GSNO.10

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GSNO.10

  1. 1. The Growth Map: Economic Opportunity in the BRICs and Beyond Jim O’Neill Chairman, Goldman Sachs Asset ManagementThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or March 2012investment advice.. Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011,Goldman Sachs. All rights reserved 1
  2. 2. Issues for UK 1. Does this changing world “suit” the UK? Yes. 2. Exports must increase as share of GDP. 3. But the Services vs. Manufacturing split is less important. 4. EU and EMU less relevant but more complicated.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 2
  3. 3. Country Classification by 2010 GDP Share N11 Bangladesh World Egypt Growth Markets Iran Nigeria Pakistan Philippines Mexico Emerging Vietnam 2% Korea Markets Mexico 2% 12% Korea Turkey Turkey Indonesia 1% Growth Indonesia China Markets 9% 1% Developed 23% Markets Brazil 65% 3% Russia India 3% 2%Source: GSAMThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 3
  4. 4. GDP Forecasts 2012 2013 2010 2011* GSAM Consensus GSAM Consensus US 3.0 1.7 2.5 2.2 2.5 2.5 UK 1.4 0.9 1.0 0.5 1.8 1.8 Canada 3.2 2.4 2.2 2.0 2.5 2.3 Euroland 1.8 1.6 -0.4 -0.4 1.0 0.9 Japan 4.0 -0.8 1.9 1.8 1.3 1.4 Brazil 7.5 3.0 3.6 3.3 5.0 4.3 China 10.3 9.2 8.2 8.4 8.0 8.6 India 10.1 6.9 7.2 7.0 8.0 7.3 Russia 4.0 4.2 3.0 3.5 4.8 3.9 Mexico 5.4 3.9 3.6 3.3 3.8 3.4 Korea 6.2 3.7 3.4 3.3 4.8 4.0 Indonesia 6.1 6.4 6.0 6.0 6.1 6.4 Turkey 8.9 8.5 1.0 1.3 4.0 4.9 Advanced 2.9 1.3 1.4 1.2 1.8 1.8 BRICs 8.9 7.5 6.9 7.0 7.3 7.3 Growth Markets 8.3 7.0 6.2 6.3 6.8 6.7 World 5.1 3.8 3.5 3.4 4.0 4.0 * Consensus Economics. Data as of Feb 2012. Source: GSAM and Consensus EconomicsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 4
  5. 5. Inflation Forecasts 2009 2010 2011* 2012* 2013* US 1.9 1.7 3.2 2.0 2.0 UK 2.1 3.4 5.3 3.0 2.6 Canada 0.8 2.2 2.9 1.9 2.0 Euroland 0.9 2.2 2.6 2.0 0.9 Japan -1.7 -0.4 -0.3 -0.3 0.0 Brazil 4.3 5.9 6.5 5.3 5.1 China 0.7 4.7 5.4 3.3 3.7 India 15.0 9.5 8.3 8.4 7.3 Russia 8.8 8.8 6.8 6.3 6.0 Mexico 3.6 4.4 3.2 3.7 3.6 Korea 2.8 3.5 4.4 3.1 3.1 Indonesia 2.8 7.0 5.4 4.9 5.4 Turkey 6.5 6.4 6.3 9.4 6.2 Advanced 1.1 1.7 2.7 1.8 1.4 BRICS 5.2 6.4 6.3 5.0 4.9 Growth Markets 4.9 6.1 6.0 5.0 4.8 World 2.6 3.5 4.1 3.2 2.9 * Consensus Economics Feb 2012 Source: IMF and Consensus EconomicsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 5
  6. 6. Change in US$ Size of GDP from 2011 to 2020 16 2010 US$ trn 14 12 10 2011 - 2020 GDP Increase 8 6 4 2 0 Source: GS Global ECS Research. GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 6
  7. 7. China vs European Periphery 2011-2012 Change in BRIC GDP 2011-2012 Change in China GDP Italy GDP, 2011 Greek GDP, 2011 GDP, $bn China GDP, 2011 0 2,000 4,000 6,000 8,000 Source: GS Global ECS Research and GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 7
  8. 8. Share of Global GDP in 2020 45 Share, % 40 35 30 25 20 2020 Share of global GDP 15 10 5 0 Source: GS Global ECS Research. GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 8
  9. 9. Growth Market / Emerging Market Split 25 Global GDP Share, % 2050 Share of Global GDP 20 Share of Global GDP Cut-off Point (1%) 15 10 Growth Markets Emerging Markets 5 0 Source: GS Global ECS Research. GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 9
  10. 10. BRICs & N11. 2010 Growth Environment Score (GES) 8 GES 1997-2010 GES Change 7 1997 GES 1997 Developing Average 6 2010 Developing Average 5 4 3 2 1 0 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 10
  11. 11. GES For Growth Markets (and US) India Indonesia Russia Turkey Mexico China Brazil Korea United States Total 4.0 4.7 4.8 5.1 5.2 5.4 5.5 7.5 6.9 Rule of Law 5.1 3.9 3.5 5.2 3.9 4.3 4.6 7.0 8.1 Corruption 4.3 3.6 2.8 5.2 4.5 3.9 4.9 6.0 7.4 Political Stability 2.6 3.7 3.6 3.2 3.6 4.1 5.6 5.4 5.8 Govt. Deficit 0.7 4.2 2.1 1.7 3.8 3.9 3.3 6.1 0.0 Ext Debt 8.3 7.5 8.0 6.9 8.4 9.3 8.6 .. .. Inflation 7.3 8.8 7.1 8.4 8.7 10.0 8.8 9.3 10.0 Life Exp 5.7 7.2 6.6 7.4 8.0 7.6 7.5 9.0 8.7 Computers 0.4 0.3 1.8 0.8 1.9 0.8 2.1 7.7 10.0 Mobiles 3.0 6.2 10.0 8.9 7.1 4.8 7.8 9.4 8.9 Internet 0.6 1.1 4.3 4.6 3.0 3.0 5.0 10.0 10.0 Investment 7.0 5.5 4.4 4.0 4.4 8.4 3.8 5.9 3.6 Schooling 4.4 6.5 6.9 7.1 6.9 6.1 7.9 9.5 8.7 Openness 2.7 2.7 2.1 2.5 3.4 3.3 1.7 4.5 1.8 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 11
  12. 12. Who is Fit for EMU? (Growth Markets) Cyclically adjusted Gross General Growth budget deficit Govt. Debt (% Environment Score (%GDP) GDP) India -8.9 65.3 4.0 Brazil -2.8 64.2 5.5 Mexico -2.8 43.2 5.2 Turkey -2.1 38.1 5.1 Korea 2.1 30.0 7.5 Indonesia -1.7 24.0 4.7 China -0.7 23.3 5.4 Russia 1.0 11.2 4.8 Note, data are 2012 estimates Source: IMF and GS Global ECSThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 12
  13. 13. Who is Fit for EMU? (Developed Markets) Cyclically adjusted budget Gross General Govt. Growth deficit (%GDP) Debt (% GDP) Environment Score Germany -0.4 81.6 7.5 France -3.3 90.7 7.2 Italy -0.8 125.3 6.2 Spain -4.7 78.1 6.5 Netherlands -2.3 66.5 7.9 Belgium -2.7 94.3 7.6 Austria -3.0 73.9 7.7 Greece -4.7 189.1 5.5 Finland 1.2 50.3 7.9 Ireland -5.5 115.4 7.4 Portugal -1.3 111.8 6.4 Slovakia -3.4 46.9 7.2 EMU Average -2.4 90.0 7.1 UK -5.1 86.6 7.3 US -5.6 107.6 6.9 Canada -3.2 86.7 7.6 Japan -8.6 241.0 6.8 Australia -1.8 23.8 7.5 Sweden 1.2 32.6 8.0 Note, data are 2012 estimates. Source: IMF and EurostatThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 13
  14. 14. Euro Area Competitiveness 155 Index, Jan Unit Labour Costs 00=100 145 France Germany Greece Ireland 135 Italy Portugal Spain Austria 125 Belgium Finland 115 105 95 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Haver AnalyticsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 14
  15. 15. China Lead Indicators 18 % yoy Index 106 16 1996=100 105 14 104 12 103 10 102 101 8 100 6 99 4 98 2 GSCA (lhs) CEMAC-GS Leading Indicator (rhs) 97 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 15
  16. 16. China FCI 112 index 111 110 China FCI 109 108 107 106 105 Easier Conditions 104 103 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 16
  17. 17. Retail Sales US and BRICs 36 %yoy 32 28 24 20 16 12 8 4 0 -4 USA Russia Brazil -8 China India* BRICs -12 04 05 06 07 08 09 10 11 12 * Private final consumption Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 17
  18. 18. Change in Real Retail Sales in Developed vs Growth Plus (Jan ‘07 to Present) 120 Bil$ Change 100 since Jan 07 80 60 40 20 0 -20 World -40 Advanced Growth and -60 Emerging Markets -80 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: National Sources, GS Global ECS Research.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 18
  19. 19. Germany’s Exports to Asia Rising – Stabilisation Elsewhere 230 Index 210 Jan07=100 China India 190 Russia 170 France 150 Italy Japan 130 US 110 Spain 90 BRIC 70 N-11 50 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Source: Haver Analytics and GSAM calculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 19
  20. 20. US Exports to Key Destinations 215 Index World Jan07=100 195 BRIC N-11 175 Canada 155 Mexico China 135 Japan 115 Germany UK 95 Brazil 75 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: Haver Analytics and GSAM Calculations.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 20
  21. 21. UK Exports to Key Destinations Index 160 Jan 07 = 100 China Netherlands 140 BRICs India 120 N-11 Germany 100 Ireland France 80 U.S. 60 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: Haver Analytics and GSAM Calculations.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 21
  22. 22. UK Composite PMI 65 Index 60 55 50 45 UK Composite PMI 40 Expansion > 50 35 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Haver AnalyticsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 22
  23. 23. ‘Crisis’ Indicator 6 Index 5 4 GS FSI (Financial Stress Index) 3 2 1 0 -1 -2 90 92 94 96 98 00 02 04 06 08 10 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 23
  24. 24. Credit Spreads 300 1800 bp bp 1600 250 CDX IG (lhs) 1400 CDX IH (rhs) 200 1200 150 1000 800 100 600 50 400 0 200 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 24
  25. 25. OECD Financial Conditions 103 Index, Jan 2000 = 100 102 101 100 99 98 OECD FCI Oil Augmented FCI 97 96 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 25
  26. 26. Momentum of the GLI 1.5 % mom 1.0 0.5 0.0 -0.5 -1.0 Global Industrial Production*, 3mma -1.5 GLI Momentum -2.0 -2.5 *Includes OECD countries plus BRICs, Indonesia and South Africa -3.0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 26
  27. 27. ISM Manufacturing Index 65 35 Index Index 60 30 25 55 20 50 15 45 10 40 5 0 35 -5 PMI Composite Index (50+ = 30 Econ Expand) [lhs] -10 New orders - Inventories Index 25 -15 (rhs) 20 -20 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 27
  28. 28. US Weekly Job Claims 700 Claims (000s) 600 4-Week Moving 500 Average 400 300 200 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 28
  29. 29. US House Prices vs Income Ratio Percent 4.5 3.0 House Price/Income Ratio* (left) 4.0 Mortgage Rate (right, inverted) 4.0 5.0 3.5 6.0 7.0 3.0 8.0 2.5 9.0 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 * S.a. median home price divided by median family income. Source: Department of Commerce. FRB. NAR.This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 29
  30. 30. Inflation Expectations in US 3.6 %yoy University of Michigan 5-10 yr 3.4 Inflation Expectations 3.2 3.0 2.8 2.6 2.4 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 30
  31. 31. US BBoP vs Current Account 2 % GDP 4-qtr 1 ma 0 -1 -2 -3 -4 -5 -6 Current Account -7 BBoP -8 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 31
  32. 32. Five Year Forward Oil Price 160 $/barrel 140 120 5-yr Forward Oil Price 100 80 60 40 20 0 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: GS Global ECS ResearchThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 32
  33. 33. Current Estimates for the Equity Risk Premium* Real Real Expected Real Expected Dividend Implied Expected GDP Earnings + = Real - Bond = Nominal Yield ERP Inflation Growth Growth Return Yield Return US 2.5 2.5 2.1 4.6 -0.3 4.8 2.0 6.6 UK 2.3 2.3 3.4 5.6 -1.0 6.6 2.0 7.6 Europe ex UK 2.0 2.0 3.7 5.7 0.8 4.9 2.0 7.7 Japan 1.5 1.5 2.3 3.8 1.0 2.7 1.0 4.8 Brazil 5.0 5.0 3.9 8.9 5.0 3.8 4.5 13.4 China 8.0 8.0 3.3 11.3 0.6 10.7 3.0 14.3 India 8.0 8.0 1.5 9.5 4.2 5.2 4.0 13.5 Russia 5.0 5.0 2.4 7.4 1.9 5.5 6.0 13.4 GDP-weighted Advanced 2.1 2.1 2.8 4.9 0.3 4.6 1.8 6.7 BRICs 7.0 7.0 3.0 10.0 2.1 7.9 3.8 13.9 World 3.5 3.5 2.8 6.3 0.8 5.5 2.4 8.7 PPP-weighted Advanced 2.2 2.2 2.7 4.9 0.2 4.7 1.9 6.8 BRICs 7.3 7.3 2.8 10.2 2.0 8.2 3.7 13.9 World 4.2 4.2 2.8 7.0 0.9 6.1 2.6 9.6 * As of 07 March 2012 Source: GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 33
  34. 34. ERP for Growth Market Economies Real Real Expected Real Expected Dividend Implied Expected GDP Earnings + = Real - Bond = Nominal Yield ERP Inflation Growth Growth Return Yield Return Brazil 5.0 5.0 3.9 8.9 5.0 3.8 4.5 13.4 China 8.0 8.0 3.3 11.3 0.6 10.7 3.0 14.3 India 8.0 8.0 1.5 9.5 4.2 5.2 4.0 13.5 Russia 5.0 5.0 2.4 7.4 1.9 5.5 6.0 13.4 Mexico 3.0 3.0 2.0 5.0 3.3 1.7 3.0 8.0 Korea 4.8 4.8 1.4 6.2 0.9 5.3 3.0 9.2 Indonesia 5.8 5.8 2.1 7.9 0.6 7.2 5.0 12.9 Turkey 5.0 5.0 2.4 7.4 4.2 3.2 5.5 12.9 * As of 07 March 2012 Source: GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 34
  35. 35. Trend in Forward P/Es 35 12mth forward United States PE 30 Japan Brazil China 25 India Russia 20 Europe 15 10 5 0 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Source: DatastreamThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 35
  36. 36. Cyclically Adjusted PE (CAPE) Ratios Latest Average Deviation CAPE vs CAPE Forward PE CAPE CAPE from avg. FY1 PE History USA 21.9 12.7 18.7 17% 73% 1973 Indonesia 21.4 13.0 21.8 -2% 65% 2001 Mexico 19.6 14.8 19.3 2% 33% 2001 Japan 19.1 13.3 46.8 -59% 44% 1975 India 18.3 14.3 22.4 -19% 28% 2001 Canada 17.4 12.7 19.3 -10% 37% 1975 Australia 16.0 11.2 15.8 1% 42% 1975 China 15.1 9.5 17.6 -14% 59% 2001 Korea 14.4 9.5 16.7 -14% 52% 2001 Brazil 13.4 9.8 15.5 -13% 37% 2001 Germany 12.4 10.4 19.1 -35% 19% 1976 UK 11.1 10.2 13.8 -19% 9% 1975 France 10.4 10.1 19.9 -48% 3% 1975 Turkey 9.3 9.6 15.5 -40% -3% 2001 Russia 8.4 5.3 14.5 -42% 58% 2001 Italy 7.2 9.0 22.4 -68% -20% 1989 Spain 7.1 9.5 18.2 -61% -25% 1985 Source: Datastream and GSAM Calculations. As of 01 March 2012This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 36
  37. 37. GSAM Benchmark Allocation in Growth Market World Group GDP Market Cap GSAM Share China 10.3% 2.4% 5.4% Brazil 3.7% 2.2% 2.5% India 2.7% 1.1% 1.7% Korea 1.8% 1.9% 2.1% Russia 2.6% 0.9% 1.9% Turkey 1.3% 0.2% 0.8% Mexico 1.8% 0.6% 1.2% Indonesia 1.2% 0.3% 0.6% Developed Markets 69.4% 86.2% 80.4% Growth Markets 25.3% 9.7% 16.1% Emerging Markets 5.3% 4.1% 3.5% Source: GSAM CalculationsThis information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.. Any reference to a specific companyor security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. Copyright © 2011, Goldman Sachs. All rights reserved 37

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