Ready Mixed Concrete March 2019 1 Agenda Market Conditions - - PowerPoint PPT Presentation

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Ready Mixed Concrete

March 2019

Agenda

• Market Conditions
• Investment Analysis
• Account Performance

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GTM – U.S.

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S&P 500 Index at inflection points 4

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000

• Oct. 9, 2002

P/E (fwd.) = 14.1x

777

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.

S&P 500 Price Index

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 Dividend yield 1.1% 1.8% 2.3% 10-yr. Treasury 6.2% 4.7% 2.7%

• 49%
• Mar. 24, 2000

P/E (fwd.) = 27.2x

1,527

• Dec. 31, 1996

P/E (fwd.) = 16.0x

741

• Dec. 31, 2018

P/E (fwd.) = 14.4x

2,507

+101%

• Oct. 9, 2007

P/E (fwd.) = 15.7x

1,565

• 57%
• Mar. 9, 2009

P/E (fwd.) = 10.3x

677

+271% +106% Equities

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Sources of earnings per share growth 8

32% 27% 27% 17% 6%

• 11%

5% 11% 0% 15% 47% 15%

• 40%
• 6%

15% 13% 24% 19% 19%

• 31%
• 60%
• 40%
• 20%

0% 20% 40% 60% 3Q18 2Q18 1Q18 '17 '16 '15 '14 '13 '12 '11 '10 '09 '08 '07 '06 '05 '04 '03 '02 '01

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.

S&P 500 year-over-year operating EPS growth

Annual growth broken into revenue, changes in profit margin & changes in share count

Equities

Share of EPS growth 3Q18

• Avg. ’01-’17

Margin 20.3% 3.8% Revenue 10.0% 3.0% Share count 1.8% 0.2% Total EPS 32.1% 6.9%

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Uses of profits 9

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

• 25%
• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25%

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.

S&P 500 announced buybacks

Value of announced buybacks, $bn

S&P 500 dividends per share

Year-over-year % change, quarterly

Corporate spending

Private non-residential fixed investment, y/y, value of deals announced, $tn

Equities

2018 2015 2014 2017 2013 2016 4Q18: 8.2% Capital expenditures M&A activity

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20% $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

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Volatility and the stock market 15

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 10 20 30 40 50 60 70 80 90

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.

CBOE Market Volatility Index (VIX)

Index level

U.S. downgrade, Europe/periphery stress (S&P 500: -19.4%) Flash crash, Europe/Greece (S&P 500: -16.0%) Eurozone double-dip (S&P 500: -9.9%) Taper Tantrum (S&P 500: -5.8%) Global slowdown fears (S&P 500: -7.4%) Global slowdown, China, Fed uncertainty (S&P 500: -12.4%) Oil, U.S. recession fears, China (S&P 500: -10.5%) Financial crisis (S&P 500: -48.8%) Inflation, trade, tech (S&P 500: -10.2%)

Equities

VIX Level ’08 Peak 80.9 Average 19.6 Latest 25.4

J.P. Morgan acquires Bear Stearns (S&P 500: -13.1%) Rising rates, trade, peak growth (S&P 500:

• 19.8%)

CP1810.2

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GTM – U.S.

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Economic growth and the composition of GDP 20

• $1

$1 $3 $5 $7 $9 $11 $13 $15 $17 $19 $21 $23

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% '18 '13 '08 '03 '98 '93 '88 '83 '78 '73

Real GDP

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.

Real GDP

Year-over-year % change

Components of GDP

3Q18 nominal GDP, USD trillions

3Q18 YoY % chg: 3.0% 14.1% Investment ex-housing 68.0% Consumption 17.2% Gov’t spending 3.9% Housing

• 3.2% Net exports

Average: 2.7% QoQ % chg: 3.4% Expansion average: 2.3%

Economy

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Consumer finances 21

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 '80 '85 '90 '95 '00 '05 '10 '15 9% 10% 11% 12% 13% 14%

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000

4Q07: 13.2%

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.

Consumer balance sheet

3Q18, trillions of dollars outstanding, not seasonally adjusted

Household debt service ratio

Debt payments as % of disposable personal income, SA

Household net worth

Not seasonally adjusted, USD billions

1Q80: 10.6% 4Q18**: 9.9% 3Q07: $69,465 4Q18**: $106,658

Economy

Total assets: $124.9tn Total liabilities: $15.9tn Homes: 23% Deposits: 9% Pension funds: 21% Other financial assets: 42% Other tangible: 5% Mortgages: 66% Other non-revolving: 1% Revolving*: 6% Auto loans: 7% Other liabilities: 9% Student debt: 10% 3Q07 Peak: $83.8tn 1Q09 Low: $72.0tn

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GTM – U.S.

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Long-term drivers of economic growth 23

0% 1% 2% 3% 4% 5% 6% '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 1.0% 1.3% 1.6% 1.9% 0.9% 2.2% 1.9% 1.4% 1.1% 0.5% 3.2% 3.2% 3.0% 3.0% 1.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% '68-'77 '78-'87 '88-'97 '98-'07 '08-'17 1.0% 0.6% 0.8% 0.2% 0.04% 0.3% 0.4% 0.6% 0.3% 0.15% 1.3% 1.0% 1.3% 0.5% 0.2%

0.0% 0.3% 0.6% 0.9% 1.2% 1.5% 1.8% '78-'87 '88-'97 '98-'07 '08-'17 '18-'27 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.

Drivers of GDP growth

Average year-over-year % change

Growth in private non-residential capital stock

Non-residential fixed assets, year-over-year % change

Growth in working-age population

Percent increase in civilian non-institutional population ages 16-64

Growth in workers + Growth in real output per worker Growth in real GDP Census forecast 2017: 1.8%

Economy

Immigrant Native born

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Unemployment and wages 25

'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 0% 2% 4% 6% 8% 10% 12%

Source: BLS, FactSet, J.P. Morgan Asset Management. Guide to the Markets – U.S. Data are as of December 31, 2018.

Civilian unemployment rate and year-over-year wage growth for private production and non-supervisory workers

Seasonally adjusted, percent

• Dec. 2018:

3.9%

• Oct. 2009:

10.0%

• Dec. 2018:

3.3%

Economy

• Jun. 2003:

6.3%

• Jun. 1992:

7.8%

• Nov. 1982:

10.8% May 1975: 9.0%

50-year avg. Unemployment rate 6.2% Wage growth 4.1%

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Inflation 28

'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

• 3%

0% 3% 6% 9% 12% 15%

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CPI and core CPI

% change vs. prior year, seasonally adjusted

Source: BLS, FactSet, J.P. Morgan Asset Management. CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed- weight basket used in CPI calculations. Guide to the Markets – U.S. Data are as of December 31, 2018.

Economy

50-yr. avg.

• Nov. 2018

Headline CPI 4.0% 2.2% Core CPI 4.0% 2.2% Food CPI 4.0% 1.4% Energy CPI 4.5% 3.2% Headline PCE deflator 3.5% 1.8% Core PCE deflator 3.4% 1.9%

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31 The Fed and interest rates

2.88% 3.13% 3.13% 2.75% 2.53% 2.39% 2.35% 2.38% 0% 1% 2% 3% 4% 5% 6% 7% '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23

FOMC December 2018 forecasts

Percent

2018 2019 2020 2021 Long run* Change in real GDP, 4Q to 4Q 3.0 2.3 2.0 1.8 1.9 Unemployment rate, 4Q 3.7 3.5 3.6 3.8 4.4 PCE inflation, 4Q to 4Q 1.9 1.9 2.1 2.1 2.0

Source: Bloomberg, FactSet, Federal Reserve, J.P. Morgan Asset Management. Market expectations are the federal funds rates priced into the fed futures market as of the date of the December 2018 FOMC meeting and are through November 2021. *Long-run projections are the rates of growth, unemployment and inflation to which a policymaker expects the economy to converge over the next five to six years in absence of further shocks and under appropriate monetary policy. Guide to the Markets – U.S. Data are as of December 31, 2018.

Federal funds rate expectations

FOMC and market expectations for the federal funds rate

Federal funds rate FOMC long-run projection* FOMC year-end estimates Market expectations on 12/19/18

Long run

Fixed income

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U.S. yield curve inversion and recessions 33

• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 '18

Source: FactSet, Federal Reserve, J.P. Morgan Asset Management. *From January 1962 to May 1976 short-term bond is U.S. 1-year bond. Short- dated bond is 2-year from June 1976. Time to recession is calculated as the time between the final sustained inversion of the yield curve prior to recession, and the onset of recession. Guide to the Markets – U.S. Data are as of December 31, 2018.

U.S. yield curve steepness

Short-term yield versus long-term yield spread* Rate hiking cycle Recession

Date of inversion prior to recession Time to recession April 11, 1968 19 months March 9, 1973 7 months August 18, 1978 16 months September 12, 1980 9 months December 13, 1988 18 months February 2, 2000 12 months June 8, 2006 17 months Average 14 months

Fixed income

Inversion without recession Inversion prior to recession

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Global monetary policy 38

Source: J.P. Morgan Asset Management; (Left) Bank of England, Bank of Japan, European Central Bank, FactSet, Federal Reserve System, J.P. Morgan Global Economic Research; (Right) Bloomberg. *Includes the Bank of Japan (BoJ), Bank of England (BoE), European Central Bank (ECB) and Federal Reserve. Balance sheet expansion assumes no more quantitative easing (QE) from BoE; tapering of ECB from 30bn to 15bn EUR in October 2018 and 0 in January 2019; tapering of BoJ QE to 30trn JPY ann. for 2019; and tapering of Fed QE per the September 2017 FOMC statement, incorporating a maturity schedule. **Including: Australia, Canada, Denmark, Eurozone, Japan, Norway, Sweden, Switzerland, UK and U.S. Guide to the Markets – U.S. Data are as of December 31, 2018.

Global central bank balance sheet expansion*

USD billions, 12-month rolling flow

Number of rate changes by top-10 DM central banks**

Cuts Hikes

Fixed income

Fed BoJ ECB BoE Total

5 10 15 20 25 30 35 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

• $1,000
• $500

$0 $500 $1,000 $1,500 $2,000 '16 '17 '18 '19

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Global equity markets: Returns 42

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. All return values are MSCI Gross Index (official) data, except the U.S., which is the S&P 500. *Multiple expansion is based on the forward P/E ratio and EPS growth outlook is based on NTMA earnings estimates. Chart is for illustrative purposes only. Past performance is not indicative of future results. Guide to the Markets – U.S. Data are as of December 31, 2018.

Sources of global equity returns*

Total return, USD

International

2018 2017 Currency effect Multiples Dividends EPS growth outlook (local) Total return 37.8% 27.8% 27.8% 24.4% 21.8%

• 4.4%
• 12.6%
• 13.8%
• 14.2%
• 14.4%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50% EM Europe ex- UK ACWI ex- U.S. Japan U.S. U.S. Japan ACWI ex- U.S. EM Europe ex- UK

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U.S. and international equities at inflection points 44

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 50 100 150 200 250 300 350 400

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Forward price to earnings ratio is a bottom-up calculation based on the most recent 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 price movement only, and do not include the reinvestment of dividends. Dividend yield is calculated as consensus estimates of dividends for the next 12 months, divided by most recent price, as provided by FactSet Market Aggregates. Past performance is not a reliable indicator of current and future results. Guide to the Markets – U.S. Data are as of December 31, 2018.

MSCI All Country World ex-U.S. and S&P 500 Indices

• Dec. 1996 = 100, U.S. dollar, price return

+90% +271% International

• 62%
• 57%

+216% +101%

• 52%
• 49%

+48% +106%

• Dec. 31, 2018

P/E (fwd.) = 11.5x

• Dec. 31, 2018

P/E (fwd.) = 14.4x

P/E 20-yr. avg.

• Div. Yield 20-yr. avg.

S&P 500 14.4x 15.8x 2.3% 2.0% ACWI ex-U.S. 11.5x 14.2x 3.8% 3.0% As % of U.S. 80% 90% 165% 149%

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Global inflation 48

Source: Bank of Mexico, DGBAS, Eurostat, FactSet, Federal Reserve, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, Japan Ministry of Internal Affairs & Communications, Korean National Statistical Office, Melbourne Institute, National Bureau of Statistics China, Statistics Canada, Statistics Indonesia, UK Office for National Statistics (ONS), J.P. Morgan Asset Management. Heatmap is based on quarterly averages, with the exception of the two most recent figures, which are single month readings. Colors are based on z- score of year-over-year inflation rate relative to 10-year history. DM and EM represent developed markets and emerging markets, respectively. Guide to the Markets – U.S. Data are as of December 31, 2018.

Year-over-year headline inflation by country and region, quarterly

International

Oct Nov Global

2.8% 2.4%

DM

2.3% 1.9%

EM

3.7% 3.3%

U.S.

2.5% 2.2%

Canada

2.4% 1.7%

Japan

1.4% 0.9%

UK

2.4% 2.3%

Euro Area

2.2% 1.9%

Germany

2.4% 2.2%

France

2.5% 2.2%

Italy

1.7% 1.6%

Spain

2.3% 1.7%

Greece

1.8% 1.1%

China

2.5% 2.2%

Indonesia

3.2% 3.2%

Korea

2.0% 1.9%

Taiwan

1.4% 0.4%

India

4.1% 3.5%

Brazil

4.6% 4.0%

Mexico

4.9% 4.7%

Russia

3.5% 3.8%

2018 Developed Emerging 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018 2016

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GTM – U.S.

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Global commodities 59

• 3
• 2
• 1

1 2 3 4 5 Bloomberg Commodity Index Agriculture Crude oil Livestock Industrial metals Silver Gold Natural gas '80 '85 '90 '95 '00 '05 '10 '15 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Source: FactSet, J.P. Morgan Asset Management; (Left) Bloomberg, CME; (Top right) BLS, CME; (Bottom right) Bloomberg, BLS. Commodity prices are represented by the appropriate Bloomberg Commodity sub-index. Crude oil shown is WTI. Other commodity prices are represented by futures contracts. Z-scores are calculated using daily prices over the past 10 years. Guide to the Markets – U.S. Data are as of December 31, 2018.

Commodity prices

Commodity price z-scores

Gold prices

USD per ounce

Commodity prices and inflation

Year-over-year % change

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18

• 6%
• 4%
• 2%

0% 2% 4% 6% 8%

• 60%
• 40%
• 20%

0% 20% 40% 60% 80% Headline CPI Bloomberg Commodity Index Gold, inflation adjusted Gold

• Dec. 2018:

$1,279 Example High level Current Low level $109.34 $41.55 $1,283 $15.44 $10.44 $6.15 $175.42 $1,892 $113.93 $22.99 $807 $72.88 $211.51 $84.23 $45.33 $1.64 $3.64 $42.08 $40.85 $29.41 $97.67 $26.21 $76.72

Alternatives

$48.60

Morningstar Asset Allocation

Performance Summary

Current Value on March 12, 2019 $19,329,119.60 Investment Gain $8,878,778.22 Annualized RMC Return 8.07% S&P 500 Composite 8.29% 60/40 Blend 4.99% Bloomberg Barclays US Aggregate 3.90%

Performance Since December 31, 2004

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