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The Growth Map: Economic
      Opportunity in the BRICs and Beyond

       Jim O’Neill
       Chairman, Goldman Sachs Asset Management

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
      March 2012
investment 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
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 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
                                                                                                                                                                                                                                         2
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: GSAM
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 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
                                                                                                                                                                                                                                         3
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 Economics

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 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
                                                                                                                                                                                                                                         4
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 Economics

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 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
                                                                                                                                                                                                                                         5
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 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 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
                                                                                                                                                                                                                                         6
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 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 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
                                                                                                                                                                                                                                         7
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 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 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
                                                                                                                                                                                                                                         8
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 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 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
                                                                                                                                                                                                                                         9
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 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 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
                                                                                                                                                                                                                                        10
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 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 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
                                                                                                                                                                                                                                        11
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 ECS




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 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
                                                                                                                                                                                                                                        12
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 Eurostat
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 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
                                                                                                                                                                                                                                        13
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 Analytics

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 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
                                                                                                                                                                                                                                        14
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 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 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
                                                                                                                                                                                                                                        15
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 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 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
                                                                                                                                                                                                                                        16
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 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 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
                                                                                                                                                                                                                                        17
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 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
                                                                                                                                                                                                                                        18
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 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 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
                                                                                                                                                                                                                                        19
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 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
                                                                                                                                                                                                                                        20
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 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
                                                                                                                                                                                                                                        21
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 Analytics

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 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
                                                                                                                                                                                                                                        22
‘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 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 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
                                                                                                                                                                                                                                        23
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 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 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
                                                                                                                                                                                                                                        24
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 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 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
                                                                                                                                                                                                                                        25
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 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 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
                                                                                                                                                                                                                                        26
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 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 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
                                                                                                                                                                                                                                        27
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 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 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
                                                                                                                                                                                                                                        28
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 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
                                                                                                                                                                                                                                        29
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 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 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
                                                                                                                                                                                                                                        30
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 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 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
                                                                                                                                                                                                                                        31
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 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 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
                                                                                                                                                                                                                                        32
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 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 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
                                                                                                                                                                                                                                        33
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 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 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
                                                                                                                                                                                                                                        34
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: Datastream

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 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
                                                                                                                                                                                                                                        35
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 2012

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 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
                                                                                                                                                                                                                                        36
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 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 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
                                                                                                                                                                                                                                        37
GSNO.10

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GSNO.10

  • 1. The Growth Map: Economic Opportunity in the BRICs and Beyond Jim O’Neill Chairman, Goldman Sachs Asset Management 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 March 2012 investment 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. 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 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 2
  • 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: GSAM 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 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 3
  • 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 Economics 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 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 4
  • 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 Economics 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 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 5
  • 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 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 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 6
  • 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 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 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 7
  • 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 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 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 8
  • 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 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 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 9
  • 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 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 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 10
  • 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 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 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 11
  • 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 ECS 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 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 12
  • 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 Eurostat 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 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 13
  • 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 Analytics 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 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 14
  • 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 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 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 15
  • 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 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 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 16
  • 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 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 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 17
  • 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 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 18
  • 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 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 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 19
  • 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 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 20
  • 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 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 21
  • 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 Analytics 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 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 22
  • 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 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 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 23
  • 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 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 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 24
  • 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 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 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 25
  • 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 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 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 26
  • 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 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 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 27
  • 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 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 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 28
  • 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 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 29
  • 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 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 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 30
  • 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 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 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 31
  • 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 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 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 32
  • 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 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 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 33
  • 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 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 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 34
  • 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: Datastream 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 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 35
  • 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 2012 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 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 36
  • 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 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 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 37