’s multi-decade post-World War II growth boom and eye-popping asset price inflation of the 1980s. What followed after Japan’s asset bubble burst was three decades of deflation and anemic growth, as corporates and households paid down liabilities instead of borrowing at near-zero interest rates to invest and spend.

Occasional equity rallies since then have turned out to be head-fakes for investors, and markets were disappointed time and again by tentative efforts at reflation, reform and rejuvenation. Since the end of 1989, the S&P 500 and Euro Stoxx 50 are up 1,334% and 342% respectively (in price return terms), making Japan one of the most notable laggards in global markets.

JAPANESE STOCKS JUST GAINED THEIR FIRST NEW HIGH IN 34 YEARS

Nikkei 225 Index level, local currency

Source: Bloomberg Finance L.P Data as of February 26, 2024

Last week, more than 34 years later, the index finally closed above that record. The mood seems different now coming off a world-leading rally in 2023 and continued outperformance in 2024. Warren Buffett’s high-profile investments into Japan since 2020 also boosted sentiment. Market enthusiasm is elevated and international investors are starting to invest in Japan, betting that deflation is finally over and corporate governance reforms – first initiated a decade ago – are finally having an impact.

The improved outlook for Japan appears to be based on two key factors – an exit from long-running deflation (or reflation) and further support from corporate governance reforms. In this note, we detail what these factors mean for the equity market outlook and address the top questions that investors have about investing into Japan.

The strong rally has investors asking whether the market has run too far. We think no, and there is still a strong case for an overweight towards Japanese equities. Continued reflation driven by domestic demand and industrial investment can persist, and corporate governance reforms are likely to continue. Japanese equities are benefitting from multi-year structural factors and could continue to make new highs in the coming quarters on high single-digit earnings growth and valuations moderately above historical averages. Any pick up in global manufacturing activity could be an added cyclical tailwind. Longer-term, we expect potential double-digit equity returns. Uncertainties regarding growth and inflation would likely be met with a patient Bank of Japan (BoJ) that moderates excessive near-term yen strength. This is supportive for equities and presents opportunities for dollar-based investors.


The short answer is yes. Japan’s nominal GDP has broken out of a two-decade stagnation and we expect continued positive nominal GDP growth going forward. Inflation has also broadened across the economy and remained above the BoJ’s target of 2% for several quarters.

JAPAN’S NOMINAL GDP HAS BROKEN OUT OF A MULTI-DECADE RANGE

Nominal GDP, JPY trillions

Source: Bloomberg Finance L.P. Data as of December 31, 2023.

The long answer is that Japan appears to have both the conditions and willingness this time to truly escape deflation. In the near-term, inflation is expected to ease to 2% in 2024, tempering the need for serious policy tightening. In the coming years, inflation will likely be between 1.5-2.0%, a sweet spot that allows for generally accommodative macro policies.

Importantly, an inflationary mindset has started to take hold amongst households and corporates, evidenced by rising expectations for positive wage growth, which builds a virtuous cycle of rising wages and rising prices (and profits) – a stark contrast to the long-held deflationary stance of past decades that depressed consumption, investment and growth.

Compared with past reflation efforts that were domestic-focused, this time the global backdrop is also favorable. Japan’s industrial sector can benefit from a revival of industrial policies to support capex in semiconductors as a beneficiary of global supply chain reallocation. The government has committed $67 billion to subsidize building semiconductor manufacturing capabilities (an area Japan once dominated which has since declined in favor of other Asian producers). These advantages are reinforced by a large interest rate differential between Japan and other developed markets, which supports borrowing and investments within Japan.

JAPAN IS COMMITTING SUBSTANTIAL CAPEX TO SEMICONDUCTORS

Projects and announced subsidies for semiconductor projects in Japan

Source: Bloomberg Finance L.P., Ministry of Economy, Trade and Industry. Data as of February 2024.
Domestic consumption has not fully recovered to pre-Covid levels and remains a source of upside potential for reflation. More determined efforts by fiscal and monetary authorities to support inflation is an important factor, which they appear to be committed to.

DOMESTIC CONSUMPTION HAS ROOM TO IMPROVE FROM CURRENT LEVELS TO RETURN TO PRE-COVID TREND

Real consumption activity, indexed 2015 = 100 (LHS); Consumer confidence (RHS)

Source: Bank of Japan, Bloomberg Finance L.P. Data as of January 2024. 

In the wake of the asset bubble collapse, households and corporates deleveraged their balance sheets – opting to pay down debt rather than borrow to spend or invest in what is now known as a “balance sheet” recession. As such, many Japanese companies have tended to hoard cash instead of investing for growth, creating a vicious cycle that dragged on growth expectations and corporate valuations. 

Corporate governance reforms are not new in Japan and improvements started taking place in 2014 under a broader set of economic policies now known as “Abenomics”, initiated under former Prime Minister Shinzo Abe. Under those directives, Japanese corporates were required to implement practices such as: calculating cost of capital; explaining why returns did not meet the cost of capital; justifying cross shareholdings; adding more independent directors, etc. Consequently, share buybacks have steadily increased as a form of improving balance sheet efficiency.

JAPANESE SHARE BUYBACKS HAVE STEADILY INCREASED OVER THE PAST DECADE

Amount of share buyback announcements, JPY trillions

Source: Tokyo Stock Exchange. Data as of January 15, 2024.

Reforms have accelerated recently. The Tokyo Stock Exchange (TSE) has further encouraged increased urgency for Japanese companies to improve returns. A starting point is for companies to acknowledge their cost of capital, and for share price performance to be considered in decision-making. The TSE’s ultimate objective is to encourage active dialogue between Japanese corporates and shareholders in order to improve corporate governance, returns on equity, and valuations. The TSE is looking to publish a list of companies that have responded to such disclosure requests on the 15th of every month. 

Other areas of focus include increased English disclosure and effectiveness of communication with investors. Even for companies trading at high price-to-book ratios (P/B), the TSE has requested that they promote constructive dialogue aimed at improving corporate value over the medium to long-term. As companies meet current requirements, there is an increasing likelihood that the TSE could initiate other measures to further raise the corporate governance bar in the near future. In just the last six months, the percentage of compliant companies has risen to 49% from 31%. We have also started to see a number of prominent companies – such as Toyota – reduce cross-shareholdings as another way of addressing historical corporate governance concerns.

Simplistically, if we focus on companies with either net cash or significant cross-shareholdings and a P/B < 1, we estimate this universe at 100-150 corporates. Assuming this group of companies indeed see a re-rating to 1x P/B, this could add over 3% to the index.

SMALLER COMPANIES TEND TO HAVE LOWER PRICE-TO-BOOK (P/B) VALUATIONS IN JAPAN

P/B, percentage of companies in the TOPIX

Source: Bloomberg Finance L.P. Data as of January 22, 2024.

Clearly, there is no reason why re-rating needs to stop at 1x (the S&P 500 and Stoxx 50 trade at 4.6x and 2.1x respectively), but it does help to contextualize that the re-rating upside for the market due to corporate governance reforms is likely in the 3-10% range. We believe this offers plentiful opportunities for fund managers that are focused on value or event-driven strategies in Japan to meaningfully outperform.

A combination of several compelling factors are presenting structural and idiosyncratic reasons for investors to consider allocating capital to Japan:

  • Accommodative monetary policy relative to the developed world
  • A re-emergence of domestic inflation
  • Corporate governance reforms
  • Meaningful re-shoring efforts
  • Investors seeking alternatives to China

We believe this is likely to sustain the Japanese equity rally going forward, and we turn more positive on the market, increasing our base case TOPIX outlook to 2,700-2,750 (from 2,420-2,480). Over the next 12 months, we expect earnings to grow 8-9%, driven by semis, consumer discretionary and financials. The price-to-earnings (P/E) multiple can be maintained at 15x, only slightly above 10-year averages.

There is a very plausible case for the multiple to further re-rate as greater evidence of reflation and corporate governance changes materialize. In the years ahead we expect double-digit equity returns, as these structural changes and a stable global economic backdrop support higher potential earnings growth for Japanese corporates. International investors have also just started returning to Japanese equities after many years of persistent outflows, providing some support from a positioning perspective.

INTERNATIONAL INVESTORS HAVE ONLY JUST STARTED REVERSING YEARS OF PERSISTENT OUTFLOWS FROM JAPAN

Net foreign investment flows into Japanese stocks (USD billions)

Source: Bloomberg Finance L.P. Data as of February 23, 2024.
If reflation persists, corporate governance reforms accelerate to further drive meaningful operational efficiency improvements, international investors continue to further reduce their underweights, and manufacturing activity sees a cyclical recovery into 2025, it is plausible for the TOPIX to reach levels as high as 2,975-3,025 over the next 12 months, under a bull-case scenario.

JAPANESE EQUITIES COULD HAVE MORE LONGER-TERM UPSIDE

TOPIX end-2024 scenarios

Source: Bloomberg Finance L.P., J.P. Morgan Private Bank. Data as of February 26, 2024.

Japan saw negative GDP growth in the second half of 2023, but we think it could be a short and shallow recession. Looking under the hood of the GDP print, the primary drag in 2023 was weak household consumption. The upturn in inflation squeezed household spending, as it was not matched by a similar level of wage growth. Looking ahead to 2024, while the export outlook is challenged, domestic demand will likely lend more support to growth, which is dependent on real wage growth.

WEAK CONSUMPTION HAS BEEN A DRAG ON GROWTH

Real GDP growth contribution, %

Source: Cabinet Office, Haver Analytics. Data as of December 31, 2023.
Real wages will likely turn positive as inflation peaks, while wage growth could be higher and more broad-based. The key catalyst here is a process known as the “Spring Offensive” or (Shuntō), where every March, Japanese unions and employers negotiate wage increases. This offers an important signal for wage-setting by corporates around the country. Expectations are that nominal wage growth could be higher than the 3.6% achieved in 2023 and outpace inflation (now at 2-3%). This could support consumption, which is reinforced by rapidly recovering tourist spending.

REAL WAGES HAVE DECLINED SUBSTANTIALLY IN RECENT QUARTERS

Japan wages, indexed 2020=100, seasonally adjusted

Source: Ministry of Health, Labor & Welfare, Haver Analytics. Data as of December 31, 2023.

The second driver is the policy stance. Fiscal policy is likely to remain supportive in the form of income support and tax rebates, as the government looks to shore up flagging approval ratings. Investments in semiconductors will likely continue in line with a government push to put Japan in the global race to reorient supply chains.

While the growth outlook is moderate, we think Japan’s reflation still has some ways to run. Nominal GDP (which matters for corporate earnings) has also continued to grow even as real GDP is weak, in another sign that the transition to reflation is persisting.

We think the BoJ can afford to be gradual with monetary policy normalization in order to create more favorable conditions for continued reflation. For decades, the central bank has pursued ultra-accommodative monetary policy, such as quantitative easing (QE) and negative interest rate policy (NIRP) in a bid to reflate the economy, with little impact. However, the pandemic spike in inflation has broadened and Japan appears to be on a steadier reflation path, prompting expectations that the BoJ can finally exit its unconventional policy stance.

Many say that persistent inflation and soft growth (a ‘stagflation’-type scenario) posts a dilemma for the BoJ. We believe this is an ongoing balancing act, and recent weak economic data has validated their gradual approach to normalization. As the economy goes through a soft patch, more patience is warranted.

More sustained reflation, particularly in domestic demand, will likely be an important pre-condition for continued policy normalization. Assuming the economy moves out of recession, an exit from negative interest rates is our base case for 2024. Even so, real rates still remain highly accommodative and could continue to support investments going forward.

JAPANESE MONETARY POLICY REMAINS VERY ACCOMMODATIVE

Policy rate and yields, %

Source: Bloomberg Finance L.P. Data as of December 31, 2023.

While the possibility of further rate hikes beyond zero cannot be precluded, it is not our base case for this year and current market pricing (~30bps of hikes in 2024) seems aggressive.

Currency is a critical part of the Japan investment conversation, as performance could vary significantly in local currency versus USD terms. While the cumulative three-year total return of 50% for the TOPIX was eye-catching, the same return in USD is much more modest at below 10%.

Over this time period, the yen depreciated over 40% against the dollar and largely wiped out equity gains for investors that did not hedge the currency. Thus, getting the currency right is critical to generating equity returns in Japan. Fundamentally, the transmission mechanism is via export earnings in overseas currencies, which are translated back into the yen.

The key driver of the yen is interest rate differentials, or carry. The 10-year U.S. Treasury (UST) – Japan Government Bond (JGB) rate differential has explained over 80% of movements in USDJPY over the past two years. This explains the sharp deprecation in the yen since 2022 when the Fed embarked on aggressive rate hikes, while the BoJ maintained easing.

INTEREST RATE DIFFERENTIALS HAVE DRIVEN MOST OF THE MOVES IN USDJPY OVER THE PAST TWO YEARS

10-year UST-JGB spread (x-axis) vs. USDJPY (y-axis)

Source: Bloomberg Finance L.P. Data as of February 27, 2024. USD = U.S. Treasury. JGB = Japanese Government Bond.

We think the yen could strengthen modestly against the dollar over the next 12 months. With USDJPY at 150 at the time of writing, we think the room for the yen to weaken is limited, as we see some verbal intervention efforts from Japanese authorities. Historically, the Ministry of Finance has instructed direct market interventions to defend the currency around 148-152.

There could be more clarity that the Fed has finished hiking and that U.S. interest rates will likely trend lower, while JGB yields could hold or grind modestly higher, narrowing the interest rate differential. That said, investors may need to be patient – any yen strength is less likely to happen before the second half of 2024 when we expect the Fed to start delivering rate cuts.

In the meantime, investors have to be mindful of currency exposure. Yen cash has zero yield, and the carry against the dollar is around -5%. This means for USD-based investors, hedging the yen back to the dollar provides a “free” 5% and could be attractive. Borrowing in yen is also viable due to low interest rates – by borrowing and investing in the same currency, investors do not take significant directional FX risks.

Aside from a stronger yen, there are other factors that could cause Japanese equities to pull back:

  • Global manufacturing activity is weak, and this has historically led to negative earnings revisions for Japanese equities. There is some moderate earnings downside risk if this weakness is protracted. In addition, in the event the U.S. enters a recession, the Fed would likely cut rates aggressively and lead to an additional headwind for Japanese equities due to meaningful appreciation in the yen and weaker external demand.

POSITIVE TOPIX EARNINGS REVISIONS HAVE NOT BEEN SUPPORTED BY RECENT PMI TRENDS

Global manufacturing PMI vs. TOPIX earnings revisions, 3-month moving average, %

Source: J.P. Morgan Investment Bank, Datastream, S&P Global, Haver Analytics. Data as of January 31, 2024.
  • With increased investor excitement in Japanese markets, valuation multiples have also re-rated. Both historically and relative to the Euro Stoxx 600 (another historically cyclical index), Japanese equity valuations are near 10-year highs. With currently overbought conditions and increased valuations, we could see tactical pullbacks in the market. A marked improvement in global sentiment on China, though unlikely in the near-term, could also lead to some reversal of flows from Japan back to China.

JAPANESE EQUITY VALUATIONS HAVE RE-RATED RELATIVE TO HISTORY AND EUROPEAN MARKETS

Valuation levels

Source: Bloomberg Finance L.P. Data as of February 19, 2024.
  • Inflation concerns have led Prime Minister Kishida’s approval ratings to fall to levels that led to both his two predecessors resigning. The Japanese equity market has historically performed poorly when a reformer (such as PM Kishida) loses power due to uncertainty over future policy direction.
  • Skeptical investors reasonably maintain that Japan remains a slow-growing economy with fundamental challenges, such as poor demographics and global competition, which clouds its long-term economic outlook. Thus, an active and approach to investing into Japanese equities is essential for capturing upside growth opportunities.

The thesis for stronger equity market performance is based on idiosyncratic and structural developments that can boost certain segments of the economy and markets while unlocking greater shareholder value from its corporations.

GLOBAL INVESTORS TEND TO BE UNDERWEIGHT IN JAPANESE EQUITIES

MSCI All Country World Index geographical allocation

Source: Bloomberg Finance L.P. Data as of February 26, 2024.
From a portfolio perspective, most global investors have been underweight Japanese equities for years. Within the context of a globally-diversified portfolio, we are constructive on closing those structural underweights and moving to a slightly overweight allocation.

All market and economic data as of February 28, 2024 and sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

For illustrative purposes only. Estimates, forecasts and comparisons are as of the dates stated in the material.

There can be no assurance that any or all of these professionals will remain with the firm or that past performance or success of any such professional serves as an indicator of the portfolio’s success.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

This document may also have been made available in a different language, at the recipient’s request, and for convenience only. Notwithstanding the provision of a convenience copy, the recipient re-confirms that he/she/they are fully conversant and has full comprehension of the English language. In the event of any inconsistency between such English language original and the translation, including without limitation in relation to the construction, meaning or interpretation thereof, the English language original shall prevail.

This information is provided for informational purposes only. We believe the information contained in this video to be reliable; however we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage arising out of the use of any information in this video. The views expressed herein are those of the speakers and may differ from those of other J.P. Morgan employees, and are subject to change without notice. Nothing in this video is intended to constitute a representation that any product or strategy is suitable for you. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees to you. You should consult your independent professional advisors concerning accounting, legal or tax matters. Contact your J.P. Morgan team for additional information and guidance concerning your personal investment goals.

Indices are not investment products and may not be considered for investment.

For illustrative purposes only. This does not reflect the performance of any specific investment scenario and does not take into account various other factors which may impact actual performance.

Past performance is not a guarantee of future results.  It is not possible to invest directly in an index.

RISK CONSIDERATIONS 

  • Past performance is not indicative of future results. You may not invest directly in an index. 
  • The prices and rates of return are indicative as they may vary over time based on market conditions. 
  • Additional risk considerations exist for all strategies. 
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service. 
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.

Index definitions

The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The Nikkei Stock Average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 225.

The Standard and Poor's 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941-43 base period.

The EURO STOXX 50 Index, Europe's leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries. The Index is licensed to financial institutions to serve as underlying index for a wide range of investment products such as Exchange Traded Funds (ETF), Futures and Options and structured products.

TOPIX also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange.

STOXX Europe 600 Index (SXXP Index): An index tracking 600 publicly traded companies based in one of 18 EU countries. The index includes small cap, medium cap, and large cap companies. The countries represented in the index are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Holland, Iceland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

Contact us to discuss how we can help you experience the full possibility of your wealth.

Please tell us about yourself, and our team will contact you. 

*Required Fields

Contact us to discuss how we can help you experience the full possibility of your wealth.

Please tell us about yourself, and our team will contact you. 

Enter your First Name

> or < are not allowed

Only 40 characters allowed

Enter your Last Name

> or < are not allowed

Only 40 characters allowed

Select your country of residence

Enter valid street address

> or < are not allowed

Only 150 characters allowed

Enter your city

> or < are not allowed

Only 35 characters allowed

Select your state

> or < are not allowed

Enter your ZIP code

Please enter a valid zipcode

> or < are not allowed

Only 10 characters allowed

Enter your postal code

Please enter a valid zipcode

> or < are not allowed

Only 10 characters allowed

Enter your country code

Enter your country code

> or < are not allowed

Enter your phone number

Phone number must consist of 10 numbers

Please enter a valid phone number

> or < are not allowed

Only 15 characters allowed

Enter your phone number

Please enter a valid phone number

> or < are not allowed

Only 15 characters allowed

Tell Us More About You

0/1000

Only 1000 characters allowed

> or < are not allowed

Checkbox is not selected

Your Recent History

Important Information

Key Risks

This material is for information purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

NON-RELIANCE

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Your investments and potential conflicts of interest

Conflicts of interest will arise whenever JPMorgan Chase Bank, N.A. or any of its affiliates (together, “J.P. Morgan”) have an actual or perceived economic or other incentive in its management of our clients’ portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product, separately managed account or hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate; (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client’s account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing, recordkeeping or custody) with respect to investment products purchased for a client’s portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account.

Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio's investment objective.

As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as, for example, cash and high-quality fixed income, subject to applicable law and any account-specific considerations.

While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios.

The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services.

Legal entity, brand & regulatory information

In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed investment 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. Insurance products 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 JPM. Products not available in all states.

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 SE. In Belgium, this material is distributed by J.P. Morgan SE – Brussels Branch with registered office at 35 Boulevard du Régent, 1000, Brussels, Belgium, 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 Brussels Branch is also supervised by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) in Belgium; registered with the NBB under registration number 0715.622.844. In Greece, this material is distributed by J.P. Morgan SE – Athens Branch, with its registered office at 3 Haritos Street, Athens, 10675, Greece, 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 – Athens Branch is also supervised by Bank of Greece; registered with Bank of Greece as a branch of J.P. Morgan SE under code 124; Athens Chamber of Commerce Registered Number 158683760001; VAT Number 99676577. In France, this material is distributed by J.P. Morgan SE – Paris Branch, with its registered office at 14, Place Vendome 75001 Paris, France, 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) under code 842 422 972; J.P. Morgan SE – Paris Branch is also supervised by the French banking authorities the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and the Autorité des Marchés Financiers (AMF). In Switzerland, this material is distributed by J.P. Morgan (Suisse) SA, with registered address at rue du Rhône, 35, 1204, Geneva, Switzerland, which is authorised and supervised by the Swiss Financial Market Supervisory Authority (FINMA) as a bank and a securities dealer in Switzerland.

This communication is an advertisement for the purposes of the Markets in Financial Instruments Directive (MIFID II) and the Swiss Financial Services Act (FINSA). Investors should not subscribe for or purchase any financial instruments referred to in this advertisement except on the basis of information contained in any applicable legal documentation, which is or shall be made available in the relevant jurisdictions (as required).

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., 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. 

References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan team.

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 US 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.

© 2024 JPMorgan Chase & Co. All rights reserved.

© $$YEAR JPMorgan Chase & Co. All rights reserved.

LEARN MORE About Our Firm and Investment Professionals Through FINRA Brokercheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products

 

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. Insurance products 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 for key important J.P. Morgan Private Bank information 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

Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC.

Not a commitment to lend. All extensions of credit are subject to credit approval.

Equal Housing Lender Icon