Ready Mixed Concrete March 2019 1
Agenda • Market Conditions • Investment Analysis • Account Performance 2
| S&P 500 Index at inflection points 4 GTM – U.S. S&P 500 Price Index 3,000 Equities Characteristic Mar. 2000 Oct. 2007 Dec. 2018 Index level 1,527 1,565 2,507 P/E ratio (fwd.) 27.2x 15.7x 14.4x 2,700 Dividend yield 1.1% 1.8% 2.3% Dec. 31, 2018 P/E (fwd.) = 14.4x 10-yr. Treasury 6.2% 4.7% 2.7% 2,507 2,400 +271% 2,100 Oct. 9, 2007 1,800 Mar. 24, 2000 P/E (fwd.) = 15.7x P/E (fwd.) = 27.2x 1,565 1,527 1,500 +106% +101% 1,200 -57% -49% 900 Dec. 31, 1996 Mar. 9, 2009 Oct. 9, 2002 P/E (fwd.) = 16.0x P/E (fwd.) = 10.3x P/E (fwd.) = 14.1x 741 677 777 600 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: Compustat, FactSet, Federal Reserve, Standard & Poor’s, J.P. Morgan Asset Management. Dividend yield is calculated as consensus estimates of dividends for the next 12 months, divided by most recent price, as provided by Compustat. Forward price to earnings ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Guide to the Markets – U.S. Data are as of December 31, 2018. 3
| Sources of earnings per share growth 8 GTM – U.S. 3 S&P 500 year-over-year operating EPS growth Annual growth broken into revenue, changes in profit margin & changes in share count Equities 60% Share of EPS growth 3Q18 Avg. ’01-’17 Margin 20.3% 3.8% 47% Revenue 10.0% 3.0% Share count 1.8% 0.2% 40% 32% Total EPS 32.1% 6.9% 27% 27% 24% 19% 19% 17% 15% 20% 15% 15% 13% 11% 5% 6% 0% 0% -6% -11% -20% -31% -40% -40% -60% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 1Q18 2Q18 3Q18 Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management. EPS levels are based on annual operating earnings per share except for 2018, which is quarterly. Percentages may not sum due to rounding. Past performance is not indicative of future returns. Guide to the Markets – U.S. Data are as of December 31, 2018. 4
| Uses of profits 9 GTM – U.S. S&P 500 announced buybacks S&P 500 dividends per share Value of announced buybacks, $bn Year-over-year % change, quarterly 25% Equities $1,000 20% 4Q18: 15% 8.2% $900 10% 5% 0% $800 -5% 2018 -10% $700 -15% -20% $600 -25% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 2015 $500 Corporate spending Private non-residential fixed investment, y/y, value of deals announced, $tn 2016 2013 $1.8 20% $400 M&A activity Capital expenditures $1.6 15% 2014 $1.4 10% $300 $1.2 5% $1.0 2017 $200 0% $0.8 -5% $0.6 $100 -10% $0.4 -15% $0.2 $0 $0.0 -20% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: Bloomberg, Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management. M&A activity is the quarterly value of officially announced transactions, and capital expenditures are private non-residential fixed domestic investment. Buybacks are based on company announcements year to date. Guide to the Markets – U.S. Data are as of December 31, 2018. 5
| Volatility and the stock market 15 GTM – U.S. CBOE Market Volatility Index (VIX) Index level 90 Equities VIX Level Financial crisis (S&P 500: -48.8%) ’08 Peak 80.9 80 Average 19.6 Latest 25.4 70 Rising rates, 60 Global slowdown, China, trade, peak U.S. downgrade, Fed uncertainty growth Flash crash, Europe/periphery stress (S&P 500: -12.4%) (S&P 500: Europe/Greece Inflation, trade, tech 50 (S&P 500: -19.4%) -19.8%) J.P. Morgan (S&P 500: -16.0%) (S&P 500: -10.2%) Global acquires Bear slowdown Oil, Stearns Eurozone 40 fears U.S. recession (S&P 500: -13.1%) double-dip (S&P 500: -7.4%) fears, China (S&P 500: -9.9%) (S&P 500: -10.5%) Taper Tantrum 30 (S&P 500: -5.8%) 20 10 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Sources: CBOE, FactSet, J.P. Morgan Asset Management. Stock market returns are based on calendar year peak to trough declines experienced during VIX spike, except for J.P. Morgan acquires Bear Stearns, which is based on the calendar year peak to the acquisition date. Average is based on the period shown from 12/31/2006 to 12/31/2018. Guide to the Markets – U.S. Data are as of December 31, 2018. 6
CP1810.2
| Economic growth and the composition of GDP 20 GTM – U.S. 1 Real GDP Components of GDP Year-over-year % change 3Q18 nominal GDP, USD trillions $23 10% Real GDP 3Q18 YoY % chg: 3.0% $21 3.9% Housing QoQ % chg: 3.4% 8% Economy 14.1% Investment ex-housing $19 $17 6% 17.2% Gov’t spending Average: $15 2.7% 4% $13 $11 2% $9 0% $7 68.0% Consumption Expansion -2% average: $5 2.3% $3 -4% $1 -6% -$1 -3.2% Net exports '73 '78 '83 '88 '93 '98 '03 '08 '13 '18 Source: BEA, FactSet, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding. Quarter-over-quarter percent changes are at an annualized rate. Average represents the annualized growth rate for the full period. Expansion average refers to the period starting in the third quarter of 2009. Guide to the Markets – U.S. Data are as of December 31, 2018. 8
| Consumer finances 21 GTM – U.S. Consumer balance sheet Household debt service ratio 3Q18, trillions of dollars outstanding, not seasonally adjusted Debt payments as % of disposable personal income, SA 14% 4Q07: $130 13.2% Total assets: $124.9tn 3Q07 Peak: $83.8tn 13% 1Q09 Low: $72.0tn $120 Economy 12% Homes: 23% $110 1Q80: 11% 4Q18**: $100 10.6% 9.9% Other tangible: 5% 10% $90 Deposits: 9% 9% $80 '80 '85 '90 '95 '00 '05 '10 '15 $70 Household net worth Pension funds: 21% Not seasonally adjusted, USD billions 4Q18**: $60 $106,658 $120,000 Other non-revolving: 1% $50 3Q07: Revolving*: 6% $100,000 $69,465 Auto loans: 7% $40 Other liabilities: 9% $80,000 Student debt: 10% $30 Other financial $60,000 assets: 42% $20 Total liabilities: $15.9tn $40,000 $10 Mortgages: 66% $20,000 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 $0 Source: FactSet, FRB, J.P. Morgan Asset Management; (Top and bottom right) BEA. Data include households and nonprofit organizations. SA – seasonally adjusted. *Revolving includes credit cards. Values may not sum to 100% due to rounding. **3Q18 figure for debt service ratio and 4Q18 figures for debt service ratio and household net worth are J.P. Morgan Asset Management estimates. Guide to the Markets – U.S. Data are as of December 31, 2018. 9
| Long-term drivers of economic growth 23 GTM – U.S. Growth in working-age population Drivers of GDP growth Percent increase in civilian non-institutional population ages 16-64 Average year-over-year % change 1.8% Census 4.0% Immigrant Native born Growth in workers forecast 1.3% + Growth in real output per worker 1.5% 1.3% Growth in real GDP 3.5% 1.2% 1.0% 0.3% Economy 0.6% 3.2% 3.2% 0.9% 0.4% 3.0% 3.0% 3.0% 0.5% 0.6% 1.0% 0.8% 0.3% 0.2% 0.3% 0.6% 0.15% 0.2% 2.5% 0.04% 0.0% '78-'87 '88-'97 '98-'07 '08-'17 '18-'27 2.0% 1.1% Growth in private non-residential capital stock Non-residential fixed assets, year-over-year % change 1.4% 6% 1.5% 1.5% 1.9% 5% 2.2% 0.5% 4% 1.0% 2017: 1.8% 3% 0.5% 2% 1% 1.0% 1.3% 1.6% 1.9% 0.9% 0.0% 0% '68-'77 '78-'87 '88-'97 '98-'07 '08-'17 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 Source: J.P. Morgan Asset Management; (Top left) Census Bureau, DOD, DOJ; (Top left and right) BLS; (Right and bottom left) BEA. GDP drivers are calculated as the average annualized growth in the 10 years ending in 4Q of the last year. Future working-age population is calculated as the total estimated number of Americans from the Census Bureau, per the September 2018 report, controlled for military enrollment, growth in institutionalized population and demographic trends. Growth in working-age population does not include illegal immigration; DOD Troop Readiness reports used to estimate percent of population enlisted. Guide to the Markets – U.S. Data are as of December 31, 2018. 10
| Unemployment and wages 25 GTM – U.S. 2 Civilian unemployment rate and year-over-year wage growth for private production and non-supervisory workers Seasonally adjusted, percent 12% 50-year avg. Nov. 1982: 10.8% Unemployment rate 6.2% Oct. 2009: 10.0% Economy Wage growth 4.1% 10% May 1975: 9.0% Jun. 1992: 7.8% 8% Jun. 2003: 6.3% 6% Dec. 2018: 3.9% 4% Dec. 2018: 3.3% 2% 0% '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 Source: BLS, FactSet, J.P. Morgan Asset Management. Guide to the Markets – U.S. Data are as of December 31, 2018. 11
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