Equity Research
Equity Strategy : Should SPW and SX5E, which stalled since March, break out higher?
July 15, 2024
Equity Strategy : Should SPW and SX5E, which stalled since March, break out higher?
Equity Strategy : Should SPW and SX5E, which stalled since March, break out higher?
This document is being provided for the exclusive use of blake@sandboxfp.com.
15 July 2024

Equity Strategy

Should SPW and SX5E, which stalled since March, break out higher?

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

While SPX is at fresh highs, powered by a few stocks, both the equal weighted US equity index - SPW, as well as SX5E, have stalled since March…

…this consolidation beneath the surface is likely to continue through the summer, in our view, on softer growth, but at the same time on higher for longer Fed

For Value to work, one nee ds rising bond yields for the right reasons, but we fear bond yields will move further lower

Source: Datastream, Bloomberg Finance L.P.

  • While the S&P500 was powered again this year by Mag-7, the equal weighted index - SPW, is up a more modest 6%, having peaked in March. Likewise, SX5E has also peaked in March - top chart. Indeed, the historical spread between the performance of S&P500 and SPW is extreme. Given this, it is probable that the divergence peaks, but that could happen through winners stalling, and not through laggards rallying. Post the benign CPI print last week, SPW is bouncing again, but we fear the conditions for a sustained rally are not there, and look for the consolidation beneath the surface to continue through the summer.
  • The peaks in SPW and in SX5E coincided with the worsening in Growth - Policy tradeoff - middle chart. Since March, Fed futures started to point to higher for longer rates, but at the same time the activity dataflow started to inflect lower, relative to the optimistic expectations. The more challenging macro tradeoff could stay with us.
  • Consumer spending and labour markets are softening, while at the same time the PMI rebound that was in force earlier in the year stalled. On the other side, and in contrast to the start of the year, when the Fed was seen to be cutting quickly, frequently, and for the right reasons, such as falling inflation, the Fed could indeed commence the cuts from Sept, but not only due to falling inflation - softer labour markets could come into the mix. In a sense, the Fed has moved from pre-emptive cuts to reactive ones, and could fall behind the curve.
  • The slowing growth is likely to impact earnings delivery in 2H. The expectations are rather punchy, at 13-15% yoy EPS growth rate in Q3 and Q4. This could be challenged by softer corporate pricing and slowing topline, on top of weakening activity, in particular from the consumer.
  • In terms of positioning, we have been bullish on Growth over Value style, the same as we had through 2023, and we are not changing it just yet, even as the risk is that Growth style struggles from here, given extreme concentration. For the leadership to broaden, we think one needs to see a genuine reflationary push, with accelerating growth and with rising bond yields for the right reasons - bottom chart, but we appear to be having the opposite. Our view remains that bond yields will be lower, which favours Defensive positioning - we are in particular bullish on Utilities and Real Estate - see our April report. Within this, while small caps remain a poor performer in most places this year, the same as they were in 2023, we have last month argued to get more constructive on selected small caps, such as in the UK, and also in Eurozone. We note that FTSE250 is now starting to move ahead of FTSE100, after 2.5 years of significant weakness. A similar pattern could be seen in Eurozone.
  • Regionally, we keep the view that it is too early to OW Eurozone vs the US - report, but given the meaningful lag, a good opportunity might present itself in 2H to buy Eurozone. For this to have traction, Growth style needs to stop leading, French politics needs to demonstrate stability over next months, and USD and tariffs should not become the headwinds.

When will the stalling in SPW and in SX5E, in force since March, change?

Figure 1: S&P500 and SPW - equal weighted SPX index

Source: Bloomberg Finance L.P.

The big 17% year to date gain for S&P500 masks the less punchy performance of the average stock within the index. The equal weighted S&P500 index is up 6% year to date, having peaked in March. In the past few days SPW is showing signs of life, on the benign inflation print, but the question is whether the rally can sustain.

Market concentration is extreme, which calls for a reversal...

Figure 2: Market capitalization weight of top 5 stocks in MSCI US

Source: Datastream

It is the case that the US market has been getting more and more narrow for a while now. The bulk of the move higher in US equities has been driven by a handful of megacap stocks. The top 5 stocks by market cap in the US index represent almost a quarter of the total market capitalization of the index.

Figure 3: Ratio of S&P500 to Equal weighted S&P500 index - 10Y run up to 2000 Tech bubble peak and current

Source: Bloomberg Finance L.P.

Looking at the ratio of S&P500 to the equal weighted index - SPW over the past 10 years, and compared to the 10 years run-up to the 2000 bubble bursting, we are at similar extremes currently.

Figure 4: Market capitalization weight of top 5 stocks in MSCI Europe

Source: Datastream

European equities have also seen an increase in concentration, though not to the same extent as seen in the US.

...the reversal might not happen in a good way, with laggards rebounding… this is because the Growth - Policy trade-off has deteriorated again since Q1...

Figure 5: CESIs in key regions

Source: Bloomberg Finance L.P.

The extreme concentration suggests the leaders might stall, but in order for the laggards to rally, we think one needs to see a genuine reflation in the background, which is underpinned by strengthening growth. We are seeing the opposite right now, after accelerating early in the year, economic surprise indices have moved into negative territory across key regions in the past months.

Figure 6: US CESI and Fed policy rate expectations

Source: Bloomberg Finance L.P.

The March peaks in both SPW and in SX5E coincided with the weakening activity, but at the same time with Fed cuts being pushed out.

Figure 7: US ISM Manufacturing and Eurozone Manufacturing PMI

Source: Bloomberg Finance L.P.

We think this stalling could have legs. The PMI rebound that was seen at the turn of the year in manufacturing and in Europe appears to have stopped.

Figure 8: US jobless claims and recessions

Source: Bloomberg Finance L.P.

Labour market was rock solid until now, but there are some indications of softening. Claims have been steadily climbing higher.

Figure 9: US unemployment rate and recessions

Source: Bloomberg Finance L.P.

The unemployment rate has made a turn.

Figure 10: US Quits rate vs Atlanta Fed wage tracker

Source: Bloomberg Finance L.P.

Weaker wage growth ahead is likely, which could be a headwind for the consumer spend.

Figure 11: US Savings rate

Source: Bloomberg Finance L.P.

US savings rate is below trend.

Figure 12: University of Michigan Consumer Sentiment index

Source: Bloomberg Finance L.P.

Consumer sentiment has been weakening as well.

Figure 13: US Retail sales control group

Source: Bloomberg Finance L.P.

Retail sales have been softening for a while now, and the number of recent corporate profit warnings in consumer space suggests this could continue.

Figure 14: Real Fed Policy rate minus Holston Laubach Williams Natural Rate of interest

Source: Bloomberg Finance L.P., Holston Laubach Williams Natural Rate is the real short-term interest rate expected to prevail when an economy is at full strength and inflation is stable

Even if Fed starts cutting in November, as JPM expects, we expect interest rates will remain well above the neutral rate, i.e. monetary policy could remain restrictive for the foreseeable future.

...earnings hurdle rate for 2H is too high if activity continues to slow

Figure 15: S&P500 quarterly EPS, with projections for the rest of the year

Source: Thomson Reuters

S&P500 earnings are projected to increase sequentially every quarter this year. Q4 EPS is forecast to be 15% above Q1.

Table 1: S&P500 historical quarterly earnings: Q4 vs Q1 move

1Q 2Q 3Q 4Q 4Q vs 1Q
2010 19.7 21.5 21.8 22.6 14%
2011 23.5 24.1 25.7 24.6 4%
2012 25.6 25.8 26.0 26.3 3%
2013 26.7 27.4 27.6 28.6 7%
2014 28.2 30.1 30.0 30.5 8%
2015 28.6 30.1 30.0 29.5 3%
2016 27.0 29.6 31.2 31.3 16%
2017 30.9 32.6 33.5 36.0 17%
2018 38.1 41.0 42.7 41.2 8%
2019 39.2 41.3 42.1 42.0 7%
2020 33.1 28.0 38.7 42.6 29%
2021 49.1 52.6 53.7 54.0 10%
2022 54.8 57.6 56.0 53.2 -3%
2023 53.1 54.3 58.4 57.2 8%
2024e 56.6 59.2 63.3 65.2 15%
Average 10%
Median 8%

Source: Thomson Reuters

This is well above the 8% median growth seen historically for Q4 EPS compared to Q1.

Figure 16: US Real GDP growth forecasts - JPM

Source: J.P. Morgan

This is also at odds with the projected slowdown in growth momentum in the US in 2H of this year. We believe corporate profitability is likely to come under pressure as topline growth weakens and margins soften on account of weaker pricing.

We reiterate our preference for Growth over Value, for now...

Figure 17: US and European Growth vs Value ytd

Source: Datastream

We have been OW Growth vs Value again this year, the same as through 2023, and, despite the extreme concentration risk, expect the trade to keep working, for now.

Figure 18: MSCI Europe Value vs Growth and US 10Y bond yields

Source: Datastream

The performance of Value factor is very much dependent on the direction of bond yields, Value needs rising bond yields for the right reasons to work. We believe bond yields are likely to keep moving lower as the Fed starts easing and / or growth continues to moderate.

...and for Defensives over Cyclicals

Figure 19: Stoxx 600 Real Estate price relative and German bond yield

Source: Bloomberg Finance L.P.

We have in early April argued to add to bond proxies, Utilities and Real Estate, on a likely move lower in bond yields.

Figure 20: MSCI Europe sectors’ performance last 3 months

Source: Datastream

In the last 3 months there has been some turn in performance, with those two sectors picking up in the rankings. We think this will continue.

Figure 21: MSCI US sectors’ performance last 3 months

Source: Datastream

The same is visible in the US.

Figure 22: MSCI World Defensives relative and US 10Y bond yields

Source: Datastream

More broadly, if the last 3-4 years of a move higher in bond yields turns, then traditional Defensive sectors are likely to see an improvement, as well.

Figure 23: Cyclicals vs Defensives 12m Fwd. P/E relative

Source: Datastream

Some of the Defensive sectors have derated significantly, and offer an attractive entry point, in our view.

Figure 24: Stoxx 600 Cyclicals minus Defensives median earnings growth, %y/y

Source: J.P. Morgan

We also note that Cyclical sectors’ relative earnings momentum is starting to deteriorate versus Defensives.

Selected Small Cap stocks could trade better versus Large caps in 2H

Table 2: Small caps vs large caps – YTD performance

YTD performance
MSCI US Small Caps 1.1%
Large Caps 17.6%
MSCI Eurozone Small Caps 1.7%
Large Caps 7.9%
MSCI UK Small Caps 5.3%
Large Caps 5.7%
MSCI Japan Small Caps 12.6%
Large Caps 25.3%

Source: Datastream

Small caps had another poor start to the year, on the back of underperformance in the past 2 years. They are back to the lows in the US, and we are not changing our UW there. Having said that, we have last month closed our long-standing UW on European and UK small caps, given the big underperformance, cheap valuations, improving domestic activity momentum and the start of the easing cycle in Europe.

Figure 25: FTSE250 relative to FTSE100 ytd

Source: Datastream

UK small caps in particular have responded positively to the recent political changes.

Figure 26: FTSE250 relative to FTSE100 and UK Manufacturing PMI

Source: Datastream, J.P. Morgan

They are also more sensitive to the domestic economic outlook and should trade better as PMIs stabilize.

Figure 27: MSCI UK Small vs large cap performance around BoE first cut

Source: Datastream

The start of the rate cut cycle has historically coincided with better performance of small caps over large caps.

Figure 28: MSCI Europe Small vs large cap performance around ECB first cut

Source: Datastream

Similarly, European small caps also outperform post the start of the rate cut cycle.

Figure 29: MSCI Eurozone Small vs Large Caps and Manufacturing PMI

Source: Datastream, J.P. Morgan

PMIs also suggest that small caps in Eurozone could be supported.

Regionally, we still believe it is too early to go OW Eurozone vs the US…

Figure 30: MSCI Eurozone relative performance to MSCI US ($)

Source: Datastream

In Q1, we closed our UW Eurozone vs the US call that we had held since May ‘23. Key considerations at the time included cheaper valuations, stabilizing China economy and start of the ECB easing cycle ahead of any Fed move.

Figure 31: Eurozone sector neutral P/E relative to US

Source: Datastream

Despite the recent weakness following the French election triggered volatility, we do not think one needs to go outright long Eurozone versus the US just yet. We acknowledge that valuations do look attractive; however, we believe there could be a better entry point for the trade in the coming months.

Figure 32: MSCI US vs Eurozone and World Growth vs Value

Source: Datastream

Eurozone equities typically struggle during periods of Value underperformance. We need a reversal in styles for Eurozone to work, and also in the near-term a market friendly outcome from the French political deadlock would be needed. Finally, dollar strength and worsening US-China trade relations could be headwinds. We look to buy Eurozone at some point in 2H, but think that there might be a better opportunity later on.

Equity Strategy Key Calls and Drivers

SPW, an equal-weighted S&P500 index, has stalled since March, and is behind SPX so far this year by more than 10%. We think this is reflecting a changing Growth-Policy narrative vs early 2024. Entering this year, investor expectations were for a Goldilocks outcome – growth acceleration and at the same time quick Fed easing, starting already in March. The early Fed cuts and the consequent improving credit impulse didn’t materialize, which should weigh on growth in 2H. US activity momentum is slowing, with CESI outright negative at present, putting EPS growth projections of as much as 15% acceleration between Q1 and Q4 of this year at risk. Instead of easing preemptively for market-friendly reasons, such as falling inflation, as was the view at the start of the year, the Fed could end up easing, but reactively, in a response to weakening growth. At the same time, there is no safety net any more, the market is positioned long, Vix is at lows, potentially underpricing risks and credit spreads are extremely tight – this is as good as it gets. Adding to the picture strengthening USD and elevated political uncertainty currently, we arrive at a problematic setup for the equity market during summer. In terms of positioning, we have entered this year again OW Growth vs Value style and Large vs Small caps, and we are keeping these for 2H in the US, not expecting much broadening. The recent relative dip due to French political uncertainty is likely to become a buying opportunity as we move through 2H, but we think the risk of further drawdowns is not finished, as the potential new French government will likely try to test the limits of what they can do. Cyclicals were the best performing sectors in Q1, but struggled to outperform in Q2 . We reiterate our barbell of OW Defensives and Commodities.

Table 3: J.P. Morgan Equity Strategy — Factors driving our medium-term views

Driver Impact Our Core Working Assumptions Recent Developments
Global Growth Neutral At risk of weakening as consumer strength wanes Global composite PMI is at 52.9
European Growth Positive reset last year, manufacturing improving, consumer can pick up  
Monetary Policy Neutral Fed pivot could be accompanied by activity weakness  
Currency Neutral USD could strengthen again  
Earnings Negative Corporate pricing power is likely to weaken from here 2024 EPS projections are continuing their downtrend
Valuations Negative At 21x, US forward P/E is still stretched, especially vs real yield  MSCI Europe on 13.7x Fwd P/E
Technicals Negative Sentiment and positioning are stretched post the rally since November RSIs are in overbought territory

Source: J.P. Morgan estimates

Table 7: J.P. Morgan Equity Strategy — Key sector calls*

Sector Recommendations Key Drivers
Utilities Overweight Sector is low beta, has strong cash flow generation, resilient earnings, and power prices are higher than pre-Ukraine but P/E relative is near record cheap
Healthcare Overweight Potential for lower yields and stronger dollar are supports, better earnings
Staples Overweight Sector is one of the best performers around the last Fed hike in the cycle, lower bond yields and better relative EPS momentum should help
Banks Underweight 3 years of strong performance, NII likely peaking, central banks moving to cuts, underprovisioning
Autos Underweight Pricing and volume could come under pressure with rising inventories, increasing China competition and weaker demand
Chemicals Underweight The sector trades at 70% premium to the market, well above historical norm. pricing continues to deteriorate, downside risks to current earnings and margin projections

Source: J.P. Morgan estimates. * Please see the last page for the full list of our calls and sector allocation.

Table 8: J.P. Morgan Equity Strategy — Key regional calls

Region Recommendations J.P. Morgan Views
EM Neutral China tactical positive call since Q1, but structural concerns remain
DM Neutral  
    US Neutral Expensive with earnings risk. but our ytd Growth style OW helps
    Japan Overweight Large rate differential, TSE reforms, consumer reflation, but JPY needs to show stability
    Eurozone Neutral Eurozone growth differential bottoming, cheap
    UK Overweight Valuations still look very attractive, low beta with the highest regional dividend yield

Source: J.P. Morgan estimates.

Top Picks

Table 9: J.P. Morgan European Strategy: Top European picks

Market Cap EPS Growth Dividend Yield 12m Fwd P/E Performance
Name Ticker Sector Rating Price Currency (€ Bn) 23e 24e 25e 24e Current 10Y Median % Premium -3m -12m
ENI ENI IM Energy OW 14 E 46.6 -35% -15% 1% 6.5% 6.7 12.5 -46% -7% 7%
TOTALENERGIES TTE FP Energy OW 63 E 149.9 -33% -1% 2% 4.9% 7.3 10.6 -31% -7% 21%
SHELL SHEL LN Energy OW 34 E 211.0 -23% 0% 2% 3.5% 8.7 11.1 -22% 0% 22%
CRH PUBLIC LIMITED CRH LN Materials OW 80 U$ 49.5 -14% 25% 9% 1.7% 14.1 14.9 -5% -5% 47%
RIO TINTO RIO LN Materials OW 5250 £ 105.8 -11% 4% -1% 6.4% 9.1 10.3 -11% 0% 6%
NORSK HYDRO NHY NO Materials OW 67 NK 11.6 -60% 27% 40% 3.7% 10.4 12.6 -18% -1% 5%
ANGLO AMERICAN AAL LN Materials OW 2394 £ 34.8 -51% -14% 19% 3.1% 13.7 9.5 44% 13% 7%
SCHNEIDER ELECTRIC SU FP Industrials OW 230 E 132.0 2% 15% 12% 1.5% 25.9 16.5 57% 10% 43%
ASHTEAD GROUP AHT LN Industrials OW 5170 £ 26.9 26% - - 1.5% 16.3 14.1 16% -10% -1%
RYANAIR HOLDINGS RYA ID Industrials OW 17 E 19.6 - - - 0.0% 8.6 12.7 -33% -17% 3%
AIRBUS AIR FP Industrials OW 132 E 104.5 10% -13% 34% 1.4% 20.3 18.5 10% -19% 0%
MTU AERO ENGINES HLDG. MTX GR Industrials OW 246 E 13.3 24% 12% 14% 0.8% 18.6 18.1 3% 16% 8%
STELLANTIS STLAM IM Discretionary OW 19 E 56.4 12% -17% 5% 8.3% 3.7 4.7 -21% -26% 14%
BMW BMW GR Discretionary OW 91 E 57.8 -35% -7% -1% 6.6% 5.6 7.6 -27% -18% -
INDITEX ITX SM Discretionary OW 46 E 144.9 27% - - 2.6% 23.2 24.0 -3% 7% 35%
ADIDAS ADS GR Discretionary OW 225 E 40.6 -154% - 121% 0.3% 44.7 24.8 80% 13% 31%
RICHEMONT N CFR SW Discretionary OW 141 SF 85.8 78% - - 1.7% 20.1 20.8 -3% 7% -4%
COMPASS GROUP CPG LN Discretionary OW 2171 £ 43.9 50% 14% 10% 1.9% 21.7 20.9 4% 0% 5%
COLRUYT GROUP COLR BB Staples OW 45 E 5.8 -27% - - 1.8% 15.1 17.6 -14% 13% 28%
ANHEUSER-BUSCH INBEV ABI BB Staples OW 56 E 113.5 -5% 9% 13% 1.3% 17.2 19.4 -11% 1% 10%
NOVO NORDISK 'B' NOVOB DC Health Care OW 967 DK 578.9 52% 26% 25% 1.0% 36.6 22.8 61% 11% 87%
ASTRAZENECA AZN LN Health Care OW 12100 £ 222.8 9% 13% 14% 1.9% 17.8 17.7 1% 10% 20%
SMITH & NEPHEW SN/ LN Health Care OW 1091 £ 11.3 1% 12% 18% 2.7% 13.8 18.4 -25% 11% -7%
UBS GROUP UBSG SW Financials OW 28 SF 98.6 -99% 4327% 65% 2.3% 17.6 10.4 70% 5% 56%
NATWEST GROUP NWG LN Financials OW 327 £ 32.3 38% -20% 9% 5.2% 7.5 10.0 -26% 20% 39%
ING GROEP INGA NA Financials OW 17 E 55.1 106% -9% 8% 6.6% 8.4 9.0 -7% 8% 32%
INTESA SANPAOLO ISP IM Financials OW 4 E 65.7 79% 19% 4% 8.2% 7.5 10.0 -25% 9% 51%
LONDON STOCK EXCHANGE GROUP LSEG LN Financials OW 9370 £ 59.1 2% 10% 13% 1.2% 24.8 23.0 8% 1% 17%
AMUNDI (WI) AMUN FP Financials OW 67 E 13.6 4% 8% 7% 6.2% 10.0 12.6 -21% 4% 22%
DASSAULT SYSTEMES DSY FP IT N 34 E 45.5 6% 8% 9% 0.8% 25.2 31.7 -21% -15% -14%
ASML HOLDING ASML NA IT OW 989 E 395.2 41% -4% 60% 0.6% 40.1 27.3 47% 9% 56%
ASM INTERNATIONAL ASM NA IT OW 728 E 36.0 -8% 19% 35% 0.4% 44.4 16.7 167% 25% 96%
DEUTSCHE TELEKOM DTE GR Telecoms OW 24 E 118.4 -13% 14% 12% 3.2% 12.3 14.0 -12% 12% 22%
BT GROUP BT/A LN Telecoms OW 141 £ 16.6 9% - - 5.5% 7.8 8.6 -9% 33% 15%
RELX REL LN Industrials OW 3543 £ 78.6 12% 7% 9% 1.7% 27.7 19.5 42% 7% 45%
HELLOFRESH HFG GR Staples N 6 E 1.0 -49% -69% 166% 0.0% 16.3 18.4 -11% -8% -75%
RWE RWE GR Utilities OW 34 E 25.3 30% -55% -26% 2.9% 14.2 13.0 9% 8% -13%
ENEL ENEL IM Utilities OW 7 E 69.0 15% 10% 0% 6.3% 10.1 11.9 -15% 19% 11%
SEGRO SGRO LN Real Estate OW 946 £ 15.2 6% 6% 8% 2.9% 26.4 25.3 5% 10% 32%

Source: Datastream, MSCI, IBES, J.P. Morgan, Prices and Valuations as of COB 11th Jul, 2024. Past performance is not indicative of future returns.

Please see the most recent company-specific research published by J.P. Morgan for an analysis of valuation methodology and risks on companies recommended in this report. Research is available at http://www.jpmorganmarkets.com

Equity Flows Snapshot

Table 10: DM Equity Fund Flows Summary

Regional equity fund flows
$mn % AUM
1w 1m 3m ytd 12m 1w 1m 3m ytd 12m
Europe ex UK -531 -1,998 347 -818 -7,172 -0.2% -0.6% 0.1% -0.2% -2.3%
UK -834 -2,771 -8,727 -15,499 -28,451 -0.3% -1.0% -3.2% -5.6% -10.4%
US 5,078 32,112 81,090 146,369 272,523 0.0% 0.3% 0.8% 1.5% 3.1%
Japan -2,105 -4,384 -4,342 7,864 13,959 -0.3% -0.5% -0.5% 1.0% 1.9%

Source: EPFR, as of 10th Jul, 2024

Technical Indicators

Performance

Table 11: Sector Index Performances — MSCI Europe

Source: MSCI, Datastream, as at COB 11th Jul, 2024.

Table 12: Country and Region Index Performances

(%change) Local Currency US$
Country Index 4week 12m YTD 4week 12m YTD
Austria ATX 2.3 18.5 7.3 3.3 17.3 5.7
Belgium BEL 20 4.1 14.0 8.7 5.2 12.8 7.0
Denmark KFX (0.9) 44.7 24.3 0.1 43.0 22.3
Finland HEX 20 (1.7) 0.7 (1.4) (0.7) (0.4) (2.9)
France CAC 40 (1.0) 5.6 1.1 (0.1) 4.6 (0.4)
Germany DAX 1.5 17.4 10.6 2.5 16.2 9.0
Greece ASE General 0.5 9.8 11.8 1.5 8.7 10.1
Ireland ISEQ 2.3 12.1 11.6 3.4 10.9 9.9
Italy FTSE MIB 2.1 22.3 13.1 3.1 21.1 11.4
Japan Topix 7.2 31.0 23.8 6.1 16.2 10.0
Netherlands AEX 1.2 23.8 19.0 2.3 22.6 17.2
Norway OBX 0.5 13.1 6.3 (0.1) 9.8 0.9
Portugal BVL GEN 2.5 0.8 (4.3) 3.5 (0.3) (5.8)
Spain IBEX 35 0.9 19.7 10.6 2.0 18.5 8.9
Sweden OMX (0.5) 14.5 7.4 (0.6) 16.8 3.4
Switzerland SMI 1.3 11.8 10.0 1.4 10.3 3.6
United States S&P 500 2.8 25.8 17.1 2.8 25.8 17.1
United States NASDAQ 3.5 32.9 21.8 3.5 32.9 21.8
United Kingdom FTSE 100 0.7 12.9 6.3 2.0 13.2 7.8
EMU MSCI EMU 0.8 13.6 8.4 1.8 12.4 6.7
Europe MSCI Europe 0.7 14.4 8.6 1.6 13.7 6.8
Global MSCI AC World 2.7 23.2 15.1 2.9 22.1 13.8

Source: MSCI, Datastream, as at COB 11th Jul, 2024.

Earnings

Table 13: IBES Consensus EPS Sector Forecasts — MSCI Europe

EPS Growth (%yoy)
2023 2024E 2025E 2026E
Europe (3.8) 4.2 10.2 9.2
Energy (31.6) (3.8) 2.2 3.0
Materials (39.0) 7.4 14.7 8.3
Chemicals (39.0) 23.0 19.0 12.9
Construction Materials 12.2 14.3 9.5 8.7
Metals & Mining (46.8) (4.5) 11.1 3.8
Industrials (0.5) 9.1 13.0 12.1
Capital Goods 20.4 12.2 14.7 12.0
Transport (55.8) (11.4) (0.8) 15.5
Business Svs 3.2 7.7 11.5 10.4
Discretionary 4.9 1.4 11.1 10.5
Automobile 1.9 (6.6) 6.5 7.0
Consumer Durables (6.0) 1.6 14.9 13.1
Media 1.8 6.1 9.3 7.9
Retailing 40.2 23.9 14.9 12.5
Hotels,Restaurants&Leisure 63.0 40.1 22.4 19.0
Staples 2.3 2.1 8.7 7.6
Food & Drug Retailing 3.7 2.3 10.1 9.4
Food Beverage & Tobacco 1.9 0.5 8.8 7.7
Household Products 2.9 6.5 7.9 6.9
Healthcare 1.1 6.4 14.5 11.1
Financials 15.8 8.0 7.7 8.9
Banks 28.8 3.6 4.4 6.7
Diversified Financials (19.9) 18.2 22.1 20.1
Insurance 11.4 14.5 8.1 7.3
Real Estate 5.6 2.6 4.1 4.3
IT 14.4 (10.2) 33.8 16.2
Software and Services 18.5 (5.8) 24.0 16.8
Technology Hardware (19.1) 8.9 7.5 11.2
Semicon & Semicon Equip 27.9 (18.5) 51.1 17.2
Telecoms (8.6) 9.5 11.0 11.0
Utilities 1.8 (0.0) 0.4 4.1

Source: IBES, MSCI, Datastream. As at COB 11th Jul, 2024.

Table 14: IBES Consensus EPS Country Forecasts

EPS growth (%change)
Country Index 2023 2024E 2025E 2026E
Austria ATX (23.6) 6.3 4.1 5.5
Belgium BEL 20 16.4 (6.6) 15.4 11.9
Denmark Denmark KFX (14.7) 32.0 17.7 17.2
Finland MSCI Finland (25.2) 0.6 13.7 8.9
France CAC 40 (2.3) 0.6 9.5 8.1
Germany DAX 0.2 0.6 12.6 11.0
Greece MSCI Greece 15.1 (8.9) 5.0 10.3
Ireland MSCI Ireland 33.8 0.4 3.0 6.4
Italy MSCI Italy 8.9 0.1 3.5 5.2
Netherlands AEX (1.9) 2.1 12.7 9.0
Norway MSCI Norway (41.2) 5.5 4.9 1.5
Portugal MSCI Portugal 16.9 16.9 0.5 8.2
Spain IBEX 35 8.2 4.9 4.1 6.1
Sweden OMX 31.9 1.5 8.6 7.1
Switzerland SMI (4.5) 11.6 12.6 10.4
United Kingdom FTSE 100 (10.5) 0.9 8.6 7.8
EMU MSCI EMU 3.0 3.5 10.6 9.3
Europe ex UK MSCI Europe ex UK (0.0) 5.3 10.8 9.6
Europe MSCI Europe (3.8) 4.2 10.2 9.2
United States S&P 500 2.5 10.5 14.7 12.3
Japan Topix 18.0 8.2 10.2 8.4
Emerging Market MSCI EM (6.5) 21.6 15.9 11.0
Global MSCI AC World 0.2 9.9 13.5 11.1

Source: IBES, MSCI, Datastream. As at COB 11th Jul, 2024** Japan refers to the period from March in the year stated to March in the following year – EPS post-goodwill

Valuations

Table 15: IBES Consensus European Sector Valuations

P/E Dividend Yield EV/EBITDA Price to Book
2024e 2025e 2026e 2024e 2025e 2026e 2024e 2025e 2026e 2024e 2025e 2026e
Europe 14.6 13.2 12.1 3.3% 3.5% 3.8% 8.2 7.7 7.1 2.0 1.9 1.7
Energy 7.7 7.5 7.3 5.5% 5.4% 5.7% 3.4 3.4 3.3 1.2 1.1 1.0
Materials 16.1 14.1 13.0 3.2% 3.5% 3.7% 7.7 6.8 6.5 1.7 1.6 1.5
Chemicals 24.0 20.2 17.9 2.7% 2.9% 3.0% 11.7 10.6 9.6 2.3 2.2 2.1
Construction Materials 13.2 12.0 11.1 3.5% 3.7% 4.1% 6.9 6.3 5.8 1.4 1.3 1.2
Metals & Mining 11.3 10.2 9.8 3.7% 4.2% 4.5% 5.2 4.4 4.4 1.3 1.2 1.1
Industrials 20.2 17.9 15.9 2.3% 2.5% 2.8% 10.4 9.4 8.6 3.4 3.1 2.9
Capital Goods 20.2 17.6 15.7 2.2% 2.4% 2.7% 11.1 9.6 8.8 3.5 3.2 2.9
Transport 16.1 16.2 14.0 3.2% 3.2% 3.4% 6.7 6.8 6.3 1.8 1.7 1.7
Business Svs 23.4 21.0 19.0 2.3% 2.5% 2.7% 13.2 12.3 11.3 6.5 6.0 5.5
Discretionary 13.3 11.9 10.8 2.8% 3.1% 3.4% 5.2 4.9 4.7 1.9 1.7 1.5
Automobile 6.0 5.6 5.2 5.5% 5.8% 6.2% 1.8 1.6 1.7 0.7 0.6 0.6
Consumer Durables 23.7 20.7 18.3 1.9% 2.1% 2.3% 13.8 12.6 11.3 4.0 3.6 3.2
Media & Entertainment 17.3 15.8 14.6 2.4% 2.6% 2.8% 12.2 9.7 9.1 2.0 2.1 1.9
Retailing 16.5 14.4 12.8 2.3% 2.5% 2.7% 7.1 10.1 7.6 3.6 3.1 2.8
Hotels,Restaurants&Leisure 23.6 19.3 16.2 2.0% 2.5% 2.9% 12.2 10.4 9.4 4.5 4.1 3.7
Staples 17.1 15.8 14.7 3.1% 3.4% 3.6% 10.7 10.0 9.2 2.8 2.7 2.5
Food & Drug Retailing 11.7 10.6 9.7 4.2% 4.5% 4.9% 5.7 5.6 5.3 1.6 1.5 1.4
Food Beverage & Tobacco 16.7 15.4 14.3 3.5% 3.7% 4.0% 10.5 9.8 9.0 2.5 2.4 2.3
Household Products 20.4 18.9 17.7 2.4% 2.6% 2.8% 13.9 12.9 11.9 4.2 3.9 3.6
Healthcare 19.3 16.9 15.2 2.2% 2.4% 2.7% 12.8 11.7 10.2 3.7 3.4 3.1
Financials 9.3 8.6 7.9 5.4% 5.6% 6.0% - - - 1.1 1.1 1.0
Banks 7.4 7.1 6.6 7.0% 7.0% 7.4% - - - 0.8 0.8 0.7
Diversified Financials 15.1 12.4 10.3 2.3% 2.6% 2.9% - - - 1.4 1.6 1.5
Insurance 10.9 10.0 9.4 5.5% 5.9% 6.3% - - - 1.7 1.6 1.5
Real Estate 15.3 14.7 14.1 4.0% 4.2% 4.4% - - - 0.9 0.9 0.8
IT 34.6 25.9 22.3 1.1% 1.2% 1.4% 20.1 15.6 13.6 5.5 5.0 4.4
Software and Services 33.2 26.8 22.9 1.3% 1.4% 1.5% 19.0 16.1 13.8 4.6 4.2 3.7
Technology Hardware 16.9 15.7 14.1 2.3% 2.5% 2.8% 9.3 8.9 7.5 2.1 1.9 1.8
Semicon & Semicon Equip 42.8 28.3 24.2 0.7% 0.9% 1.0% 26.4 17.8 15.6 9.7 8.2 6.9
Communication Services 15.1 13.6 12.2 4.2% 4.3% 4.5% 6.6 6.2 5.7 1.5 1.5 1.4
Utilities 12.7 12.6 12.1 4.9% 4.9% 5.2% 8.0 8.1 8.0 1.6 1.5 1.4

Source: IBES, MSCI, Datastream. As at COB 11th Jul, 2024.

Table 16: IBES Consensus P/E and 12-Month Forward Dividend Yields — Country Forecasts

P/E Dividend Yield
Country Index 12mth Fwd 2024E 2025E 2026E 12mth Fwd
Austria ATX 8.2 8.3 8.0 7.6 5.8%
Denmark Denmark KFX 26.2 29.0 24.6 21.0 1.5%
Finland MSCI Finland 14.5 15.7 13.8 12.7 4.4%
France CAC 40 12.4 13.1 12.0 11.1 3.5%
Germany DAX 11.8 12.8 11.3 10.2 3.4%
Greece MSCI Greece 29.5 30.3 28.9 26.2 1.9%
Ireland MSCI Ireland 11.0 11.2 10.9 10.3 3.7%
Italy MSCI Italy 9.1 9.3 9.0 8.5 5.6%
Netherlands AEX 15.9 17.0 15.1 13.8 2.4%
Norway MSCI Norway 10.2 10.5 10.0 9.9 6.4%
Portugal MSCI Portugal 14.9 15.0 14.9 13.8 3.9%
Spain IBEX 35 10.6 10.9 10.4 9.8 4.8%
Sweden OMX 14.6 15.3 14.1 13.3 3.8%
Switzerland SMI 16.9 18.1 16.1 14.6 3.2%
United Kingdom FTSE 100 11.3 11.8 10.9 10.1 4.0%
EMU MSCI EMU 12.9 13.7 12.4 11.4 3.5%
Europe ex UK MSCI Europe ex UK 14.5 15.5 14.0 12.7 3.3%
Europe MSCI Europe 13.7 14.6 13.2 12.1 3.5%
United States S&P 500 21.4 23.4 20.4 18.2 1.4%
Japan Topix 15.4 16.0 14.5 13.4 2.3%
Emerging Market MSCI EM 12.1 13.2 11.9 10.2 2.9%
Global MSCI AC World 17.8 19.2 17.3 15.2 2.0%

Source: IBES, MSCI, Datastream. As at COB 11th Jul, 2024; ** Japan refers to the period from March in the year stated to March in the following year – P/E post goodwill.

Economic, Interest Rate and Exchange Rate Outlook

Table 17: Economic Outlook in Summary

Real GDP Real GDP Consumer prices
% oya % over previous period, saar % oya
2023E 2024E 2025E 4Q23 1Q24 2Q24E 3Q24E 4Q24E 1Q25E 1Q24 3Q24E 1Q25E 3Q25E
United States 2.5 2.3 1.7 3.4 1.4 2.0 1.0 1.0 2.0 3.2 3.1 2.7 2.4
Eurozone 0.6 0.8 1.1 -0.2 1.3 1.5 1.5 1.0 1.0 2.6 2.3 2.3 1.9
United Kingdom 0.1 1.0 0.8 -1.2 2.9 2.0 1.0 1.0 0.8 3.5 2.2 2.5 2.9
Japan 1.8 -0.1 0.7 0.4 -1.8 1.5 1.0 0.8 0.6 2.5 2.8 3.5 2.5
Emerging markets 4.2 4.2 3.6 4.1 6.1 3.0 3.5 3.5 3.4 3.7 3.5 3.5 3.2
Global 2.8 2.6 2.3 2.7 3.2 2.3 2.2 2.1 2.3 3.3 3.1 3.0 2.7

Source: J.P. Morgan economic research J.P. Morgan estimates, as of COB 5th Jul, 2024

Table 18: Official Rates Outlook

Forecast for
Official interest rate Current Last change (bp) Forecast next change (bp) Sep 24 Dec 24 Mar 25 Jun 25
United States Federal funds rate 5.50 26 Jul 23 (+25bp) Sep 24 (-25bp) 5.25 5.00 4.75 4.50
Eurozone Depo rate 3.75 6 Jun 24 (-25bp) Sep 24 (-25bp) 3.50 3.25 3.00 2.50
United Kingdom Bank Rate 5.25 03 Aug 23 (+25bp) Aug 24 (-25bp) 5.00 4.75 4.50 4.25
Japan Pol rate IOER 0.10 19 Mar 24 (+20bp) 3Q24 (+15bp) 0.25 0.50 0.50 0.75

Source: J.P. Morgan estimates, Datastream, as of COB 5th Jul, 2024

Table 19: 10-Year Government Bond Yield Forecasts

10 Yr Govt BY Forecast for end of
12-Jul-24 Sep 24 Dec 24 Mar 25 Jun 25
US 4.21 4.50 4.40 4.20 4.00
Euro Area 2.49 2.40 2.20 2.10 2.00
United Kingdom 4.07 4.10 3.95 3.85 3.75
Japan 1.06 1.20 1.45 1.45 1.60

Source: J.P. Morgan estimates, Datastream, forecasts as of COB 28th Jun, 2024

Table 20: Exchange Rate Forecasts vs. US Dollar

Exchange rates vs US$ Forecast for end of
11-Jul-24 Oct 24 Jan 25 Apr 25 Jul 25
EUR 1.09 1.05 1.09 1.12 1.12
GBP 1.29 1.25 1.31 1.35 1.35
CHF 0.90 0.94 0.92 0.89 0.89
JPY 159 157 156 155 154
DXY 104.4 107.1 103.7 101.3 101.1

Source: J.P. Morgan estimates, Datastream, forecasts as of COB 28th Jun, 2024

Sector, Regional and Asset Class Allocations

Table 21: J.P. Morgan Equity Strategy — European Sector Allocation

MSCI Europe Weights Allocation Deviation Recommendation
Energy 5.6% 8.0% 2.4% OW
Materials 7.0% 6.0% -1.0% N
Chemicals UW
Construction Materials N
Metals & Mining N
Industrials 15.8% 14.0% -1.8% N
Capital Goods ex Aerospace & Defence UW
Aerospace & Defence OW
Transport N
Business Services N
Consumer Discretionary 9.1% 7.0% -2.1% UW
Automobile UW
Consumer Durables N
Consumer Srvcs UW
Speciality Retail UW
Internet Retail UW
Consumer Staples 11.7% 13.0% 1.3% OW
Food & Drug Retailing UW
Beverages OW
Food & Tobacco OW
Household Products OW
Healthcare 16.0% 18.0% 2.0% OW
Financials 18.1% 14.0% -4.1% UW
Banks UW
Insurance N
Real Estate 0.9% 2.0% 1.1% OW
Information Technology 7.1% 7.0% -0.1% N
Software and Services N
Technology Hardware N
Semicon & Semicon Equip UW
Communication Services 4.5% 5.0% 0.5% OW
Telecommunication Services OW
Media N
Utilities 4.4% 6.0% 1.6% OW
100.0% 100.0% 0.0% Balanced

Source: MSCI, Datastream, J.P. Morgan.

Table 22: J.P. Morgan Equity Strategy — Global Regional Allocation

MSCI Weight Allocation Deviation Recommendation
EM 10.0% 10.0% 0.0% Neutral
DM 90.0% 90.0% 0.0% Neutral
US 70.9% 68.0% -2.9% Neutral
Japan 6.2% 8.0% 1.8% Overweight
Eurozone 8.6% 8.0% -0.6% Neutral
UK 3.8% 6.0% 2.2% Overweight
Others* 10.5% 10.0% -0.5% Neutral
100.0% 100.0% 0.0% Balanced

Source: MSCI, J.P. Morgan *Other includes Denmark, Switzerland, Australia, Canada, Hong Kong SAR, Sweden, Singapore, New Zealand, Israel and Norway

Table 23: J.P. Morgan Equity Strategy — European Regional Allocation

MSCI Weight Allocation Deviation Recommendation
Eurozone 51.0% 48.0% -3.0% Neutral
United Kingdom 22.6% 25.0% 2.4% Overweight
Others** 26.5% 27.0% 0.5% Overweight
100.0% 100.0% Balanced

Source: MSCI, J.P. Morgan **Other includes Denmark, Switzerland, Sweden and Norway

Table 24: J.P. Morgan Equity Strategy — Asset Class Allocation

Benchmark weighting Allocation Deviation Recommendation
Equities 60% 55% -5% Underweight
Bonds 30% 35% 5% Overweight
Cash 10% 10% 0% Neutral
100% 100% 0% Balanced

Source: MSCI, J.P. Morgan

Click here for our weekly podcast

 

Anamil Kochar (anamil.kochar@jpmchase.com) of J.P. Morgan India Private Limited is a co-author of this report.

Analyst Certification: The Research Analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple Research Analysts are primarily responsible for this report, the Research Analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect the Research Analyst’s personal views about any and all of the subject securities or issuers; and (2) no part of any of the Research Analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the Research Analyst(s) in this report. For all Korea-based Research Analysts listed on the front cover, if applicable, they also certify, as per KOFIA requirements, that the Research Analyst’s analysis was made in good faith and that the views reflect the Research Analyst’s own opinion, without undue influence or intervention.

All authors named within this report are Research Analysts who produce independent research unless otherwise specified. In Europe, Sector Specialists (Sales and Trading) may be shown on this report as contacts but are not authors of the report or part of the Research Department.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan–covered companies, and certain non-covered companies, by visiting https://www.jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request.

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight (over the duration of the price target indicated in this report, we expect this stock will outperform the average total return of the stocks in the Research Analyst’s, or the Research Analyst’s team’s, coverage universe); Neutral (over the duration of the price target indicated in this report, we expect this stock will perform in line with the average total return of the stocks in the Research Analyst’s, or the Research Analyst’s team’s, coverage universe); and Underweight (over the duration of the price target indicated in this report, we expect this stock will underperform the average total return of the stocks in the Research Analyst’s, or the Research Analyst’s team’s, coverage universe. NR is Not Rated. In this case, J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia and ex-India) and U.K. small- and mid-cap Equity Research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those Research Analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying Research Analyst’s coverage universe can be found on J.P. Morgan’s Research website, https://www.jpmorganmarkets.com.

J.P. Morgan Equity Research Ratings Distribution, as of July 06, 2024

Overweight(buy) Neutral(hold) Underweight(sell)
J.P. Morgan Global Equity Research Coverage* 49% 38% 13%
    IB clients** 49% 46% 34%
JPMS Equity Research Coverage* 48% 41% 11%
    IB clients** 69% 66% 50%

*Please note that the percentages may not add to 100% because of rounding.**Percentage of subject companies within each of the "buy," "hold" and "sell" categories for which J.P. Morgan has provided investment banking services within the previous 12 months. For purposes of FINRA ratings distribution rules only, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above. This information is current as of the end of the most recent calendar quarter.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. For material information about the proprietary models used, please see the Summary of Financials in company-specific research reports and the Company Tearsheets, which are available to download on the company pages of our client website, http://www.jpmorganmarkets.com. This report also sets out within it the material underlying assumptions used.

A history of J.P. Morgan investment recommendations disseminated during the preceding 12 months can be accessed on the Research & Commentary page of http://www.jpmorganmarkets.com where you can also search by analyst name, sector or financial instrument.

Analysts' Compensation: The research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of J.P. Morgan Securities LLC, may not be registered as research analysts under FINRA rules, may not be associated persons of J.P. Morgan Securities LLC, and may not be subject to FINRA Rule 2241 or 2242 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide.

UK MIFID FICC research unbundling exemption: UK clients should refer to UK MIFID Research Unbundling exemption for details of J.P. Morgan’s implementation of the FICC research exemption and guidance on relevant FICC research categorisation.

All research material made available to clients are simultaneously available on our client website, J.P. Morgan Markets, unless specifically permitted by relevant laws. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research material available on a particular stock, please contact your sales representative.

Any long form nomenclature for references to China; Hong Kong; Taiwan; and Macau within this research material are Mainland China; Hong Kong SAR (China); Taiwan (China); and Macau SAR (China).

J.P. Morgan Research may, from time to time, write on issuers or securities targeted by economic or financial sanctions imposed or administered by the governmental authorities of the U.S., EU, UK or other relevant jurisdictions (Sanctioned Securities). Nothing in this report is intended to be read or construed as encouraging, facilitating, promoting or otherwise approving investment or dealing in such Sanctioned Securities. Clients should be aware of their own legal and compliance obligations when making investment decisions.

Any digital or crypto assets discussed in this research report are subject to a rapidly changing regulatory landscape. For relevant regulatory advisories on crypto assets, including bitcoin and ether, please see https://www.jpmorgan.com/disclosures/cryptoasset-disclosure.

The author(s) of this research report may not be licensed to carry on regulated activities in your jurisdiction and, if not licensed, do not hold themselves out as being able to do so.

Exchange-Traded Funds (ETFs): J.P. Morgan Securities LLC (“JPMS”) acts as authorized participant for substantially all U.S.-listed ETFs. To the extent that any ETFs are mentioned in this report, JPMS may earn commissions and transaction-based compensation in connection with the distribution of those ETF shares and may earn fees for performing other trade-related services, such as securities lending to short sellers of the ETF shares. JPMS may also perform services for the ETFs themselves, including acting as a broker or dealer to the ETFs. In addition, affiliates of JPMS may perform services for the ETFs, including trust, custodial, administration, lending, index calculation and/or maintenance and other services.

Options and Futures related research: If the information contained herein regards options- or futures-related research, such information is available only to persons who have received the proper options or futures risk disclosure documents. Please contact your J.P. Morgan Representative or visit https://www.theocc.com/components/docs/riskstoc.pdf for a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options or http://www.finra.org/sites/default/files/Security_Futures_Risk_Disclosure_Statement_2018.pdf for a copy of the Security Futures Risk Disclosure Statement.

Changes to Interbank Offered Rates (IBORs) and other benchmark rates: Certain interest rate benchmarks are, or may in the future become, subject to ongoing international, national and other regulatory guidance, reform and proposals for reform. For more information, please consult: https://www.jpmorgan.com/global/disclosures/interbank_offered_rates

Private Bank Clients: Where you are receiving research as a client of the private banking businesses offered by JPMorgan Chase & Co. and its subsidiaries (“J.P. Morgan Private Bank”), research is provided to you by J.P. Morgan Private Bank and not by any other division of J.P. Morgan, including, but not limited to, the J.P. Morgan Corporate and Investment Bank and its Global Research division.

Legal entity responsible for the production and distribution of research: The legal entity identified below the name of the Reg AC Research Analyst who authored this material is the legal entity responsible for the production of this research. Where multiple Reg AC Research Analysts authored this material with different legal entities identified below their names, these legal entities are jointly responsible for the production of this research. Research Analysts from various J.P. Morgan affiliates may have contributed to the production of this material but may not be licensed to carry out regulated activities in your jurisdiction (and do not hold themselves out as being able to do so). Unless otherwise stated below, this material has been distributed by the legal entity responsible for production. If you have any queries, please contact the relevant Research Analyst in your jurisdiction or the entity in your jurisdiction that has distributed this research material.

Legal Entities Disclosures and Country-/Region-Specific Disclosures: Argentina: JPMorgan Chase Bank N.A Sucursal Buenos Aires is regulated by Banco Central de la República Argentina (“BCRA”- Central Bank of Argentina) and Comisión Nacional de Valores (“CNV”- Argentinian Securities Commission - ALYC y AN Integral N°51). Australia: J.P. Morgan Securities Australia Limited (“JPMSAL”) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by the Australian Securities and Investments Commission and is a Market Participant of ASX Limited, a Clearing and Settlement Participant of ASX Clear Pty Limited and a Clearing Participant of ASX Clear (Futures) Pty Limited. This material is issued and distributed in Australia by or on behalf of JPMSAL only to "wholesale clients" (as defined in section 761G of the Corporations Act 2001). A list of all financial products covered can be found by visiting https://www.jpmm.com/research/disclosures. J.P. Morgan seeks to cover companies of relevance to the domestic and international investor base across all Global Industry Classification Standard (GICS) sectors, as well as across a range of market capitalisation sizes. If applicable, in the course of conducting public side due diligence on the subject company(ies), the Research Analyst team may at times perform such diligence through corporate engagements such as site visits, discussions with company representatives, management presentations, etc. Research issued by JPMSAL has been prepared in accordance with J.P. Morgan Australia’s Research Independence Policy which can be found at the following link: J.P. Morgan Australia - Research Independence Policy. Brazil : Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Ombudsman J.P. Morgan: 0800-7700847 / 0800-7700810 (For Hearing Impaired) / ouvidoria.jp.morgan@jpmorgan.com. Canada : J.P. Morgan Securities Canada Inc. is a registered investment dealer, regulated by the Canadian Investment Regulatory Organization and the Ontario Securities Commission and is the participating member on Canadian exchanges. This material is distributed in Canada by or on behalf of J.P.Morgan Securities Canada Inc. Chile: Inversiones J.P. Morgan Limitada is an unregulated entity incorporated in Chile. China: J.P. Morgan Securities (China) Company Limited has been approved by CSRC to conduct the securities investment consultancy business. Dubai International Financial Centre (DIFC) : JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - The Gate, West Wing, Level 3 and 9 PO Box 506551, Dubai, UAE. This material has been distributed by JP Morgan Chase Bank, N.A., Dubai Branch to persons regarded as professional clients or market counterparties as defined under the DFSA rules. European Economic Area (EEA): Unless specified to the contrary, research is distributed in the EEA by J.P. Morgan SE (“JPM SE”), which is authorised as a credit institution by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB). JPM SE is a company headquartered in Frankfurt with registered address at TaunusTurm, Taunustor 1, Frankfurt am Main, 60310, Germany. The material has been distributed in the EEA to persons regarded as professional investors (or equivalent) pursuant to Art. 4 para. 1 no. 10 and Annex II of MiFID II and its respective implementation in their home jurisdictions (“EEA professional investors”). This material must not be acted on or relied on by persons who are not EEA professional investors. Any investment or investment activity to which this material relates is only available to EEA relevant persons and will be engaged in only with EEA relevant persons. Hong Kong : J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong, and J.P. Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. JP Morgan Chase Bank, N.A., Hong Kong Branch (CE Number AAL996) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission, is organized under the laws of the United States with limited liability. Where the distribution of this material is a regulated activity in Hong Kong, the material is distributed in Hong Kong by or through J.P. Morgan Securities (Asia Pacific) Limited and/or J.P. Morgan Broking (Hong Kong) Limited. India : J.P. Morgan India Private Limited (Corporate Identity Number - U67120MH1992FTC068724), having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz - East, Mumbai – 400098, is registered with the Securities and Exchange Board of India (SEBI) as a ‘Research Analyst’ having registration number INH000001873. J.P. Morgan India Private Limited is also registered with SEBI as a member of the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited (SEBI Registration Number – INZ000239730) and as a Merchant Banker (SEBI Registration Number - MB/INM000002970). Telephone: 91-22-6157 3000, Facsimile: 91-22-6157 3990 and Website: http://www.jpmipl.com. JPMorgan Chase Bank, N.A. - Mumbai Branch is licensed by the Reserve Bank of India (RBI) (Licence No. 53/ Licence No. BY.4/94; SEBI - IN/CUS/014/ CDSL : IN-DP-CDSL-444-2008/ IN-DP-NSDL-285-2008/ INBI00000984/ INE231311239) as a Scheduled Commercial Bank in India, which is its primary license allowing it to carry on Banking business in India and other activities, which a Bank branch in India are permitted to undertake. For non-local research material, this material is not distributed in India by J.P. Morgan India Private Limited. Compliance Officer: Spurthi Gadamsetty; spurthi.gadamsetty@jpmchase.com; +912261573225. Grievance Officer: Ramprasadh K, jpmipl.research.feedback@jpmorgan.com; +912261573000.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Indonesia : PT J.P. Morgan Sekuritas Indonesia is a member of the Indonesia Stock Exchange and is registered and supervised by the Otoritas Jasa Keuangan (OJK). Korea : J.P. Morgan Securities (Far East) Limited, Seoul Branch, is a member of the Korea Exchange (KRX). JPMorgan Chase Bank, N.A., Seoul Branch, is licensed as a branch office of foreign bank (JPMorgan Chase Bank, N.A.) in Korea. Both entities are regulated by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). For non-macro research material, the material is distributed in Korea by or through J.P. Morgan Securities (Far East) Limited, Seoul Branch. Japan : JPMorgan Securities Japan Co., Ltd. and JPMorgan Chase Bank, N.A., Tokyo Branch are regulated by the Financial Services Agency in Japan. Malaysia : This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X), which is a Participating Organization of Bursa Malaysia Berhad and holds a Capital Markets Services License issued by the Securities Commission in Malaysia. Mexico : J.P. Morgan Casa de Bolsa, S.A. de C.V. and J.P. Morgan Grupo Financiero are members of the Mexican Stock Exchange and are authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. New Zealand : This material is issued and distributed by JPMSAL in New Zealand only to "wholesale clients" (as defined in the Financial Markets Conduct Act 2013). JPMSAL is registered as a Financial Service Provider under the Financial Service providers (Registration and Dispute Resolution) Act of 2008. Philippines : J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Singapore : This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 030/08/2023 and Co. Reg. No.: 199405335R], which is a member of the Singapore Exchange Securities Trading Limited, and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore), both of which are regulated by the Monetary Authority of Singapore. This material is issued and distributed in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289 (SFA). This material is not intended to be issued or distributed to any retail investors or any other investors that do not fall into the classes of “accredited investors,” “expert investors” or “institutional investors,” as defined under Section 4A of the SFA. Recipients of this material in Singapore are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the material. South Africa : J.P. Morgan Equities South Africa Proprietary Limited and JPMorgan Chase Bank, N.A., Johannesburg Branch are members of the Johannesburg Securities Exchange and are regulated by the Financial Services Conduct Authority (FSCA). Taiwan : J.P. Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. Material relating to equity securities is issued and distributed in Taiwan by J.P. Morgan Securities (Taiwan) Limited, subject to the license scope and the applicable laws and the regulations in Taiwan. According to Paragraph 2, Article 7-1 of Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers (as amended or supplemented) and/or other applicable laws or regulations, please note that the recipient of this material is not permitted to engage in any activities in connection with the material that may give rise to conflicts of interests, unless otherwise disclosed in the “Important Disclosures” in this material. Thailand : This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission, and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. UK: Unless specified to the contrary, research is distributed in the UK by J.P. Morgan Securities plc (“JPMS plc”) which is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. JPMS plc is registered in England & Wales No. 2711006, Registered Office 25 Bank Street, London, E14 5JP. This material is directed in the UK only to: (a) persons having professional experience in matters relating to investments falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) (Order) 2005 (“the FPO”); (b) persons outlined in article 49 of the FPO (high net worth companies, unincorporated associations or partnerships, the trustees of high value trusts, etc.); or (c) any persons to whom this communication may otherwise lawfully be made; all such persons being referred to as "UK relevant persons". This material must not be acted on or relied on by persons who are not UK relevant persons. Any investment or investment activity to which this material relates is only available to UK relevant persons and will be engaged in only with UK relevant persons. Research issued by JPMS plc has been prepared in accordance with JPMS plc's policy for prevention and avoidance of conflicts of interest related to the production of Research which can be found at the following link: J.P. Morgan EMEA - Research Independence Policy. U.S .: J.P. Morgan Securities LLC (“JPMS”) is a member of the NYSE, FINRA, SIPC, and the NFA. JPMorgan Chase Bank, N.A. is a member of the FDIC. Material published by non-U.S. affiliates is distributed in the U.S. by JPMS who accepts responsibility for its content.

General: Additional information is available upon request. The information in this material has been obtained from sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated in this material are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable, JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) make no representations or warranties whatsoever to the completeness or accuracy of the material provided, except with respect to any disclosures relative to J.P. Morgan and the Research Analyst's involvement with the issuer that is the subject of the material. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this material. There may be certain discrepancies with data and/or limited content in this material as a result of calculations, adjustments, translations to different languages, and/or local regulatory restrictions, as applicable. These discrepancies should not impact the overall investment analysis, views and/or recommendations of the subject company(ies) that may be discussed in the material. J.P. Morgan accepts no liability whatsoever for any loss arising from any use of this material or its contents, and neither J.P. Morgan nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof, apart from the liabilities and responsibilities that may be imposed on them by the relevant regulatory authority in the jurisdiction in question, or the regulatory regime thereunder. Opinions, forecasts or projections contained in this material represent J.P. Morgan's current opinions or judgment as of the date of the material only and are therefore subject to change without notice. Periodic updates may be provided on companies/industries based on company-specific developments or announcements, market conditions or any other publicly available information. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections, which represent only one possible outcome. Furthermore, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified, and future actual results or events could differ materially. The value of, or income from, any investments referred to in this material may fluctuate and/or be affected by changes in exchange rates. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated. Past performance is not indicative of future results. Accordingly, investors may receive back less than originally invested. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. This material may include views on structured securities, options, futures and other derivatives. These are complex instruments, may involve a high degree of risk and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. The recipients of this material must make their own independent decisions regarding any securities or financial instruments mentioned herein and should seek advice from such independent financial, legal, tax or other adviser as they deem necessary. J.P. Morgan may trade as a principal on the basis of the Research Analysts’ views and research, and it may also engage in transactions for its own account or for its clients’ accounts in a manner inconsistent with the views taken in this material, and J.P. Morgan is under no obligation to ensure that such other communication is brought to the attention of any recipient of this material. Others within J.P. Morgan, including Strategists, Sales staff and other Research Analysts, may take views that are inconsistent with those taken in this material. Employees of J.P. Morgan not involved in the preparation of this material may have investments in the securities (or derivatives of such securities) mentioned in this material and may trade them in ways different from those discussed in this material. This material is not an advertisement for or marketing of any issuer, its products or services, or its securities in any jurisdiction.

Confidentiality and Security Notice : This transmission may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMorgan Chase & Co., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. This message is subject to electronic monitoring: https://www.jpmorgan.com/disclosures/email

MSCI: Certain information herein (“Information”) is reproduced by permission of MSCI Inc., its affiliates and information providers (“MSCI”) ©2024. No reproduction or dissemination of the Information is permitted without an appropriate license. MSCI MAKES NO EXPRESS OR IMPLIED WARRANTIES (INCLUDING MERCHANTABILITY OR FITNESS) AS TO THE INFORMATION AND DISCLAIMS ALL LIABILITY TO THE EXTENT PERMITTED BY LAW. No Information constitutes investment advice, except for any applicable Information from MSCI ESG Research. Subject also to msci.com/disclaimer

Sustainalytics: Certain information, data, analyses and opinions contained herein are reproduced by permission of Sustainalytics and: (1) includes the proprietary information of Sustainalytics; (2) may not be copied or redistributed except as specifically authorized; (3) do not constitute investment advice nor an endorsement of any product or project; (4) are provided solely for informational purposes; and (5) are not warranted to be complete, accurate or timely. Sustainalytics is not responsible for any trading decisions, damages or other losses related to it or its use. The use of the data is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers. ©2024 Sustainalytics. All Rights Reserved.

"Other Disclosures" last revised July 06, 2024.

Copyright 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party. #$J&098$#*P

Completed 14 Jul 2024 11:02 PM BSTDisseminated 15 Jul 2024 03:00 AM BST