Revisiting our 2025 Outlook: Building on strength

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text: ideas & insights

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Hello, my name is Jake Manoukian. Thank you for taking the time to join me and my colleagues, Steve Parker and Kristin Kallergis Rowland. We want to spend the next 30 minutes recapping what has happened in markets both public and private so far this year, and checking in on the expectations that we laid out in our outlook that we published in November.

Ultimately, we hope you leave this call feeling both informed about the macro and market environment, and, more importantly, empowered to make any changes that you might have to make to your portfolio to help you stick with your plan.

So in setting up the environment that we've seen so far in the first quarter, a helpful framework that we think might be useful for the rest of this call is expectations versus reality. In December and January, expectations were very high. Valuations were elevated. There was hopes that we would get this surge of deregulation and capital market activity. Expectations were for US assets to continue outperforming their global peers.

And there was also this expectation that bond yields would keep rising on sustained government deficits and further tax cuts. But really, we've seen bond yields lower year to date. So Steve, I'll start with you. Can you just help walk us through the macroeconomic landscape, the market environment? What's happened this year and why?

Yeah. I mean, to your point, one of my favorite investment adages is this idea that markets don't move on good or bad, but they move on better or worse. And, as you said, we came into this year with a consensus view that we'll see a continuation of recent strength led by the US tech sector, led by that pro-growth policy that you referred to.

This meant that the bar was very high, especially after two years of 25-plus percent returns in US equity markets. We saw this in valuations. We saw this in sentiment. We saw this in positioning. And while investors acknowledge some of these risks, the view was that fundamental momentum would continue to carry the day.

Now, what we've seen is a few small areas of stumble. Those higher expectations, particularly in the US, and particularly in the tech sector, have disappointed on the margin. That's more of a sentiment story than it is a fundamental change to the outlook, which is important.

But the good news is, despite the headlines about the sell-off in US equity markets, diversification is back. If you look at non-US equity markets as an example, the bar was much lower coming into this year. Valuations were lower. Expectations were lower.

And as a result, some positive surprises related to stimulus in places like Europe and China has translated into really good performance results. European stocks have outperformed the US by more than 15% this year and done what most investors thought was impossible, which is to go up when US markets were actually down.

You also touched on fixed income. For all of the handwringing in recent years about bonds and whether they'd continue to be a diversifier within portfolios, we've seen very clearly this year that that continues to be the case, especially when the concern in markets is about growth rather than inflation.

Yeah, absolutely. And so the key takeaway for me is that diversification is working. We want to be global investors. And we want to really rely on fixed income to be that kind of ballast to our portfolio.

But before we get carried away just some stats to level-set. The S&P 500 is down something like 3%. The Magnificent Seven, which was the real leadership sector over the last couple of years, is down over 13%. But to your point, the MSCI world, which is the global benchmark, is flat. And a 60/40 portfolio is even up slightly on the year. So I think investors can take solace in that.

So public markets have seen a lot of that volatility. And of course they have. They mark to market every second of every day. But in the private markets, too, I think there's been this dichotomy between expectations and reality. The kind of surge in dealmaking and capital market activity may be delayed. Maybe it will fail to materialize. But what are we seeing in private markets so far this year?

Yeah. I do think that they will materialize. I do think the same reasons why there's hesitancy in the public markets is why there's hesitancy on the private side, that if you could just keep a company private, keep chugging along, try to really focus on driving operational value with these companies to make it an attractive asset for an exit, I definitely think that's still there. I think we're-- whether it's a matter of weeks or months away from getting more of that certainty, the same factors apply.

What I would say is on the private markets, what we've gotten used to over the last two to three years is the lack of exit activity has drawn people to things like the secondary market, or drawn things to-- drawn folks to things like continuation vehicles.

But I would say, fundamentally, the things that are exiting are those that were well-operated assets that have high growth potential. The medium asset really doesn't have a place to go right now, and I think that stays persistent.

We also think that in private equity markets, the last decade has been-- almost 50% of the returns of the industry came from multiple expansion. We don't expect that going forward. So where we're focused is really on driving operational, strategic, decently growing assets on a go-forward basis. And when we do see some deregulation, we do think that's an area where you're going to see more exit activity to start versus anywhere else.

Absolutely. And it's almost the simple equation, where you have time keeps marching forward. And there's something like 30,000 private equity portfolio companies that need to be managed.

Yeah. And then to the point that you made about being a global investor, too, there's other parts of the market. We're looking at places like Japan, and there's over 3 million SMEs. And when you-- and a lot of are family-owned assets.

New corporate governance really came into effect in 2015. That was 10 years ago. We're starting to see more deal activity in places outside of the US, in what's the third largest economy in the world. So having sort of that global portfolio has helped us see more of that activity. But in the US alone, we certainly need some more volatility dampening from a news perspective before we see more activity.

Yeah. So let's get into that with Steve a little bit. And I want to talk about how we kind of marry the private markets with the public markets in a portfolio context a little bit later. But the news has been relentless. A lot of the correction in the sell-off that we've seen in US equity markets is driven by what seems like some pretty drastic shifts in the way US trade policy is organized.

So from your perspective, what is driving this correction in US equity markets? And then for maybe investors who are looking to put capital to work, what do we need to believe to be able to buy the dip?

Yeah. So first of all, when you look at the US tech sector, which we know has been the leader, but also the epicenter of some of the pain, it's a little bit like the A+ student who comes home with a B+ on their test. Things are still good, but relative to expectations, it's been a little bit of a disappointment.

We'll touch on policy in a second. But I think the important piece to remember from an event perspective, the first part of the sell-off really started when we got the news out of DeepSeek. So this idea that out of China, we were getting an AI platform that was lower cost, faster to market, called into question this idea that the US had the leadership position in all things AI. And as a result, the hyperscalers, the Mag Seven companies, which had been the big winners on the upside, began to underperform.

The good news is that concentration risk that so many were worried about coming into this year, we're actually seeing that flip a little bit. And, in fact, the other 493 in the S&P, if you will, are actually going to be the beneficiaries. Lower cost AI, more scalable technology is better for the broadening concept, which was which was core to our theme. So that was the first piece. That's what led the shift in market leadership.

The second piece of it is really this idea about policy. And so we came into the year with an expectation that policy changes out of DC would be focused on pro-growth initiatives, lower taxes, deregulation. In fact, what we're seeing, at least up front, is this focus on tariffs, cost-cutting, turning that policy tailwind into a bit of a headwind.

And the interesting thing about the policy choices, at least from the administration, is we hear a lot of focus on the 10-year treasury yield. And it seems like one of the focuses that they have is kind of incentivizing a little bit more borrowing, a little bit more leverage from the private sector, and a little bit less borrowing from the government sector. So I think, at least from that perspective, maybe they're making some progress. Or how do you see the kind of policy mix playing out into the second half of this year in 2026?

Yeah. I mean, the good news so far is that a lot of the pain that we've seen in markets is, as I said, more related to sentiment-- so soft data rather than hard data. So this transition that we're going through hasn't yet played out into the broader economy. That's certainly something that we need to watch.

I think what's important to recognize is, as you said, the areas that we would be most concerned about-- the corporate sector, the consumer-- the areas that we think are going to drive growth still remain in very good shape. So even as policy uncertainty is on the rise, the fundamental outlook is still one that points us to a softer growth environment, but still a positive growth environment.

Right. So what I'm hearing from you is as long as you believe that the fundamentals in the corporate sector and the household sector are OK, if you believe the kind of historical precedent that spikes in policy uncertainty are actually interesting times to add to equities, you can feel pretty good about phasing in here. Is that fair?

I think that's right. There's a very good chance, given that this is more of a sentiment-driven issue than it is a fundamental issue, that we may have already seen a bottom in US equity markets. But we also need the humility to understand that life is not just about a single path in markets, but around a range of outcomes. And so one of the things that we think about is what is the potential path that could take us lower?

If you go back to the global financial crisis, we've had four series of growth scares where we saw markets begin to price in increasing odds of recession but where we didn't get there. In those cases, on average, markets fell by 15% to 20%. So a lot of that historical pain we've already felt.

So now is probably the time where for fully invested clients, we feel really good hanging out at normal levels of risk. For clients who are sitting on elevated levels of cash or who are thinking about phasing into portfolios, we're getting close to that point where you want to be putting some of that capital to work, recognizing that the ultimate bottom may not be in, but taking that disciplined and gradual approach is much better for long-term success.

Absolutely. And there are other ways than just buying the equity market outright to add exposure to portfolios. I'm thinking about things like equity-linked structured notes. I'm thinking about opportunities at a subsector level, or even a company level. So you don't have to kind of have a binary decision point here.

That's right. But I also think it's really important to have that shopping list. So one of the things that we always talk about with our portfolio managers is being ready. What are the things that you would want to buy if we get to lower levels? Because ultimately, things feel really bad when you hit those bottoms in market, and so you want to be ready to go.

And so whether it's using, as you said, structures with downside protection to leg into markets, or thinking about opportunities in things like financials or technology, now is the time you should be thinking about that discussion.

And I want to come back to your-- the scenarios that you alluded to, just to think through like maybe what are we watching in case we're wrong. But it made me think, like, what are those kind of opportunities that we're seeing in the private markets right now, where they're-- the managers that we work with are kind of circling around either potential distress, or I know real estate was in the news for the last two years about being a potential area where there is opportunity. How are they thinking through the potential areas that are more opportunistic?

Well, I would say you're right. Real estate is certainly a place that we've been legging into over the last couple quarters. We do think that when you look at the odyssey indexes, a lot of those have bottoms. They've started picking up the last-- I think the last two quarters, in particular, which has been fantastic.

We do also think real estate is fundament-- a lot of the subsectors of real estate-- you can't just say real estate, right? Within every sector, within every city, with every-- office in New York is very different than office in Munich or Paris or wherever it might be.

But what I would say is that in the real estate market, we certainly see continued constrained supply. The sentiment doesn't help in terms of new construction also. And so there's a lot of things that have allowed us to do a reset in real estate that we feel very good about on a go-forward basis.

So I would say real estate returns on a go-forward basis we do think are higher than in the past. If you look at our long-term capital market assumptions, which sort of predicts over a 10 to 15-year period, what every sub asset class, sort of the range of outcomes might be, real estate is typically in the 7% to 8.5% was maybe when I looked back over the last 20 years, that range. And now it's the highest of any subsector. It's over 10% And so there there's certainly an interest in thinking about real estate as part of a portfolio.

On the opportunistic credit side, I think credit, in general, more folks have focused on direct lending over the last several years as a way to gather income and portfolios. I would say there's a lot of people that under the hood of credit-- we were just talking about when you look at-- high yield has been pretty good over the last couple of years, both from a company perspective, a subsector perspective, et cetera.

When you look at lev loans, it did surprise me to learn that there's over $80 billion in sort of the distressed zone, whether it's 2/3 of that in areas where companies have spreads over 1000 basis points.

And that's surprising just because in public markets, credit spreads have remained very resilient--

And it feels OK.

--very tight. And everything feels OK.

Yeah. But I would say that our opportunistic credit managers are starting to see sort of these opportunities arise at a more micro level than a macro level. But that's-- I think we forget how large the overall non-investment grade market has become over the last 12 years, 14 years. And so there's still plenty of opportunity on the opportunistic credit side as well.

Absolutely. And I think what we're kind of painting here is this picture that we wrote about in our outlook, which is, how do you make a portfolio more resilient? How do you generate the returns that you need to meet your goals over time by pulling various different levers? And whether that's broad equity markets driving capital appreciation, whether it's using equity-linked structured notes to change the volatility profile, whether it's using real estate to have a different return driver that's still in that kind of high single-digit range.

Asset-backed, yeah.

There's a lot of asset-backed finance. There's a lot of different ways that we can generate those returns, and that's going to continue to be important.

Yeah. I thought you were going to go there next, which was, building that portfolio resiliency, which is a lot. People are also looking at places like infrastructure that are also asset-backed, but are essential services-- utilities, power.

And they have a little inflation protection.

Yeah. Or even like some people were asking about stagflation, thinking about slower growth, higher inflation. And a lot of the pass-throughs that you can get within the infrastructure assets and ecosystem has been really essential to returns over the last couple decades.

So let's dig in on that with Steve.

Yeah, great.

Because the reason why you need a resilient portfolio is because you can't just invest for one central case.

Totally.

That's how you get a portfolio that's fragile and is exposed to pretty severe drawdown. So when we think about the range of possible outcomes, what are we watching to see if our base case is on track? And then what would make us a little bit more nervous about the kind of rest of the year?

Yeah. So, again, to reiterate, our base case is that we will see a positive growth environment, perhaps slowing a little bit relative to the last couple of years. But that in retrospect this will be more of a growth scare. In that scenario, the upside to our S&P target, as an example, is high single to low double-digit types of returns between now and the end of the year.

Now, what are the potential downside scenarios. We talked a little bit about this growth scare idea. So there's a risk that continued policy uncertainty starts to translate from those sentiment surveys into actual corporate action and gets us a little bit of a slowdown. That's a possibility. But as I said, a lot of that has already been priced into markets.

The bigger risk is the recession risk. And you're hearing more and more noise about this policy uncertainty translating into a true slowdown. That historically has meant something like a 20% to 30% correction in markets. But we don't see that as a high probability risk.

What are we watching, to get back to your question to figure out if that risk is higher? One, and KK touched on it a little bit, credit spreads. That is the best real-time indicator around the health of the corporate sector. Thus far, we haven't seen a lot of movement that would indicate great deals of concern from the credit markets.

Two would be this idea of the translation from softness in the soft data to the hard data. So today, the biggest areas of weakness are around consumer sentiment, corporate sentiment surveys, rather than actual spending data, rather than actual employment data, et cetera. So we want to keep a close eye on whether the hard data, the actual numbers, start to slow down.

And then the third one is really around corporate commentary. So a big part of our positive view on the world is related to the fact that the corporate sector is in very good shape. We expect capital spending to remain robust. We will get earnings season kicking off in about a month.

But between now and then, we want to keep an ear to the ground on what companies are saying. Are they changing the trajectory of their spending? Are they bringing down expectations? And thus far, we haven't seen that play out in a broad-based way.

And so I'm sure kind of the first quarter earnings report season is going to be very important to kind of parse through how companies are actually dealing with the policy uncertainty and the tariff uncertainty that's in the landscape, to just make sure that what we're seeing from a bottoms-up perspective is aligned with our expectations for the environment.

Yeah, that's right. And the good news is we talked at the beginning about, better or worse, what is the level of expectations? With the sell-off that we've seen in markets, we have seen some degree of correction from a valuation perspective. In fact, if you look at the Mag Seven, which was an area of concern, valuations there relative to the broader market are now at their lowest levels in 10 years. So this is, again, going back to what are the risks and what are the opportunities?

Right so our base case is for a continued expansion, maybe a little bit slower growth than we were penciling in before-- sticky inflation, but nothing that's really going to get the fed to materially shift their policy. But if we're wrong, it seems like we're going to be in an elevated volatility environment. And most of your investment portfolios probably enjoys low volatility. I'm thinking about equities, and I'm talking about fixed income right. The valuation of assets is probably going to be higher if they're less volatile.

One kind of asset class or investment option that actually does well when volatility is higher is hedge funds. So I'm interested to hear, what are the-- what is the case for hedge funds in this environment? And then what are some of the managers that we work with doing?

Well, I know that you know that I hate saying hedge funds. You're right. Hedge funds are an industry.

I knew I was going to make you mad with this question.

No, it's good.

And you can correct me.

Hedge funds are an industry, not an asset class. And I think it's important only because there's over 10,000 that are out there. We invest in less than 100 of them. What I would say is, you're right. In a portfolio where correlations have risen together, as long as there's not significant spikes in volatility, hedge funds, over time, have done very well in terms of delivering alpha.

We went through a period pre-GFC, where we saw significant help in the industry. We went through what I call the alpha winter of hedge funds, which was 2010 to 2019.

More like an ice age.

[LAUGHS] And since 2020, we've seen alpha come back. Now, what do you have to fundamentally have, though, for hedge funds to be able to deliver in a portfolio? And, again, I'm speaking broad-based.

But when we focus on less correlated return streams within hedge funds-- relative value, quant, a little bit of macro-- what I would say is that when you have risk-free rates over 2%, when you have increased vol, and when you have increased to stock dispersion, that's typically been a good environment from an alpha perspective of hedge funds being able to deliver.

And when you look at the broad-- even the broad-based industry, even though I just said that we focus on less than 1%, over half of the hedge fund industry has abated a broader markets of less than 0.5. So there's plenty of opportunities to think about it.

I would say the uncorrelated return streams is where we're focused. What can you not replicate via public markets? And those have done fantastically well.

I also think there's a lot of hedge funds that have become more the market-makers in the markets when times of volatility come. And so there's a lot going on there. There's a lot of availability of alpha, we think, in today's environment because risk-free is over two, volatility has increased, and stock dispersion has also increased.

Right. And when you think about what role we're trying to have the hedge fund industry play in a portfolio is to be that volatility dampener, to give us a return that's above and beyond what cash can give us without being as correlated to either public equities or public fixed income. And we think the landscape sets up well for it to be able to achieve.

Yeah. I always say it takes a roller coaster of a market to make it a baby roller coaster. If you start at 100, and you're down 50 and up 50, you're not back at 100. If you could be down 25, up 25, you go from being at 75 versus 93.75. So even minimizing that roller coaster, I think, can help you compound at higher returns.

Yeah. And minimizing the roller coaster is all portfolio resilience is about. We're just trying to add differentiated return streams that are less correlated to each other so that you aren't suffering those really damaging drawdowns--

Spot on.

--to portfolios. OK. So now, we've covered a lot. We've covered a lot of policy backdrop, a lot of the kind of market backdrop, our expectations for the future and the implications. One of the kind of longer term themes that we are really positive on is AI.

You correctly pointed out that the kind of DeepSeek news was the first demarcation line that, oh, maybe this year, 2025, is going to be different than what 2023 and 2024 were like. I think you said it correctly. Less expensive AI that creates better output should be better for the global economy and for global companies.

One of the ways that we think the AI trade is going to manifest is through the software space, because all of these applications are really just software. So it's interesting-- and I'm going to steal a stat from you, but I want you to tell the whole story-- is that there's 100,000-ish investable software companies in the world, and 95,000 of them are private.

So having private exposure to this trend, we think is critical. But can you just elucidate a little bit more of why it's so critical to have access to that sleeve of the market?

Yeah. Well, a couple of different things. I do think you're right. We hit on-- part one was like the infrastructure phase. And it was a lot of the infrastructure funds, building data centers, thinking about that.

We've sort of shifted off of that a little bit. We're still doing-- making investments behind some of the data centers. But the DeepSeek, the questions about how much demand is there, who's going to hold the bag in terms of the risk in the end? We've moved into the power side of the equation. How do you actually power these things? That's interesting.

But, you're right. We've moved-- also, we're starting to invest in the application layer. And so we do think software is the one place. It has very low CapEx spend. It has non-- we focus, in particular, on enterprise software. That's a place that we really like.

And I would also say within software, security is one place that we're starting to focus more. I think the market is starting to focus more and more on it. Last week, Google announced the acquisition of Wiz a year after they last did. I think it went from $23 billion to $32 billion a year later.

That tells me two things. One-- and it was the largest-- I think it was the largest acquisition in the security market maybe ever. But it tells me two things. It tells me, one, people are starting to focus on security, and that one's a multi-cloud provider. So it's not just about Google themselves.

But number two, I do think it's interesting because it's one of the first things to happen in this new administration. And so talking about the difference in a year ago versus today, the revenues have only increased for that company, let's say. But a lot of people talk about just the fact that you can now start doing M&A or thinking about that.

So applications, software, in particular-- you just talked about the large percentage of the market that you could only get in private markets-- and then the focus on security, I think, are the near-term focus items in AI.

Got it. Got it. So we're going to go ahead and wrap up. But I just want to think back to the beginning, which is some of those performance statistics that I listed. This week is the five-year anniversary of the market bottom during the COVID crisis. So we have five years of data.

Since then, the S&P 500 has returned 175%, which is 22% annualized. The long-term capital market assumptions say the S&P should do something like 7%. So we've been on a really good stretch for the last five years.

Magnificent Seven is up over 500%. Global equities up over 150%. And a global 60/40 has returned to over 70%. So this has been a tremendous stretch for financial markets and for investors.

And when you think about everything the world has been through over the last five years-- pandemic, global lockdowns, social distancing, sharpest inflation shock in 40 years, sharpest central bank tightening cycle in 40 years, two presidential elections, wars, a mini banking crisis in March 2023-- I think it's really a testament to this idea that if you build a portfolio that is designed to achieve your goals over your given time horizon, you need to trust it, and you need to let it work.

So I just want to thank both of you very much for the insights on the individual asset classes. And I want to thank you all again for joining us. In conclusion, this current market landscape is certainly-- it feels overwhelming at times, but that requires an active and empowered approach. And we think the most important decision you can make is to get invested and stay invested in a portfolio that's designed for you and for your goals.

And at JPMorgan, we are all here to help. And we just, again, appreciate all of the time and all of your confidence in us. So thank you for joining.

Thank you.

Thanks.

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Text:J.P.Morgan. LONG-TERM CAPITAL MARKET ASSUMPTIONS. Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative optimization approaches in setting strategic allocations. Please note that all information shown is based on qualitative analysis. Exclusive reliance on the above is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. Note that these asset class and strategy assumptions are passive only they do not consider the impact of active management. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting legal or tax advice. The outputs of the assumptions are provided for illustration/discussion purposes only and are subject to significant limitations. "Expected" or "alpha" return estimates are subject to uncertainty and error. For example, changes in the historical data from which it is estimated will result in different implications for asset class returns. Expected returns for each asset class are conditional on an economic scenario: actual returns in the event the scenario comes to pass could be higher or lower, as they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. References to future returns for either asset allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making a decision. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. The model assumptions are passive only they do not consider the impact of active management. A manager's ability to achieve similar outcomes is subject to risk factors over which the manager may have no or limited control.

The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield are not a reliable indicator of current and future results.

KEY RISKS. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments involve greater risks than traditional investments and should not be deemed a complete investment program. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. The value of the investment may fall as well as rise and investors may get back less than they invested. Structured products involve derivatives and risks that may not be suitable for all investors. The most common risks include, but are not limited to, risk of adverse or unanticipated market developments, issuer credit quality risk, risk of lack of uniform standard pricing, risk of adverse events involving any underlying reference obligations, risk of high volatility, risk of illiquidity/little to no secondary market, and conflicts of interest. Before investing in a structured product, investors should review the accompanying offering document, prospectus or prospectus supplement to understand the actual terms and key risks associated with the each individual structured product. Any payments on a structured product are subject to the credit risk of the issuer and/or guarantor. Investors may lose their entire investment i.e., incur an unlimited loss. The risks listed above are not complete. For a more comprehensive list of the risks involved with this particular product, please speak to your J.P. Morgan representative. Diversification and asset allocation does not ensure a profit or protect against loss. Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation. call, prepayment, and reinvestment risk. The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to "stock market risk" meaning that stock prices in general may decline over short or extended periods of time.

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.

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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.

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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.

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KEY RISKS OF INVESTING IN ALTERNATIVES. Additional risks. There may be additional risks inherent in the underlying investments within funds. Currency risks and non-United States investments. Investments may be denominated in non-U.S. currencies. Accordingly, changes in currency exchange rates, costs of conversion and exchange control regulations may adversely affect the dollar value of investments. Dependence on manager. Performance is more dependent on manager-specific skills, rather than broad exposure to a particular market. Event risk. Given certain funds' niche specialization (e.g., in an industry or a region), market dislocations can affect some strategies more adversely than others. Financial services industry risk factors. Financial services institutions have asset and liability structures that are essentially monetary in nature and are directly affected by many factors, including domestic and international economic and political conditions, broad trends in business and finance, legislation and regulation affecting the national and international business and financial communities, monetary and fiscal policies, interest rates, inflation, currency values, market conditions, the availability and cost of short-term or long-term funding and capital, the credit capacity or perceived creditworthiness of customers and counterparties, and the volatility of trading markets. Financial services institutions operate in a highly regulated environment and are subject to extensive legal and regulatory restrictions and limitations and to supervision, examination and enforcement by regulatory authorities. Failure to comply with any of these laws, rules or regulations, some of which are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties, fines, suspension or expulsion, and termination of deposit insurance, which may have material adverse effects.

KEY RISKS OF INVESTING IN ALTERNATIVES. General/Loss of capital. An investment in private equity funds involves a high degree of risk. There can be no assurance that (1) a private equity fund will be able to choose, make and realize investments in any particular company or portfolio of companies, (ii) the private equity fund will be able to generate returns for its investors or that the returns will be commensurate with the risks of investing in the type of companies and transactions that constitute the fund's investment strategy or (iii) an investor will receive any distributions from the private equity fund. Accordingly, an investment in a private equity fund should only be considered by persons who can afford a loss of their entire investment due to its high degree of risk. Investors in the private equity fund could lose up to the full amount of their invested capital. The private equity fund's fees and expenses may offset the private equity fund's profits. Past performance is not indicative of future results. J.P. Morgan's role. J.P. Morgan generally acts as a placement agent to the funds. The investment managers or general partners (or the equivalent) may pay (or cause the funds to pay) J.P. Morgan an initial fee and/or an ongoing servicing fee in connection with its services. In addition, where J.P. Morgan acts as placement agent, an origination fee of up to 2% will be paid by investors in the funds (including those investing through a conduit vehicle and in the Vintage Funds) to J.P. Morgan at the closing and will be in addition to, and not in reduction of, capital commitments to the applicable fund. The origination fee is in addition to fees charged by a fund. J.P. Morgan also provides investment advice and/or administrative functions for certain private investment funds (including the Vintage funds and funds serving as conduit vehicles investing in the funds); J.P. Morgan receives a fee for providing these services in some cases (including with respect to the Vintage Funds). Lack of information. The industry is largely unregistered and loosely regulated with little or no public market coverage. Investors are reliant on the manager for the availability, quality and quantity of information. Information regarding investment strategies and performance may not be readily available to investors. Leverage. The capital structures of many portfolio companies typically include substantial leverage. In addition, investments may be consummated through the use of significant leverage. Leveraged capital structures and the use of leverage in financing investments increase the exposure of a company to adverse economic factors such as rising interest rates, downturns in the economy or deteriorations in the condition of the company or its industry and make the company more sensitive to declines in revenues and to increases in expenses.

KEY RISKS OF INVESTING IN ALTERNATIVES. Limited liquidity for private equity. Investments in private equity funds are intended for long-term investors who have the financial ability and willingness to accept the risks associated with making speculative and primarily illiquid investments. Interests in the private equity funds are generally not redeemable. An investor in such a fund may not freely transfer, assign or sell any interest without the prior written consent of the fund manager. An investor may not, save in particular circumstances, withdraw from a private equity fund. Interests in private equity funds will not be registered under the U.S. Securities Act of 1933, as amended or any other securities laws in any jurisdiction. There is no liquid market for such interests and none is expected to develop. Consequently, a commitment may be difficult to sell or realize. Limited liquidity generally. Interests are not publicly listed or traded on an exchange or automated quotation system. There is not a secondary market for interests, and as a result, invested capital is less accessible than that of traditional asset classes. Also, withdrawals and transfers are generally restricted. Potential conflicts of interest. Investors should be aware that there will be occasions when a private equity fund's general partner and its officers and affiliates may encounter potential conflicts of interest in connection with the fund. Fund professionals may work on other matters and, therefore, conflicts may arise in the allocation of management resources. The payment of carried interest to the general partner may create an incentive for the general partner to cause the private equity fund to make riskier or more speculative investments than it would in the absence of such incentive.

Risks associated with infrastructure investments generally. An infrastructure investment is subject to certain risks associated with the ownership of infrastructure and infrastructure-related assets in general, including: the burdens of ownership of infrastructure assets; local, national and international economic conditions; the supply and demand for services from and access to infrastructure; the financial condition of users and suppliers of infrastructure assets: changes in interest rates and the availability of funds, which may render the purchase, sale or refinancing of infrastructure assets difficult or impracticable; changes in environmental laws and regulations, and planning laws and other governmental rules; environmental claims arising in respect of infrastructure assets acquired with undisclosed or unknown environmental problems or as to which inadequate reserves have been established; changes in the price of energy, raw materials and labor; changes in fiscal and monetary policies; negative developments in the economy that depress travel; uninsured casualties; force majeure acts, terrorist events, underinsured or uninsurable losses; sovereign and sub-sovereign risks; contract counterparty default risk.

KEY RISKS OF INVESTING IN ALTERNATIVES. Risks of certain investments. The securities of portfolio companies and the ability of such companies to pay debts could be adversely affected by interest rate movements, changes in the general economic or political climate, or the economic factors affecting a particular industry, changes in tax law or specific developments within such companies. The securities in which a private equity fund will invest generally will be among the most junior in the portfolio company's capital structure, and thus may be subject to the greatest risk of loss. Most of a private equity fund's investments will not have a readily available public market, and disposition of such investments may require a lengthy time period or may result in distributions in kind to investors. A private equity fund's manager generally has a limited ability to extend the term of the fund, therefore the fund may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. Speculation. Alternative investments often employ leverage, sometimes at significant levels, to enhance potential returns. Investment techniques may include the use of derivative instruments such as futures, options and short sales, which amplify the possibilities for both profits and losses and may add volatility to the alternative investment fund's performance.

Taxation considerations. An investment in a private equity fund or hedge fund may involve complex tax considerations, which may differ for each investor. Each investor is advised to consult its own tax advisers. Changes in applicable tax laws could affect, perhaps adversely, the tax consequences of an investment. Valuation. Because of overall size or concentration in particular markets of positions held by the alternative investment fund or other reasons, the value at which its investments can be liquidated may differ, sometimes significantly, from the interim valuations arrived at by the alternative investment fund. Private investments are subject to special risks. Individuals must meet specific suitability standards before investing. This information does not constitute an offer to sell or a solicitation of an offer to buy. As a reminder, hedge funds (or funds of hedge funds), private equity funds, real estate funds often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum. Securities are made available through J.P. Morgan Securities LLC, Member FINRA, and SIPC, and its broker-dealer affiliates.

KEY RISKS OF INVESTING IN ALTERNATIVES. Hedge funds (or funds of hedge funds) often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum. Liquid alternative funds are registered funds that seek to accomplish the fund's objectives through non-traditional investments and trading strategies. They differ significantly from both hedge funds and traditional mutual funds because they can be redeemed on any business day, they are said to be "liquid." Such funds do not follow the typical buy and hold strategy of a traditional mutual fund and generally hold more nontraditional investments and use more complex trading strategies than a traditional mutual fund, which may make an investment in a liquid alternative fund riskier. Non-traditional investments may include, but not limited to private equity, derivatives, commodities, real estate, distressed debt and hedge funds. While investments in private equity funds provide potential for attractive returns, access to opportunities not available in the public markets and diversification, they also present significant risks including illiquidity, long-term time horizons, loss of capital and significant execution and operating risks that are not typically present in public equity markets. Private equity funds typically have a 10-15 year term and will begin to monetize investments after holding them for 4-5 years. Hedge funds (or funds of hedge funds) often engage in leveraging and other speculative investment practices that may increase the risk of investment loss; can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any hedge fund.

KEY RISKS OF INVESTING IN ALTERNATIVES. Economy, currency, tax and market conditions, including market liquidity, may increase the risks of these investments and may impact performance of the funds. The views and strategies described herein may not be suitable for all investors, and more complete information is available which discusses risks, liquidity, and other matters of interest. Hedge funds (or funds of hedge funds) often engage in leveraging and other speculative investment practices that may increase the risk of investment loss; can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any hedge fund Any investment associated with leverage will include additional risks such as implied volatility, exposure to rising interest rates (borrowing costs) and margin calls, which may occur if the underlying investment declines below its minimum lending values. Leverage will have the effect of magnifying losses or gains. Please note that lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Margin calls may include sale of the asset serving as collateral if the collateral value declines below the amount required to secure the line of credit. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have.