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As of February 2008

Asset Class Return Comparison
(Including U.S.)

by William Pometto
JPMorgan Investment Analytics and Consulting
william.m.pometto@jpmorgan.com Multiple Asset Class Return Comparison

U.S. Equity

  • Stocks continued to trade downward throughout the month of February.
  • The U.S. Stock Market is looking less attractive to investors with its increased level of volatility in recent months.
  • The technology sector was hit the hardest in February, largely contributing to the 4.85 percent loss suffered by the NASDAQ Composite.
  • The Dow Jones Industrial Average experienced its fourth consecutive monthly decline, losing 2.75 percent in February.

International Equity

  • International Equity Markets gained back some of what they lost in January.
  • Emerging Market countries were again the top performers among the Non-U.S. Markets.
  • The MSCI Emerging Markets Free Index posted a 7.42 percent return for the month.

Fixed Income

  • Fixed Income Markets continue to yield positive returns in 2008 as most indices posted gains in February.
  • U.S. Treasuries are providing safety to investors in a time when volatile stockmarkets are not producing favorable returns.
  • The L.B. Treasury Index gained 1.14 percent in February, putting it up 3.71 percent for the first two months of the year.

Real Estate

  • The supply of homes continues to exceed demand, driving prices down further.
  • The MSCI REIT Index was down 3.80 percent for the month.

Global Equities (Excluding U.S.)

by Simreet Gill
JPMorgan Investment Analytics and Consulting
simreet.k.gill@jpmorgan.com

World equities experienced a very volatile month of January with sharp falls in the first three weeks and a rebound late in the month. The rebound was rather technical, though, likely driven by the unwinding of recession trades that appear to have become overcrowded in mid-January. The rebound was led by regions and sectors that suffered most over the past 3 months and thus were pricing a large amount of recession risk (i.e., Japan) across regions.

Equity markets declined over February 2008 on renewed fears of a U.S. recession and its impact on earnings. Momentum in economic data has become worse and the near-term outlook looks gloomy if one takes into account that the main drags of the U.S. economy (namely housing, credit market conditions and inflation) all worsened in February.

On the other hand, the full global fixed income class, including both governments and spread products such as corporates and mortgages, performed largely in line with cash. This may seem surprising in a month where consensus risks of a U.S. recession rose significantly, U.S. economic data surprised on the downside, and equities and credit dropped.

Multiple Asset Class Return Comparison

  • Euro area equities have underperformed U.S. equities by 5% YTD (through February). Currency appreciation, as well as continued resistance by Euro area policy makers to provide any stimulus, create headwind for European equities.
  • European equities have been very correlated with U.S. or UK equities, but with a higher beta.

Multiple Asset Class Return Comparison

  • Australia, Hong Kong, Singapore: The January underperformance of emerging market equities versus developed markets proved short lived. The momentum of the trade turned positive once again in the month of February.
  • Japan (Nikkei 225) and Korean (KOSPI): Emerging market equities are slightly up YTD (through February) vs developed markets, helped by record high oil and commodity prices.
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