Subject: J.P. Morgan Eye on the Market on China, May 31, 2011
From: "Person, Brian H" <[email-masked]>
To: "Undisclosed recipients:"
Date: Tue, 31 May 2011 13:03:19 -0400

Market update. Recent US economic data continue to soften, as consumer spending, income, housing and manufacturing surveys have come in below expectations. It's too soon to tell if this is a temporary swoon like last year. The disconnect between subpar economic data and resilient equity markets is growing. Our views haven't changed since January: a recovery reliant on monetary and fiscal policy bazookas runs the risk of unexpected potholes, and negative feedback loops (higher commodity prices). Corporate profits are a clear bright spot, but require measures to address the negative personal income implications of all-time lows in relative wages. Our portfolios are positioned for a muddle-through kind of year.

On China. Last week, I had the opportunity to interview Dr. Henry Kissinger at our Institutional Research Summit on the occasion of his new book entitled "On China", and his 88th birthday. Opinionated, controversial, an unflinching believer in Realpolitik, unparalleled access to politicians around the globe, still an adviser to US Presidents; not much has changed for Dr. Kissinger in 50 years. This week's Eye on the Market summarizes the interview, which focused on China's past, present and future.

Michael Cembalest
Chief Investment Officer

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