Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies Core Insights - Overall demand for US equities has declined, but there is no significant selling observed, with net flows feeling lower due to unusually high flows in the second half of 2024 [4][6] - Europe has emerged as the primary destination for equity fund flows, with a notable increase in flows to European equity funds while flows to US stocks have decreased [9][10][12] - European investors hold €2.6 trillion of US debt, representing over 10% of fixed income assets in the euro area, indicating a significant cross-border investment [21] - Strong inflows to European fixed income funds have been observed since 'Liberation Day', although this has not yet translated into increased demand for European debt securities [24][29] - The EUR/USD exchange rate is expected to rise to 1.27 by the end of 2026, driven by both fundamental and technical factors, with increased hedging incentives due to rising volatility [34][42] - European equities are projected to show a consensus EPS growth of 1.3% in local currency terms for 2025, but in USD terms, this growth is expected to be 7.6%, indicating a favorable outlook for European stocks [63][65] - The European securitized market, currently valued at approximately €550 billion, has potential for growth due to ongoing regulatory reforms, which could lead to substantial market expansion [69][81] Summary by Sections Fund Flows - Demand for US stocks has decreased, but there is no evidence of significant selling; net flows to US equities are lower due to high previous flows [4][6] - Europe is now the leading destination for equity fund flows, with minimal spillover to other regions [9][10][12] European Debt Holdings - Euro area investors own €2.6 trillion of US debt, which is over 10% of their fixed income assets [21] - Evidence of stronger inflows to European fixed income funds has emerged, but this has not yet impacted demand for European debt securities [24][29] Currency and Hedging - The EUR/USD exchange rate is forecasted to reach 1.27 by the end of 2026, influenced by fundamental and technical factors [34] - Increased volatility and uncertainty are raising hedging incentives, with approximately $4 trillion in unhedged US assets potentially needing hedging [42] European Equities - European consensus EPS growth for 2025 is projected at 1.3% in local currency, but 7.6% in USD terms, indicating a positive outlook for European stocks [63][65] Securitized Market - The European securitized market is valued at around €550 billion and has potential for growth due to regulatory reforms [69][81]

J P M O R G A N Global Markets Strategy 18 June 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Flows & Liquidity Thoughts on the dollar-equity correlation Cross Asset Fund Flow Monitor Current level shows the latest percentile of weekly flows; Min is d ...

Group 1 - The core viewpoint of the articles indicates that Japan's major life insurance companies have significantly reduced their hedging ratio for overseas assets, dropping from 45.2% six months ago to 44.4%, and down from 63% year-on-year, marking a 14-year low [1] - The trend of decreasing hedging has persisted for three years, reflecting a belief that the likelihood of a strong yen is diminishing due to low real interest rates [1][2] - The Bank of Japan's policy rate remains 3 percentage points lower than the country's inflation rate, with market expectations for a rate hike being pushed back, leading to a decline in demand for overseas bonds among life insurance companies [2] Group 2 - Life insurance companies have been forced to reduce their overseas asset holdings, with net sales of foreign bonds amounting to 756 billion yen (approximately 5.3 billion USD) over the past six months, marking the seventh consecutive period of such sales [3] - The outlook for the yen remains bleak, but a potential rate cut by the Federal Reserve could change the situation, as it may lower the currency hedging costs for Japanese investors [4] - The demand for currency hedging is expected to rebound if the Federal Reserve resumes rate cuts, which could lead to increased urgency among life insurance companies to hedge against currency risks [4]