new us weekly kickstart - mpl law firm · 2020. 3. 23. · goldman sachs. 2 us weekly kickstart 20...
TRANSCRIPT
Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html.
US Weekly Kickstart
Source: I/B/E/S, FirstCall, Goldman Sachs Investment Research
S&P 500 earnings and valuation
PerformanceThe S&P 500 was down 15% this week. Consumer Staples was the best-performing sector (-5%) while Energy was the worst-performing sector (-20%). We expect the S&P 500 will end 2020 at 3000 (+30%).
US Portfolio Strategy recommendationsBuy S&P 500 / Sell 10-year Treasury: -38.3% YTDBuy Dividend Growth stocks vs. S&P 500: -10.6%Buy Low Labor Costs stocks vs. S&P 500: -6.8%
The third cut is the deepest: Slicing 2020 S&P 500 EPS forecast to $110, a 33% decline from last year
Conversations we are having with clients 2Charts we are watching 3Markets and money flow 6Market performance 7Sector performance 10Style and size 14Strategy baskets 15Earnings, sales, and revisions 20Valuations 21Factors 23Fund Flows, Fund Performance, and Short Interest 24Correlation, breadth, and dispersion 25Economics 26Goldman Sachs macro forecasts 27
Table of Contents
Business activity continues to deteriorate at a rapid rate. In 2008, financial excesses affected the rest of the economy. In 2020, the collapse in the real economy has driven financial markets into turmoil. As social distancing has confined many citizens to their homes, corporate sales have plunged, creating liquidity crises for many firms. S&P 500 has plummeted 32% in 30 days. We cut our S&P 500 EPS estimate for the third time in a month and now expect a decline of 33% to $110. On a quarterly basis, year/year EPS growth will equal -15%, -123%, -21%, and +27%. In a“V”-shaped recovery scenario, S&P 500 EPS will grow by 55% to $170 in 2021, and the index will end 2020 at 3000 (30% above the current level).
Need access to view our baskets on GS Marquee? Email us.
David J. Kostin(212) 902-6781 |[email protected] Sachs & Co. LLC
Ben Snider(212) 357-1744 | [email protected] Sachs & Co. LLC
Arjun Menon, CFA(212) 902-9693 | [email protected] Sachs & Co. LLC
Ryan Hammond(212) 902-5625 | [email protected] Sachs & Co. LLC
Cole Hunter, CFA(212) 357-9860 | [email protected] Sachs & Co. LLC
Nicholas Mulford(212) 357-6308 | [email protected] Sachs & Co. LLC
Jamie Yang(212) 357-5913 | [email protected] Sachs & Co. LLC
20 March 2020 | 6:00PM EDT
Goldman Sachs ConsensusPortfolio Strategy Bottom-Up
2020E 2021E 2020E 2021EEPS $110 $170 $168 $190Growth (33)% 55 % 2 % 13 %
NTM 2020E NTM 2020EP/E 19.6x 14.2x 14.3x 14.3x
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US Weekly Kickstart
20 March 2020
Conversations we are having with clients: Third cut is the deepest: EPS will fall by 33% to $110It is incredible how much can change in one month. On February 19th, the S&P 500 reached an all-time high of 3386, Senator Bernie Sanders was the front-runner to win the 2020 Democratic nomination, and investors were evaluating the extent to which the novel coronavirus would create supply chain disruptions. One month and one day later, the S&P 500 sits 32% lower, former Vice President Joe Biden has a large delegate lead, and people around the world are now isolated in their homes.
Each day contains a month’s worth of market news. Global monetary and fiscal policymakers have taken dramatic steps to arrest the economic devastation that is disrupting civilian life and business activity. Volatility has soared. In March, the typical daily move in the S&P 500 index has been 5%. US federal, state, and local governments have taken increasingly drastic measures to “flatten the curve” of new coronavirus cases. The list of travel restrictions grows almost hourly. California, home to 1 in 8 Americans, mandates people “stay-at-home.” NYC closed schools and restaurants and 100% of the non-essential workforce must stay at home.
Government measures taken to slow the viral spread have impaired near-term sales and earnings for many firms. As a result of the social distancing taking place across the US, many retailers have reduced store hours (WMT, TGT, and HD) or closed physical stores altogether (M, JWN, and KSS). Airlines have cut routes in response to low passenger demand and hotel occupancies stand at record lows.
We now forecast S&P 500 EPS of $110 in 2020, a decline of 33% from 2019. On a quarterly basis, this reflects year/year growth of -15%, -123%, -21% and +27% (Exhibit 1). We have cut our 2020 earnings forecast three times in 30 days (-37% in total) as the magnitude of the economic slowdown has become increasingly apparent. Our economists have incorporated similar expectations into their revised annual average US GDP growth forecast of -4% in 2020, including –24% annualized growth in 2Q. At the sector level, we expect large declines in Energy, Consumer Discretionary (e.g., Cruises, Hotels, Restaurants), and Industrials (e.g., Airlines). On the other hand, stockpiling may partially insulate Consumer Staples EPS.
The key question now is “V” or “U” or “L”? Early in the correction, investors were focused on quantifying the downside risk to near-term earnings, but were confident that EPS growth and share prices would recover later in 2020. As the virus spread and its economic impact intensified, they have been forced to grapple with whether the sharp decline in near-term activity will be followed by an equally sharp recovery (“V”), last multiple quarters before improving (“U”), or create lasting economic damage that reduces the outlook for earnings in 2021 and beyond (“L”).
Policymakers have responded in force with startling speed. The Fed has slashed the policy rate effectively to zero and taken steps to boost credit availability, such as reintroducing the Commercial Paper Funding Facility (CPFF) backstopping corporate borrowing for terms out to 90 days. Our economists expect Congress and the Trump administration will continue to enact legislation that provides a fiscal boost of $1 trillion (5% of GDP) or greater. If all goes according to plan, S&P 500 EPS will leap by 55% to $170 in 2021, and the index will end 2020 at 3000 (30% above the current level). Earnings and investor sentiment will be recovering later in
2020. Using the Fed Model, applying a Treasury yield of 1% and a yield gap of 465 bp, suggests a P/E multiple of 18x on 2021 EPS and a year-end 2020 level of 3000.
In the near-term, we expect the S&P 500 will fall towards a low of 2000. The stock market is a leading indicator of business trends, and corporate activity continues to deteriorate with no signs yet of a bottom. The first quarter has not even ended and companies have yet to release 1Q results but equities have already collapsed by 32% in one month. The speed of business erosion is unprecedented.
Understandably, many firms have withdrawn previously issued guidance. More will pre-announce in coming days. Revenues have dropped precipitously and firms face cash shortfalls. Ford (F) announced this week it will suspend its dividend. Other firms will likely follow its lead. More than 65% of S&P 500 market cap will report 1Q results during a concentrated 2-week period that is more than one month away (April 20-May 1). For most corporations, business was strong in January and the first half of February, weakened only towards the end February (coincident with the market peak), and plummeted in March. The outlook for 2Q remains dire for many industries and most firms will probably refrain from providing guidance for 2Q.
The difference between a “V” and “U” in the stock market will depend on three developments: (1) whether the virus can be contained quickly, an answer difficult even for epidemiologists; (2) whether companies, both large and small, have access to enough capital and liquidity to last the 90 to 180 days most investors expect (hope) will encompass the worst part of the crisis; and (3) whether fiscal stimulus will act quickly enough to stabilize the economic and earnings outlooks. One possibility is that business activity cannot normalize by late 2020 because the viral spread is worse than expected or has a hiatus and recurs in the fall. In addition, if short-term shutdowns lead to business defaults, closures, and permanent layoffs, the damage to corporate earnings growth could persist well after the virus is contained.
Thin liquidity across asset markets has exacerbated price swings as investors try to assess the path of growth. Our equity illiquidity ratio, which measures the impact of trading volumes on share prices, shows the liquidity shock has now surpassed the December 2018 experience and is approaching 2008 levels. This trend is consistent with cycle-high bid-ask spreads and cycle-low top of book depth.
Illiquidity likely contributed to the sharp underperformance of popular hedge fund and mutual fund stocks this week as investors reduced risk. We have previously highlighted that investor positioning remained unusually elevated relative to levels at the bottom of other major S&P 500 corrections. This week, however, those positions declined. From Monday to Wednesday, our Hedge Fund VIP basket (GSTHHVIP) lagged our basket of large shorts (GSTHVISP) by 850 bp (-17% vs. -8%), more than any 3-day period in the nearly 20 years of the baskets’ history. Mutual Fund Overweights (GSTHMFOW) also lagged Underweights (GSTHMFUW). However, both groups of popular stocks recovered extremely sharply, posting their best-ever days of outperformance on Thursday. Our Sentiment Indicator shows that equity positioning has plunged in recent weeks, but additional selling is likely until positioning matches lows reached at the bottom of prior corrections (see Exhibit 4).
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US Weekly Kickstart
20 March 2020
Mid-year Trough Year-end$140 $170
($110 in 2020, $170 in 2021) ($170 in 2021)
Yield gap S&P 500Change from
peak S&P 500Change from
trough800 bp 1,650 (51)% 1,900 (5)%
700 1,875 (45) 2,125 6
650 2,000 (41) 2,275 14
600 2,150 (37) 2,425 21
500 2,550 (25) 2,825 41
465 2,725 (20) 3,000 50
400 3,100 (8) 3,400 70
S&P 500 EPS:
(3.5)
(3.0)
(2.5)
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
US Equity Sentiment Indicator
Mar-09-2.2
Oct-11-3.0
Feb-16-2.0
Dec-18-2.6
-1.4Current
-15%
-123%
-21%
27%
-3% -2% 5%
9%
(140)%
(120)%
(100)%
(80)%
(60)%
(40)%
(20)%
0 %
20 %
40 %
1Q 20 2Q 20 3Q 20 4Q 20
S&P 500year/year
EPS growth
GSestimate
Consensus bottom-up
S&P 500EPS
(GS est.)1Q 20 $332Q 20 (10)3Q 20 334Q 20 53
Full year $110
Charts we are watching: Earnings, Valuation, Prices, and Positioning
Source: Goldman Sachs Global Investment Research
Exhibit 1: We expect a sharp decline in 2Q S&P 500 EPSas of March 19, 2020
Source: FactSet, Goldman Sachs Global Investment Research
Exhibit 2: We expect the yield gap to narrow by year-endas of March 19, 2020; assuming 10-yr UST yield of 0.5% at mid-year, 1% at year-end
Source: Goldman Sachs Global Investment Research
Exhibit 3: Sensitivity of our 2020 S&P 500 price targets to the yield gapgray indicates baseline forecasts, assuming 10-yr UST yield of 0.5% at trough, 1% at year-end
Source: Goldman Sachs Global Investment Research
Exhibit 4: Our Sentiment Indicator remained at -1.4 this weekas of March 19, 2020
100 bp
200 bp
300 bp
400 bp
500 bp
600 bp
700 bp
800 bp
2006 2008 2010 2012 2014 2016 2018 2020 2022
S&P 500 earnings yield gapvs. 10-year US Treasury
Year-end2020E465 bp
Mid-year2020E650 bp
March 19590 bp
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US Weekly Kickstart
20 March 2020
Performance of Hedge Fund VIPs and Very Important Short PositionsExhibit 5: Constituents of our GSTHHVIP and GSTHVISP basketsas of March 19, 2020; holdings as of December 31, 2019
Source: FactSet, Goldman Sachs Global Investment Research.
Hedge Fund VIPs (GSTHHVIP) Very Important Short Positions (GSTHVISP)
YTD YTD YTD YTDCompany Ticker return Company Ticker return Company Ticker return Company Ticker return
Eldorado Resorts Inc ERI (87)% Bristol-Myers Squibb Co. BMY (23)% Simon Property Group, Inc. SPG (62)% Target Corp. TGT (21)%
Boeing Co. BA (70) Berkshire Hathaway Inc. BRK.B (23) Chevron Corp. CVX (52) Cisco Systems, Inc. CSCO (21)
Carvana Co. CVNA (67) Comcast Corp. CMCSA (20) Exxon Mobil Corp. XOM (50) Texas Instruments Inc. TXN (20)
Delta Air Lines, Inc. DAL (63) Charter Communications, Inc. CHTR (19) Welltower, Inc. WELL (49) Southern Co. SO (19)
Citigroup Inc. C (50) Visa Inc. V (19) Wells Fargo & Co. WFC (47) AT&T Inc. T (19)
Nexstar Media Group, Inc. NXST (47) Alphabet Inc. GOOGL (17) CarMax, Inc. KMX (45) Danaher Corp. DHR (19)
TransDigm Group Inc. TDG (45) Apple Inc. AAPL (16) Lowe's Companies, Inc. LOW (41) Lockheed Martin Corp. LMT (19)
Booking Holdings Inc. BKNG (42) Twilio, Inc. TWLO (16) Healthpeak Properties, Inc. PEAK (41) AbbVie, Inc. ABBV (19)
NXP Semiconductors NV NXPI (40) Centene Corp. CNC (15) Broadcom Inc. AVGO (38) Becton, Dickinson and Co. BDX (18)
Bank of America Corp BAC (39) Alibaba Group Holding Ltd. (ADR) BABA (15) Charles Schwab Corp. SCHW (33) Amgen Inc. AMGN (17)
JPMorgan Chase & Co. JPM (38) salesforce.com, inc. CRM (14) Medtronic Plc MDT (30) Duke Energy Corp. DUK (17)
SS&C Technologies Holdings, Inc. SSNC (38) PayPal Holdings Inc PYPL (13) Prologis, Inc. PLD (28) Oracle Corp. ORCL (15)
Walt Disney Co. DIS (34) Microsoft Corp. MSFT (9) QUALCOMM Inc. QCOM (26) NextEra Energy, Inc. NEE (14)
Micron Technology, Inc. MU (33) Interxion Holding N.V. INXN (8) CVS Health Corp. CVS (25) Abbott Laboratories ABT (14)
Uber Technologies, Inc. UBER (31) Adobe Inc. ADBE (7) UnitedHealth Group Inc. UNH (25) PepsiCo, Inc. PEP (14)
GoDaddy, Inc. GDDY (30) Tiffany & Co. TIF (5) International Business Machines Corp. IBM (24) Advanced Micro Devices, Inc. AMD (13)
KKR & Co. Inc. KKR (29) WABCO Holdings Inc. WBC (4) Illinois Tool Works Inc. ITW (24) Johnson & Johnson JNJ (12)
Global Payments Inc. GPN (28) ServiceNow, Inc. NOW (2) Waters Corp. WAT (24) Verizon Communications Inc. VZ (12)
Cigna Corp. CI (28) Sea Ltd. (Singapore, ADR) SE (1) McDonald's Corp. MCD (24) Procter & Gamble Co. PG (11)
PG&E Corp. PCG (27) Zayo Group Holdings, Inc. ZAYO 1 Coca-Cola Co. KO (24) NVIDIA Corp. NVDA (9)
Fiserv, Inc. FISV (27) Amazon.com, Inc. AMZN 2 Intel Corp. INTC (23) Walmart Inc. WMT 1
Home Depot, Inc. HD (26) Tesla Inc TSLA 2 CME Group Inc. CME (22) Eli Lilly and Co. LLY 2
Facebook, Inc. FB (25) Netflix, Inc. NFLX 3 Merck & Co., Inc. MRK (22) Costco Wholesale Corp. COST 4
Fidelity National Information Services, Inc. FIS (24) JD.com, Inc. (ADR) JD 6 Pfizer Inc. PFE (22) Gilead Sciences, Inc. GILD 22
Mastercard Inc. MA (24) RingCentral, Inc. RNG 9 3M Co. MMM (21) Clorox Co. CLX 26
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US Weekly Kickstart
20 March 2020
Performance of Mutual Fund Overweights and UnderweightsExhibit 6: Constituents of our GSTHMFOW and GSTHMFUW basketsas of March 19, 2020; holdings as of December 31, 2019
Source: FactSet, Goldman Sachs Global Investment Research.
Mutual Fund Overweights (GSTHMFOW) Mutual Fund Underweights (GSTHMFUW)
YTD YTD YTD YTDCompany Ticker return Company Ticker return Company Ticker return Company Ticker return
Marathon Petroleum Corp. MPC (72)% TJX Companies Inc TJX (32)% Boeing Co. BA (70)% Intel Corp. INTC (23)%
Discover Financial Services DFS (66) Crown Holdings, Inc. CCK (31) Simon Property Group, Inc. SPG (62) Philip Morris International Inc. PM (22)
Delta Air Lines, Inc. DAL (63) Medtronic Plc MDT (30) Chevron Corp. CVX (52) Pfizer Inc. PFE (22)
Valero Energy Corp. VLO (60) Marvell Technology Group Ltd. MRVL (29) Ford Motor Co. F (51) 3M Co. MMM (21)
American International Group, Inc. AIG (59) Exelon Corp. EXC (28) Exxon Mobil Corp. XOM (50) Cisco Systems, Inc. CSCO (21)
Capital One Financial Corp. COF (55) UnitedHealth Group Inc. UNH (25) Welltower, Inc. WELL (49) Southern Co. SO (19)
General Motors Co. GM (51) Fidelity National Information Services, Inc. FIS (24) United Technologies Corp. UTX (44) AT&T Inc. T (19)
Citigroup Inc. C (50) Mastercard Inc. MA (24) Broadcom Inc. AVGO (38) AbbVie, Inc. ABBV (19)
Stanley Black & Decker, Inc. SWK (49) Sherwin-Williams Co. SHW (24) JPMorgan Chase & Co. JPM (38) Amgen Inc. AMGN (17)
MetLife, Inc. MET (47) Bristol-Myers Squibb Co. BMY (23) Walt Disney Co. DIS (34) Duke Energy Corp. DUK (17)
Exact Sciences Corp. EXAS (46) Alexion Pharmaceuticals, Inc. ALXN (23) Realty Income Corp. O (34) Apple Inc. AAPL (16)
U.S. Bancorp USB (44) Zoetis, Inc. ZTS (23) Micron Technology, Inc. MU (33) NextEra Energy, Inc. NEE (14)
Burlington Stores, Inc. BURL (43) Target Corp. TGT (21) Starbucks Corp. SBUX (30) Abbott Laboratories ABT (14)
TE Connectivity Ltd. TEL (43) Intercontinental Exchange, Inc. ICE (20) Caterpillar Inc. CAT (30) PepsiCo, Inc. PEP (14)
Booking Holdings Inc. BKNG (42) Comcast Corp. CMCSA (20) Prologis, Inc. PLD (28) Johnson & Johnson JNJ (12)
PNC Financial Services Group, Inc. PNC (42) Visa Inc. V (19) Linde plc LIN (27) Procter & Gamble Co. PG (11)
Lowe's Companies, Inc. LOW (41) Intuit Inc. INTU (17) Home Depot, Inc. HD (26) Allergan plc AGN (10)
Zimmer Biomet Holdings, Inc. ZBH (40) Alphabet Inc. GOOGL (17) Facebook, Inc. FB (25) NVIDIA Corp. NVDA (9)
Bank of America Corp BAC (39) Electronic Arts Inc. EA (16) Equity Residential EQR (25) Microsoft Corp. MSFT (9)
Morgan Stanley MS (39) salesforce.com, inc. CRM (14) Accenture Plc ACN (24) Crown Castle International Corp CCI (7)
Chubb Limited CB (36) PayPal Holdings Inc PYPL (13) International Business Machines Corp. IBM (24) Walmart Inc. WMT 1
CBRE Group, Inc. CBRE (36) Adobe Inc. ADBE (7) McDonald's Corp. MCD (24) Amazon.com, Inc. AMZN 2
Discovery, Inc. DISCA (35) Progressive Corp. PGR (4) Coca-Cola Co. KO (24) Eli Lilly and Co. LLY 2
Charles Schwab Corp. SCHW (33) ServiceNow, Inc. NOW (2) CSX Corp. CSX (24) Netflix, Inc. NFLX 3
General Dynamics Corp. GD (33) Vertex Pharmaceuticals Inc. VRTX (1) Berkshire Hathaway Inc. BRK.B (23) Costco Wholesale Corp. COST 4
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US Weekly Kickstart
20 March 2020
Markets and Money Flow
Source: Haver, EPFR, FactSet, CFTC, and Goldman Sachs Global Investment Research.
Pricing in this report as of March 19, 2020, unless otherwise indicated.
S&P 500 level and EPS 10-yr. Treasury Yields Fed Funds Target Rate
Sentiment Indicator Rotation Index Volatility
10
20
30
40
50
60
70
80
90
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
VIX
72
(1.0)
(0.8)
(0.6)
(0.4)
(0.2)
0.0
0.2
0.4
0.6
Dec
-18
Mar
-19
Jun-
19
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Stan
dard
dev
iatio
ns
Risk off; favors BOND flows
Risk on; favors EQUITY flows
Rotation Index (4-wk moving avg)
6-month trend
(2.5)
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
2.5
Dec
-18
Mar
-19
Jun-
19
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Z-Sc
ore
SI>1.0 = STRETCHED positioning
(1.5)<SI<(1.0) = LIGHT positioning
(1.4)
SI<(1.5) = EXTREMELY LIGHT positioning
0.4 %
0.8 %
1.2 %
1.6 %
2.0 %
2.4 %
2.8 %
3.2 %
Dec
-18
Dec
-19
Dec
-20
Dec
-21
Dec
-22
US 10-Year Treasury Yield
Current:1.14%
GSforecast
Futures market
2020E:0.75%
2021E:1.35%
90
110
130
150
170
190
210
1800
2000
2200
2400
2600
2800
3000
3200
3400D
ec-1
8
Dec
-19
Dec
-20
Dec
-21
Dec
-22
S&P 500 adjusted EPS
S&P
500
Pric
e
Goldman SachsAdjusted
EPS Forecast
S&P 500Price
Current2409
2019E$165
2020E$110
2020E3000
2021E$170
Note: Sentiment Indicator measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. Readings below -1.0 or above +1.0 indicate extreme positions that are significant in predicting future returns.
Note: Rotation Index plots the first principal component of weekly reallocation activity across equity and debt mutual fund and ETF categories as a measure of retail risk appetite.
0 %
1 %
2 %
3 %
4 %
5 %
6 %
2004
2008
2012
2016
2020
2024
2028
GS forecast
Fed FundsTarget Rate
2020E:0.1%
Futuresmarket
2021E:0.4%
2022E:0.9%
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US Weekly Kickstart
20 March 2020
Market Performance: 2020 YTD absolute and risk-adjusted returns
Source: Haver, FactSet, and Goldman Sachs Global Investment Research.
Total Return Risk Adjusted Return (Sharpe Ratio)
Note: Crude Oil (S&P GSCI) return represents S&P GSCI Crude Oil Index total return. Spot change equals (57)% YTD.
(25)
(57)
(36)
(34)
(31)
(26)
(26)
(20)
(20)
(19)
(18)
(14)
(58)
(36)
(32)
(31)
(28)
(20)
(18)
(16)
(16)
(10)
(5)
(3)
(2)
8
(80) (70) (60) (50) (40) (30) (20) (10) 0 10 20 30
Crude Oil (S&P GSCI)
ENERGY
FINANCIALS
Russell 2000
INDUSTRIALS
Russell 1000 Value
MATERIALS
MSCI Emerging Markets
MSCI Developed Markets
REAL ESTATE
CONSUMER DISCRETIONARY
S&P 500
Russell 1000 Growth
COMM SERVICES
UTILITIES
HEALTH CARE
INFORMATION TECHNOLOGY
HY Credit
Nasdaq 100
Equity L/S HF Index
CONSUMER STAPLES
IG Credit
$/Euro
Gold
Global Macro HF Index
10-year US Treasury
(2.9)
(2.4)
(2.1)
(1.5)
(1.3)
(1.2)
(1.2)
(1.2)
(1.1)
(0.8)
(0.6)
(0.5)
(0.3)
1.3
(1.5)
(1.3)
(1.2)
(1.2)
(1.1)
(0.9)
(0.9)
(0.9)
(0.7)
(0.7)
(0.6)
(1.0)
(5) (4) (3) (2) (1) 0 1 2 3
Equity L/S HF Index
HY Credit
MSCI Emerging Markets
IG Credit
ENERGY
MSCI Developed Markets
INDUSTRIALS
MATERIALS
Russell 1000 Value
Russell 2000
FINANCIALS
Crude Oil (S&P GSCI)
$/Euro
CONSUMER DISCRETIONARY
S&P 500
HEALTH CARE
REAL ESTATE
COMM SERVICES
Russell 1000 Growth
UTILITIES
CONSUMER STAPLES
Nasdaq 100
INFORMATION TECHNOLOGY
Global Macro HF Index
Gold
10-year US Treasury
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Sector Baskets – Performance Relative to S&P 500
Source: FactSet and Goldman Sachs Global Investment Research.
Cyclicals Defensives Domestic Global
Domestic Cyclicals Global Cyclicals Domestic Defensives Global Defensives
90
92
94
96
98
100
102
104
106
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBCYCLBloomberg <ticker>
90
92
94
96
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBDCYC
BanksInsuranceDiversified FinancialsTransportationRetailing
94
96
98
100
102
104
106
108
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBDEFS
90
92
94
96
98
100
102
104
106
108
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBGCYC
AutosCapital GoodsEnergyMaterialsTech HardwareSemiconductorsConsumer DurablesMedia
94
95
96
97
98
99
100
101
102
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBDOMS
90
92
94
96
98
100
102
104
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBDDEF
Food RetailingReal EstateTelecomUtilitiesHealth Care Equip.Commercial Services
99
100
101
102
103
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBGLBL
96
98
100
102
104
106
108
110
112
114
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSSBGDEFSoftware & ServicesConsumer ServicesFood, Beverage & TobaccoHousehold & Personal ProductsPharmaceuticals
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9
US Weekly Kickstart
20 March 2020
Sector Baskets Performance
Source: FactSet and Goldman Sachs Global Investment Research.
Cyclicals vs. Defensives Domestic vs. Global
80
84
88
92
96
100
104
108
112
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
CYCLICALSoutperforming
DEFENSIVESoutperforming
90
92
94
96
98
100
102
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
DOMESTICoutperforming
GLOBALoutperforming
Performance and fundamentals of our sector baskets Bloomberg % of
Ticker # of S&P 500 Non-US Earnings Growth Sales Growth NTM LTM Div Total ReturnBasket <GSSBXXXX> Stocks Cap Beta Sales 2020E 2021E 2020E 2021E P/E P/B Yield 1 Wk 1 Mo 3 Mo LTM YTD
Defensives DEFS 215 49 % 0.8 23% 6 % 10 % 6 % 5 % 15.8x 4.0x 2.5 % (2.1)% (24)% (18)% (6)% (19)%Cyclicals CYCL 285 51 1.2 35 1 14 1 7 13.1 2.1 2.5 (3.6) (33) (30) (20) (31)
Global GLBL 279 62 % 1.1 46% 4 % 14 % 2 % 6 % 15.4x 3.6x 2.4 % (2.5)% (29)% (24)% (12)% (25)%Domestic DOMS 221 38 0.9 16 3 10 5 6 12.8 1.9 2.7 (3.5) (29) (25) (15) (26)
Global Defensives GDEF 101 31 % 0.9 45% 7 % 11 % 6 % 6 % 16.7x 6.2x 2.3 % (0.7)% (23)% (17)% (4)% (17)%Domestic Defensives DDEF 114 18 0.7 13 6 8 6 5 14.5 2.6 3.0 (4.4) (24) (20) (8) (21)Domestic Cyclicals DCYC 107 20 1.0 19 1 11 3 9 11.5 1.6 2.5 (2.7) (33) (30) (20) (30)Global Cyclicals GCYC 178 32 1.2 47 1 17 0 6 14.3 2.5 2.6 (4.2) (33) (30) (20) (31)
Services-providing SERV 259 57 % 1.0 20% 4 % 12 % 6 % 7 % 14.3x 2.6x 2.1 % (2.3)% (29)% (24)% NM (24)%Goods-producing GOOD 240 43 1.0 45 3 13 0 5 14.2 2.9 3.1 (3.5) (28) (25) NM (26)
S&P 500 500 100 % 1.0 30% 2 % 13 % 4 % 6 % 14.3x 2.7x 2.5 % (2.8)% (29)% (24)% (13)% (25)%
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US Weekly Kickstart
20 March 2020
Sectors – Relative Performance vs. S&P 500
Source: FactSet and Goldman Sachs Global Investment Research.
Consumer Discretionary Financials Information Technology
Industrials Energy Materials Real Estate
Consumer Staples Health Care Communication Services Utilities
84
88
92
96
100
104
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
RetailingConsumer ServicesConsumer Durables & ApparelAutos & Components
72%15%10%3%
82
86
90
94
98
102
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Capital GoodsTransportationComm & Prof Services
69%21%10%
80
85
90
95
100
105
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Diversified FinancialsBanksInsurance
43%39%18%
40
50
60
70
80
90
100
110D
ec-1
8
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
95
100
105
110
115
120
125
130
135
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Software & ServicesTech Hardware & EquipmentSemis
56%28%17%
80
85
90
95
100
105
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
92
96
100
104
108
112
116
120
124
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Food Beverage & TobaccoHousehold & Personal ProductsFood & Staples Retailing
49%28%24%
80
85
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Pharma & BiotechHealth Care Equip & Services
57%43%
98
100
102
104
106
108
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Media & EntertainmentTelecom Services
78%22%
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
92
96
100
104
108
112
116
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Recommended Sector PositioningGoldman S&P
Sachs 500Sectors Weighting Wgt YTDInfo Tech 25% (18)%Real Estate 3 (26)
Utilities 4 (20)Comm Services 11 (20)Materials 2 (31)Industrials 8 (34)Consumer Staples 8 (14)Health Care 15 (19)Consumer Discr 10 (26)Financials 11 (36)Energy 2 (57)S&P 500 100% (25)%
Overweight
Underweight
Neutral
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11
US Weekly Kickstart
20 March 2020
Industry Groups – Relative Performance vs. S&P 500 and 3 largest stocks
Source: FactSet, compiled by Goldman Sachs Global Investment Research.
Automobiles & Components Consumer Durables & Apparel Consumer Services Retailing
Banks Diversified Financials Insurance Semiconductors
Software & Services Technology Hardware & Equipment Health Care Equipment & Services Pharma, Biotech, & Life Sciences
50
60
70
80
90
100
110
120
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GMFAPTV
39%30%18%
76
84
92
100
108
116
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
NKEVFCGRMN
46%10%5%
75
80
85
90
95
100
105
110
115
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
JPMBACWFC
31%20%13%
60
70
80
90
100
110
120
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
MCDSBUXYUM
39%25%6%
86
88
90
92
94
96
98
100
102D
ec-1
8
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
BRK.BCMEAXP
36%6%5%
90
100
110
120
130
140
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
INTCNVDATXN
24%15%11%
95
100
105
110
115
120
125
130
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
MSFTVMA
39%9%7%
90
100
110
120
130
140
150
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
AAPLCSCOMSI
73%11%2%
82
86
90
94
98
102
106
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
CBMMCPGR
12%10%10%
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
AMZNHDLOW
56%13%4%
80
85
90
95
100
105
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
UNHABTMDT
16%10%8%
76
80
84
88
92
96
100
104
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
JNJMRKPFE
19%10%10%
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12
US Weekly Kickstart
20 March 2020
Industry Groups – Relative Performance vs. S&P 500 and 3 largest stocks (continued)
Source: FactSet, compiled by Goldman Sachs Global Investment Research.
Capital Goods Commercial & Professional Services Transportation Energy
Materials Food & Staples Retailing Food Beverage & Tobacco Household & Personal Products
Real Estate Media & Entertainment Telecommunication Services Utilities
98
100
102
104
106
108
110
112
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GOOGLFBDIS
38%21%10%
80
85
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
HONMMMLMT
8%7%7%
96
100
104
108
112
116
120
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
WMVRSKINFO
25%14%13%
40
50
60
70
80
90
100
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
XOMCVXCOP
30%22%6%
75
80
85
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
UNPUPSCSX
25%20%12%
80
85
90
95
100
105
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
LINAPDECL
17%9%8%
859095
100105110115120125130
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
WMTCOSTWBA
44%35%9%
9095
100105110115120125130135
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
PGCLKMB
61%13%10%
88
92
96
100
104
108
112
116
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
AMTCCIPLD
16%9%8%
85
90
95
100
105
110
115
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
TVZTMUS
47%46%5%
90
95
100
105
110
115
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
NEEDDUK
14%8%8%
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
PEPKOPM
20%20%13%
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US Weekly Kickstart
20 March 2020
S&P 500 Sector and Industry Group Performance
Source: FactSet and Goldman Sachs Global Investment Research.
Weight 1 Week 1 Month 3 Months Last 12 Months YTDS&P 500 100 % (2.8)% (28.7)% (24)% (13)% (25)%
Consumer Staples 8 % 3.0 % (16.3)% (14)% 0 % (14)% Top quartile
Communication Services 11 0.5 (24.8) (20) (7) (20) Bottom quartile
S Information Technology 25 (0.7) (27.3) (17) 3 (18)E Health Care 15 (2.9) (20.9) (19) (9) (19)C Materials 2 (3.1) (30.3) (30) (22) (31)T Financials 11 (3.9) (37.2) (36) (25) (36)O Consumer Discretionary 10 (4.6) (30.1) (25) (17) (26)R Utilities 4 (4.7) (26.0) (19) (7) (20)
Industrials 8 (7.3) (35.7) (33) (26) (34)Real Estate 3 (11.3) (30.3) (24) (16) (26)Energy 2 (13.3) (53.2) (57) (59) (57) Region Cycle
Food & Staples Retailing 2 % 11.6 % (5.7)% (5)% 13 % (5)% Domestic Defensives
Household & Personal Products 2 7.2 (12.2) (9) 9 (9) Global Defensives
Telecommunication Services 2 2.2 (14.5) (15) 2 (15) Domestic Defensives
Pharmaceuticals Biotechnology & Life Sciences 9 0.5 (14.9) (14) (5) (14) Global Defensives
Media & Entertainment 9 0.0 (27.3) (22) (9) (21) Global Cyclicals
I Technology Hardware & Equipment 7 (0.4) (24.9) (17) 10 (20) Global Cyclicals
N Software & Services 14 (0.4) (26.8) (15) 3 (16) Global Defensives
D Retailing 7 (0.5) (23.8) (15) (7) (16) Domestic Cyclicals
U Banks 4 (1.2) (40.8) (42) (31) (43) Domestic Cyclicals
S Semiconductors & Semiconductor Equipment 4 (2.3) (32.2) (24) (6) (25) Global Cyclicals
T Food Beverage & Tobacco 4 (2.7) (22.6) (20) (9) (20) Global Defensives
R Transportation 2 (2.9) (33.6) (32) (27) (32) Domestic Cyclicals
Y Diversified Financials 5 (3.1) (32.2) (29) (19) (29) Domestic Cyclicals
Materials 2 (3.1) (30.3) (30) (22) (31) Global Cyclicals
G Commercial & Professional Services 1 (4.2) (27.9) (19) (5) (20) Domestic Defensives
R Utilities 4 (4.7) (26.0) (19) (7) (20) Domestic Defensives
O Health Care Equipment & Services 7 (7.2) (27.7) (24) (14) (25) Domestic Defensives
U Capital Goods 6 (9.0) (37.3) (35) (28) (36) Global Cyclicals
P Consumer Durables & Apparel 1 (10.4) (39.1) (39) (30) (39) Global Cyclicals
Insurance 2 (11.3) (39.8) (37) (28) (37) Domestic Cyclicals
Real Estate 3 (11.3) (30.3) (24) (16) (26) Domestic Defensives
Energy 2 (13.3) (53.2) (57) (59) (57) Global Cyclicals
Consumer Services 1 (14.2) (43.2) (41) (33) (42) Global Defensives
Automobiles & Components 0 (21.8) (48.0) (53) (49) (52) Global Cyclicals
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US Weekly Kickstart
20 March 2020
Style and Size
Source: FactSet and Goldman Sachs Global Investment Research.
Large-cap vs. Small-cap
Sectors: Russell 1000 vs. Russell 2000
Weight (%) 1-Week (% Return) YTD (% Return)Russell Sector R1000 R2000 R1000 R2000 ∆ (bps) R1000 R2000 ∆ (bps)Cons Discretionary 15 10 (3) (16) 1,274 (24) (48) 2,397Technology 26 14 0 (4) 378 (18) (31) 1,289Health Care 15 20 (3) (4) 81 (19) (28) 887Financials 19 25 (7) (8) 13 (33) (38) 499Materials 3 6 (5) (4) (50) (32) (40) 796Industrials 9 13 (7) (6) (141) (34) (39) 475Consumer Staples 7 3 1 6 (440) (18) (28) 1,049Utilities 6 6 (2) 5 (740) (18) (14) (410)Energy 2 2 (13) 1 (1,404) (58) (59) 68
Index 100 100 (4) (6) 213 (26) (36) 1,041
95
100
105
110
115
120
125
130
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Russell 1000 outperforming
Russell 2000 outperforming
Growth vs. Value
Sectors: Russell 1000 Growth vs. Value
Weight (%) 1-Week (% Return) YTD (% Return)Russell Sector Growth Value Growth Value ∆ (bps) Growth Value ∆ (bps)Utilities 0 13 4 (2) 559 (2) (18) 1,582Energy 0 5 (9) (14) 465 (57) (58) 97Technology 41 7 1 (3) 405 (17) (27) 983Cons Discretionary 18 11 (2) (6) 387 (19) (33) 1,423Industrials 9 8 (6) (8) 256 (31) (37) 525Financials 12 27 (8) (7) (23) (23) (38) 1,509Health Care 15 15 (5) (2) (279) (20) (18) (197)Materials 2 4 (7) (4) (304) (24) (36) 1,170Consumer Staples 4 11 (2) 3 (460) (20) (17) (273)
Index 100 100 (2) (5) 233 (20) (32) 1,145
95
100
105
110
115
120
125
130
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Growth outperforming
Value outperforming
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15
US Weekly Kickstart
20 March 2020
US Portfolio Strategy Baskets are available on GS Marquee platform
Source: FactSet and Goldman Sachs Global Investment Research.
For details and constituents of our baskets see Anatomy of our US Portfolio Strategy Thematic and Sector Baskets, February 5, 2020.
Total Return P/E P/B DivTicker 1 wk 1 mo YTD NTM LTM Yield
Dual Beta GSTHBETA (2.5)% (35)% (34)% 12x 1.8x 2.3 %
Interest Rate Sensitive GSTHUSTY (4.2) (39) (40) 8 1.4 4.1
High Tax GSTHHTAX (5.3) (33) (31) 13 3.3 2.2
Low Tax GSTHLTAX (6.0) (37) (35) 13 2.5 2.8
High Labor Cost GSTHHLAB (4.0) (29) (26) 15 3.5 1.5
Low Labor Cost GSTHLLAB (7.1) (34) (32) 10 2.4 2.4
Domestic Sales GSTHAINT (3.6)% (29)% (28)% 13x 2.6x 2.2 %
International Sales GSTHINTL (6.5) (33) (32) 14 2.7 2.2
BRICs Sales GSTHBRIC (5.2) (37) (36) 15 2.7 2.6
Western Europe Sales GSTHWEUR (6.6) (36) (36) 11 1.8 1.1
High Revenue Growth GSTHREVG (4.3)% (33)% (29)% 22x 4.7x 0.7 %
High Operating Leverage GSTHOPHI (1.5) (31) (28) 15 2.7 1.2
Low Operating Leverage GSTHOPLO (5.5) (33) (31) 13 3.9 2.2
ROE Growth GSTHGROE (5.5) (33) (31) 13 2.0 2.5
High Quality Stock GSTHQUAL (5.5) (30) (26) 19 4.5 1.1
High Adjusted FCF Yield GSTHHACF (3.4) (31) (31) 8 2.1 4.4
Low Adjusted FCF Yield GSTHLACF (7.6) (35) (31) 18 3.5 0.7
Strong Balance Sheet GSTHSBAL (2.5) (26) (21) 24 6.9 0.4
Weak Balance Sheet GSTHWBAL (6.7) (39) (37) 9 1.0 3.2
Capex and R&D GSTHCAPX (6.0)% (36)% (36)% 9x 1.3x 3.8 %
Total Cash Return to Shareholders GSTHCASH (2.6) (31) (31) 9 2.7 4.7
Buyback GSTHREPO (3.9) (32) (31) 11 2.7 3.7
Dividend Growth GSTHDIVG (4.5) (35) (36) 9 1.8 5.1
High Growth Investment Ratio GSTHHGIR (1.6) (27) (23) 15 4.2 2.2
Debt Issuers GSTHDISS (7.5) (38) (37) 11 2.2 2.6
Debt Reducers GSTHDRED (3.5) (30) (27) 11 1.7 3.0
High Sharpe Ratio GSTHSHRP (5.2)% (35)% (31)% 12x 2.2x 2.0 %
High Liquidity GSTHHLIQ (2.6) (30) (24) 18 4.9 2.7
Low Liquidity GSTHLLIQ (11.1) (43) (43)
Hedge Fund "VIP" List GSTHHVIP (6.1)% (34)% (27)% 17x 3.9x 0.0 %
Hedge Fund Very Important Shorts GSTHVISP (1.2) (24) (23) 14 4.5 3.2
High Hedge Fund Concentration GSTHHFHI (15.1) (46) (47) 8 1.5 1.0
Low Hedge Fund Concentration GSTHHFSL (0.2) (33) (31) 13 1.5 3.7
Mutual Fund Overweight Positions GSTHMFOW (8.0) (36) (32) 11 2.3 2.1
Mutual Fund Underweight Positions GSTHMFUW (3.3) (28) (25) 16 3.7 3.4 ( ) ( ) ( )
S&P 500 Average 15 5.3 3.6S&P 500 Median 13 2.4 2.7
Hed
ge F
unds
&M
utua
l Fun
ds
YTD Performance
Geo
grap
hic
Sale
sU
ses
of C
ash
Ris
k &
Li
quid
ityFu
ndam
enta
lM
acro
econ
omic
(21)
(23)
(23)
(24)
(25)
(26)
(26)
(27)
(27)
(28)
(28)
(29)
(31)
(31)
(31)
(31)
(31)
(31)
(31)
(31)
(31)
(32)
(32)
(32)
(34)
(35)
(36)
(36)
(36)
(36)
(37)
(25)
(45) (40) (35) (30) (25) (20) (15) (10) (5) 0 5
Strong Balance Sheet
Hedge Fund Very Important Shorts
High Growth Investment Ratio
High Liquidity
Mutual Fund Underweight Positions
S&P 500
High Labor Cost
High Quality Stock
Hedge Fund "VIP" List
Debt Reducers
Domestic Sales
High Operating Leverage
High Revenue Growth
ROE Growth
Low Operating Leverage
Total Cash Return to Shareholders
Low Adjusted FCF Yield
Low Hedge Fund Concentration
High Tax
High Sharpe Ratio
Buyback
High Adjusted FCF Yield
International Sales
Low Labor Cost
Mutual Fund Overweight Positions
Dual Beta
Low Tax
Western Europe Sales
Dividend Growth
Capex and R&D
BRICs Sales
Weak Balance Sheet
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16
US Weekly Kickstart
20 March 2020
US Portfolio Strategy Baskets – Relative performance vs. S&P 500
Source: FactSet and Goldman Sachs Global Investment Research.
Macroeconomics Geographic Sales
Dual Beta Interest Rate Sensitive US Sales International Sales
High vs. Low Labor Cost High vs. Low Tax Rate BRICs Sales Western Europe Sales
86
88
90
92
94
96
98
100
102
104
106
108
110
112
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHBETABloomberg <ticker>
90
92
94
96
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHLLAB/GSTHHLAB
70
74
78
82
86
90
94
98
102
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHUSTY
86
88
90
92
94
96
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHTAX/GSTHLTAX
94
95
96
97
98
99
100
101
102
103
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHAINT
88
90
92
94
96
98
100
102
104
106
108
110
112
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHBRIC
94
96
98
100
102
104
106
108
110
112
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHINTL
84
88
92
96
100
104
108
112
116
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHWEUR
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17
US Weekly Kickstart
20 March 2020
US Portfolio Strategy Baskets – Relative performance vs. S&P 500 (continued)
Source: FactSet and Goldman Sachs Global Investment Research.
Fundamentals Risk & Liquidity
Revenue GrowthHigh vs. Low
Operating Leverage ROE Growth High Sharpe Ratio
High Quality Strong vs. Weak Balance Sheet High vs. Low Adjusted FCF Low vs. High Liquidity
80
84
88
92
96
100
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHACF/GSTHLACF
90
95
100
105
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHREVGBloomberg <ticker>
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHQUAL
88
90
92
94
96
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHOPHI/GSTHOPLO
94
99
104
109
114
119
124
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHSBAL/GSTHWBAL
92
94
96
98
100
102
104
106
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHGROE
90
92
94
96
98
100
102
104
106
108
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHSHRP
60
68
76
84
92
100
108
Apr-1
9
Jul-1
9
Oct
-19
Jan-
20
Apr-2
0
Jul-2
0
GSTHLLIQ/GSTHHLIQ
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18
US Weekly Kickstart
20 March 2020
US Portfolio Strategy Baskets – Relative performance vs. S&P 500 (continued)
Source: FactSet and Goldman Sachs Global Investment Research.
Uses of CashCapex and R&D High Growth Investment Ratio Debt Reducers vs. Issuers
Total Cash Return Buybacks Dividend Growth
82
86
90
94
98
102
106
110
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHCAPXBloomberg <ticker>
88
90
92
94
96
98
100
102
104
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHCASH
94
96
98
100
102
104
106
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHGIR
90
92
94
96
98
100
102
104
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHREPO
86
88
90
92
94
96
98
100
102
104
106
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHDIVG
90
92
94
96
98
100
102
104
106
108
Apr-1
9
Jul-1
9
Oct
-19
Jan-
20
Apr-2
0
GSTHDRED/GSTHDISS
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19
US Weekly Kickstart
20 March 2020
US Portfolio Strategy Baskets – Relative performance vs. S&P 500 (continued)
Source: FactSet and Goldman Sachs Global Investment Research.
Hedge Fund Ownership Mutual Fund Ownership
Hedge Fund VIP Short Positions Overweight Positions Underweight Positions
High Concentration Low Concentration
92
94
96
98
100
102
104
106
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHVIPBloomberg <ticker>
65
70
75
80
85
90
95
100
105
110
115
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHFHI
88
90
92
94
96
98
100
102
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHVISP
84
86
88
90
92
94
96
98
100
102
104
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHHFSL
84
88
92
96
100
104
108
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHMFOW
98
99
99
100
100
101
101
102
102
103
103
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
GSTHMFUW
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20
US Weekly Kickstart
20 March 2020
S&P 500 Earnings, Sales and Revisions
Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global Investment Research.
Earnings & Sales Revisions (Consensus)EPS REVISIONS SALES REVISIONS
1 month 3 month 1 month 3 month20E 21E 20E 21E 20E 21E 20E 21E
Health Care (0.1)% (0.1)% (0.0)% (0.2)% (0.0)% 0.0 % 2.1 % 2.1 %
Utilities (0.2) (0.2) (0.2) (0.5) NM NM NM NM
Real Estate (0.2) 0.6 (3.5) (2.2) NM NM NM NM
Consumer Staples (0.7) (0.7) (1.1) (1.1) (0.2) (0.3) (0.3) (0.3)
Information Technology (1.3) (0.7) 1.1 2.0 (1.1) (0.8) (0.0) 0.7
Communication Services (1.7) (0.9) (2.3) (1.2) (0.5) (0.4) (0.5) (0.3)
S&P 500 ex. Energy (2.2) (1.5) (2.6) (1.6) (1.0) (0.7) (0.9) (0.3)
Financials (2.3) (2.9) (0.8) (2.6) NM NM NM NM
S&P 500 (3.6) (2.5) (4.2) (2.9) (2.0) (1.4) (1.9) (1.2)
Materials (4.8) (3.9) (9.9) (8.5) (1.4) (1.4) (3.2) (3.4)
Consumer Discretionary (6.0) (3.3) (7.2) (4.1) (1.6) (0.8) (1.9) (1.1)
Industrials (6.9) (3.6) (13.4) (6.5) (3.0) (2.0) (5.4) (3.2)
Energy (34.3) (24.1) (38.6) (30.1) (10.8) (7.6) (11.1) (9.1)
Earnings Growth (consensus bottom-up)2020 Earnings Per Share Growth Annual1QE 2QE 3QE 4QE 2020E 2021E
Real Estate 12 % 15 % 13 % 13 % 13 % 6 %Information Technology 4 7 10 10 8 15Health Care 1 3 7 12 6 10Utilities 4 8 3 8 5 5Materials 5 (1) 7 11 5 16Consumer Staples (0) 4 6 7 4 7S&P 500 ex. Energy (2) 1 6 9 4 13S&P 500 (3) (2) 5 9 2 13Communication Services (2) (2) 10 2 2 13Consumer Discretionary (14) (6) 8 18 2 19Financials (3) (5) 2 6 (0) 8Industrials (18) (3) (3) 15 (2) 21Energy (18) (46) (25) (18) (28) 31
Sales Growth (consensus bottom-up)2020E Sales Per Share Growth Annual1QE 2QE 3QE 4QE 2020E 2021E
Communication Services 14 % 13 % 14 % 7 % 12 % 7 %Information Technology 9 8 8 7 8 8Health Care 5 5 6 7 6 6Consumer Staples 6 6 6 4 5 3S&P 500 ex. Energy 5 4 6 6 5 6S&P 500 4 2 5 5 4 6Consumer Discretionary 2 2 5 6 4 7Materials 1 (3) 1 2 0 4Industrials (4) (5) 0 3 (2) 7Energy (2) (13) (4) (3) (6) 5
Consensus Bottom-UpAdjusted EPS
Consensus Bottom-UpContribution EPS growth
2018A 2019E 2020E 2019E 2020EReal Estate $4 $4 $5 7 % 13 %Utilities 5 5 5 6 5Health Care 25 27 28 7 6Consumer Staples 11 11 11 3 4Communication Services 16 17 17 9 2Information Technology 32 32 34 (0) 8Financials 29 30 30 5 (0)Industrials 16 15 15 (4) (2)Consumer Discretionary 13 13 13 0 2Materials 5 4 4 (14) 5
S&P 500 ex-Energy 154 158 164 3 4Energy 9 6 5 (29) (28)
S&P 500 EPS $163 $165 $168 1 % 2 %
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21
US Weekly Kickstart
20 March 2020
Valuation: Absolute and Relative
Source: FactSet, I/B/E/S, FirstCall, and Goldman Sachs Global Investment Research.
S&P 500 NTM P/E S&P 500 Cost of Equity = ERP + 10-yr UST
S&P 500 LTM P/B
We estimate the equity risk premium (ERP) using our DDM framework to model expected future cash flows.
We solve for the cost of equity that implies the market is at ‘fair value’ and then deduct the 10-year US treasury.
Current aggregate valuation metrics - absolute Current relative valuation vs. historical average (Z-score)10-year 30-year
EV/ Sales
EV/ EBITDA
Price/ Book
FCF Yield
PEG Ratio
NTM P/E
EV/ Sales
EV/ EBITDA
Price/ Book
FCF Yield
PEG Ratio P/E
Median Z-Score
Median Z-Score
S&P 500 2.0x 10.3x 2.7x 5.4 % 1.3x 14.3x S&P 500 0.4 (0.1) (0.2) (0.5) 0.0 (0.7) (0.1) (0.1)Financials NM NM 1.0 NM 1.2 8.7 Financials NM NM (2.8) NM (0.0) (2.3) (2.3) (1.6)
Energy 0.8 4.6 0.7 8.5 2.1 12.7 Materials (2.3) (1.9) (2.5) (1.2) (2.4) (1.8) (2.1) (0.5)
Industrials 1.6 9.1 3.3 6.0 1.6 13.0 Energy (2.9) (1.1) (2.7) (3.4) 0.5 (0.5) (1.9) (1.7)
Health Care 1.7 11.5 3.7 6.5 1.4 13.0 Industrials (2.0) (1.1) (0.9) (0.8) 1.1 (1.3) (1.0) (0.1)
Materials 1.8 8.8 1.6 5.4 1.0 14.0 Comm Services (0.7) (1.5) (1.0) 0.3 1.0 (1.1) (0.9) (0.4)
Real Estate NM NM 2.9 NM 1.9 14.8 Real Estate NM NM 1.8 NM (1.4) (0.7) (0.7) 0.1
Comm Services 2.9 8.2 2.7 6.0 1.5 15.2 Health Care (0.6) 0.7 1.0 0.2 (0.6) (0.4) (0.1) (0.5)
Utilities NM 10.5 1.9 (2.4) 3.3 15.9 Cons Discr (0.7) 0.0 1.8 0.1 (0.3) 1.5 0.1 0.7
Cons Staples 1.6 12.4 5.2 4.9 2.7 17.5 Utilities NM 0.9 0.8 3.9 (0.7) 1.0 0.9 1.1
Info Tech 4.2 13.0 6.6 5.5 1.3 17.6 Cons Staples 0.6 1.0 1.7 1.0 0.7 2.0 1.0 0.7
Cons Discr 1.7 11.4 6.0 4.9 1.0 18.2 Info Tech 2.5 2.5 3.2 1.9 0.2 3.2 2.5 0.4
14.3
0
5
10
15
20
25
30
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
NTM
P/E
(x)
10-yr rolling avg
P/E
2.7
0123456
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
LTM
P/B
(x)
10-yr rolling avg
P/B
0
2
4
6
8
10
12
14
16
1985 1990 1995 2000 2005 2010 2015 2020 2025
Cost ofEquity
10 YearUST
ERP6.6%
1.1%
7.8%
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22
US Weekly Kickstart
20 March 2020
Valuation: Sector baskets
Source: Compustat, FactSet, I/B/E/S, and Goldman Sachs Global Investment Research.
Global vs. Domestic
Defensives vs. S&P 500
0.8x
0.9x
1.0x
1.1x
1.2x
1.3x
1.4x
1.5x
1.6x
1.7x
1980 1985 1990 1995 2000 2005 2010 2015 2020
Relative NTM P/EGlobal vs. DomesticGlobal more
expensive
0.8x
0.9x
1.0x
1.1x
1.2x
1.3x
1.4x
1980 1985 1990 1995 2000 2005 2010 2015 2020
Relative NTM P/EDefensives vs. S&P 500
Defensives more expensive
Valuation of Cyclicals vs. Defensives
Cyclicals vs. S&P 500
0.8x
0.9x
1.0x
1.1x
1.2x
1980 1985 1990 1995 2000 2005 2010 2015 2020
Relative NTM P/ECyclicals vs. S&P 500
Cyclicals more expensive
0.6x
0.7x
0.8x
0.9x
1.0x
1.1x
1.2x
1.3x
1.4x
1.5x
1980 1985 1990 1995 2000 2005 2010 2015 2020
Relative NTM P/ECyclicals vs. Defensives
Cyclicals more expensive
75th %ile
25th %ile
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23
US Weekly Kickstart
20 March 2020
Factors: Performance and Valuation
Source: Compustat, FactSet, I/B/E/S, and Goldman Sachs Global Investment Research.
Momentum
85
90
95
100
105
110
115
120
125
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Momentum Factor<GSMEFMOM>
(leaders vs. laggards)
Growth vs. Value
70
75
80
85
90
95
100
105
110
115
120
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Growth Factor<GSMEFGRO>(high vs. low)
Value Factor<GSMEFVAL>(low vs. high)
(4)
(2)
0
2
4
6
8
Size(small vs. large)
Dividend yield(high vs. low)
Valuation(low vs. high)
Returns(high vs. low)
Margins(high vs. low)
Growth(high vs. low)
Balance sheet(strong vs.
weak)
Volatility(low vs. high)
Momentum(leaders vs.laggards)
Stan
dard
dev
iatio
n of
cu
rren
t val
uatio
n vs
. hi
stor
ical
ave
rage
s
Relative to last 10 yearsRelative to last 35 years
Factor valuation P/E multiple z-scores
compared with history
More expensive
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24
US Weekly Kickstart
20 March 2020
Fund Flows, Fund Performance, and Short Interest
Source: FactSet, EPFR, and Goldman Sachs Global Investment Research.
Weekly fund flowsEPFR Mutual Fund Flows EPFR ETF Fund Flows
Total TotalTotal 4-Wk Avg Flows Total 4-Wk Avg Flows
($ billions) Assets Flows YTD Assets Flows YTDAll Equity 5,362 (18.1) (89.3) 3,502 1.1 81.9
Real Estate 263 (0.3) 1.2 72 0.1 0.7Global 390 (0.9) (6.1) 299 0.2 13.9Equity Income 447 (1.2) (9.8) 222 0.6 7.2Int'l Equity 2,718 (9.7) (20.2) 1,128 0.7 24.7U.S. Equity 2,253 (7.5) (62.9) 2,075 0.2 43.3
All Bonds 4,450 (27.3) (19.0) 1,115 (6.3) 21.0Gov't Treasury 313 1.1 5.2 272 5.5 29.1Municipal Bond 440 (2.5) (0.6) 49 (0.3) 1.7All Taxable Bond 3,696 (25.9) (23.6) 794 (11.6) (9.8)
Money Market 5,156 71.9 377.3 34 1.3 6.2
Domestic equity fund flows
(16)
(12)
(8)
(4)
0
4
8
12
16
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
$ B
illio
ns
Domestic equity fund flows (4wk avg)
Mutual funds
ETFs
Net flows
Mutual Fund Performance% outperf
Mutual Fund Style YTDLarge-Cap Core 37%Large-Cap Growth 44Large-Cap Value 47
Total 42%
-2
2
6
10
14
18
22
26
(38.0) (34.0) (30.0) (26.0) (22.0) (18.0) (14.0)
% o
f Lar
ge-C
ap C
ore
Mut
ual F
unds
YTD total return (%)
Distribution of Large-Cap Core
Mutual Fund YTD returns
Average YTD return
(26.3)%
Short Interest
2.1%
1.9%
2.0%
2.1%
2.2%
2.3%
2.4%
Dec
-18
Mar
-19
Jun-
19
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Shor
t int
eres
t % o
f cap
Short interest % of market capS&P 500 median
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Correlation, Breadth and Dispersion
Source: FactSet and Goldman Sachs Global Investment Research.
Sector and Stock Correlation
0.72
1.01
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Aver
age
3-M
onth
Cor
rela
tion
Average stock correlation
Average sector correlation
S&P 500 3-month Return Dispersion
18pp
22pp
26pp
30pp
34pp
38pp
42pp
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
+/-1
sta
ndar
d de
viat
ion
(pp)
S&P 500 3-month return dispersion
30-year average: 29 pp
38pp
Return Dispersion+/- 1 Standard Deviation
1-Month Returns 3-Month ReturnsCurrent 30-Year Historical Current 30-Year HistoricalMar 19 Average %ile Mar 19 Average %ile
S&P 500 33 pp 17 pp 98 % 38 pp 28 pp 86 %
Consumer Staples 35 pp 13 pp 100 % 39 pp 22 pp 99 %Real Estate 29 9 98 36 15 96Utilities 21 10 95 27 18 90Industrials 28 14 98 31 23 89Materials 22 15 92 33 25 88Consumer Discretionary 33 17 98 36 29 86Energy 35 14 100 32 24 85Financials 24 13 93 29 22 83Communication Services 29 15 95 33 26 82Health Care 26 15 96 29 25 76Information Technology 23 20 73 30 35 48
Goldman Sachs Breadth Index (GSBI)
0
10
20
30
40
50
60
70
80
90
100
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Gol
dman
Sac
hs B
read
th In
dex
GS Breadth Index
<5 = Narrow breadth
30-yr avg = 35σ = 28
Current100
R = SPX returnw = individual constituent weightsr = individual constituent returns
𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵ℎ =𝑅𝑅2 ∗ ∑𝑤𝑤2
∑𝑤𝑤2𝐵𝐵2
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Economics
Source: FactSet and Goldman Sachs Global Investment Research.
Our Current Activity Indicator (CAI) measures the growth signal in major high-frequency activity indicators for the US economy, expressed in GDP-equivalent units.
GDP Core PCE and CPI Employment
Current Activity (CAI) Economic Surprise (MAP) Financial Conditions (FCI)
1.4
1.6
1.8
2.0
2.2
2.4
2.6
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Year
ove
r Yea
r cha
nge
(%)
Core CPI
Core PCE
98.5
99.0
99.5
100.0
100.5
101.0
101.5
102.0
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Financial Conditions Index
Tighter
Looser-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Dec
-18
Mar
-19
Jun-
19
Sep-
19
Dec
-19
Mar
-20
Jun-
20
China C
AIUS
CAI
US CAI(left axis)
China CAI(right axis)
3.1 2.0 2.1 2.1
(6.0)
(24.0)
12.0 10.0
4.0 3.5 2.5 2.3
(28)%
(24)%
(20)%
(16)%
(12)%
(8)%
(4)%
0 %
4 %
8 %
12 %
16 %
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
GD
P G
row
th (q
oq a
nnua
lized
%)
2019 2020 2021
Goldman SachsEconomics
Consensus
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
US-
MAP
Sur
pris
e In
dex
US MAP Surprise Index
PositiveData Surprises
NegativeData Surprises
190
200
210
220
230
240
250
260
Dec
-18
Apr-1
9
Jul-1
9
Sep-
19
Dec
-19
Mar
-20
Jun-
20
Initi
al J
oble
ss C
laim
s (th
ousa
nds)
4-Week Moving Average
Initial Jobless Claims
US Labor Market
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Goldman Sachs Global Macro Forecasts
Source: FactSet and Goldman Sachs Global Investment Research.
Goldman Sachs US Economics Forecasts Share % Annual Change
of GDP 2019 2020E 2021E 2022EOUTPUT AND SPENDING
Real GDP 100% 2.3% (3.8)% 3.6% 2.3%Consumer Spending 70 2.6 0.2 2.6 2.5Total Fixed Investment 18 1.3 (1.7) 3.7 3.7
Business Fixed Investment 14 2.1 (2.9) 3.5 3.8Structures 3 (4.3) (9.6) 2.4 2.4Equipment 7 1.3 (4.1) 2.6 3.4IP Products 5 7.6 4.6 6.1 4.9
Residential Investment 3 (1.5) 2.4 4.4 3.1Federal Government Spending 7 3.5 4.3 2.6 0.1State and Local Government 11 1.6 3.2 3.0 1.2Net Exports (Bil.) (5) (954) (878) (971) (1,005)
HOUSING MARKETHousing Starts (000s) 1,300 1,334 1,348 1,367New Home Sales (000s) 682 701 707 717Existing Home Sales (000s) 5,330 5,452 5,504 5,556Case-Shiller Home Prices (%) 3.3 3.0 2.2 2.1
INFLATIONCore CPI 2.2 2.2 2.3 2.4Core PCE 1.6 1.7 1.9 2.1
LABOR MARKETUnemployment Rate 3.7 3.9 3.6 3.5U6 Underemployment Rate 7.2 6.9 6.5 6.2Payrolls (000s) 173 115 151 121
GOVERNMENT FINANCEFederal Budget (FY, Bil.) (984) (1,025) (1,050) (1,200)Federal debt-to-GDP ratio (FY, %) 79 80 82 83
FINANCIAL INDICATORSFed Funds Rate 1.6 0.1 0.4 0.910-year Treasury Rate 1.9 0.8 1.4 1.8
Real GDP 2019E 2020E 2021E 2022E
China 6.1 % 3.0 % 8.5 % 5.0 %World 3.1 0.9 5.0 3.6France 1.3 0.4 1.8 1.5Russia 1.3 (0.5) 4.5 3.1Brazil 1.1 (0.9) 2.3 2.8UK 1.4 (1.1) 3.8 3.1Spain 2.0 (1.3) 4.3 1.8Euro Area 1.2 (1.7) 3.5 1.5Germany 0.6 (1.9) 3.6 1.5Japan 0.7 (2.1) 1.1 0.9Italy 0.2 (3.4) 3.5 0.9USA 2.3 (3.8) 3.6 2.3Australia 1.8 (6.0) 9.8 3.5
Goldman Sachs Global Macro ForecastsChange
units Current 3m 6m 12m to TargetEquities
MXAPJ level 392 440 470 510 30 %S&P 500 level 2409 2000 2500 3100 29STOXX Europe 600 level 288 300 340 370 29TOPIX level 1283 1300 1400 1600 25
Ten Year RatesJapan % 0.1 (0.3) (0.2) (0.1) (18)bpUS % 1.1 0.4 0.6 0.9 (24)Euro Area (Germany) % (0.2) (0.9) (0.9) (0.7) (47)
Corporate BondsHigh yield bp 982 725 715 475 (52)%Investment grade bp 335 190 185 135 (60)
CurrenciesSterling / US Dollar £/$ 1.17 1.26 1.28 1.34 15 %Euro / US Dollar EUR/$ 1.07 1.08 1.10 1.15 7US Dollar / Yen $/¥ 110 102 105 105 (5)
CommoditiesNYMEX Nat. Gas $/mmBtu 1.65 1.50 1.75 3.00 81 %Brent Crude Oil $/bbl 28 20 30 45 58WTI Crude Oil $/bbl 27 20 28 41 53LME Copper $/mt 4685 4900 5600 6000 28COMEX Gold $/troy oz 1479 1600 1650 1800 22
EPS Forecast EPS Growth NTM P/E Div2019 2020 2021 2020 2021 Current YE 2020 Yield
MXAPJ $ 35 $ 35 $ 39 1 % 12 % 10.9 x 13.0 x 3.8 %
S&P 500 $ 165 $ 110 $ 170 (33) 55 19.6 17.6 2.6
STOXX Europe 600 € 25 € 20 € 23 (23) 16 14.3 16.3 5.0
TOPIX ¥ 101 ¥ 98 ¥ 113 (3) 15 12.6 14.1 3.2
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Politics and policies
Source: FactSet, Predictit.org, PolicyUncertainty.com, Federal Reserve Bank, Haver Analytics, and Goldman Sachs Global Investment Research.
Economic Policy Uncertainty
40
80
120
160
200
240
280
Mar-18 Sep-18 Mar-19 Sep-19 Mar-20
Economic Policy Uncertainty(Rolling 1-month average) Current:
233
2020 US Election Odds
20%
30%
40%
50%
60%
70%
80%
90%
Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20
Prediction market probability that Democrats have control following the 2020 election
President: 55%
House: 71%
Senate: 47%
US Treasury yield curve
1.6%
1.1%
0.1%
1.2%
0.1%
0.8%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
FedFunds
1 2 3 4 5 6 7 8 9 10
Yiel
d (%
)
Years to Maturity
Current
US Treasury yield curve
6-monthforward
GS 2020E
Market-implied change in fed funds rate
(120)bp
(100)bp
(80)bp
(60)bp
(40)bp
(20)bp
0bp
20bp
40bp
60bp
80bp
100bp
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20
Futures market expectation forfed funds tightening/(easing)
in subsequent months
12 months:(8) bp
6 months:(16) bp
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Goldman Sachs Global Macro Forecasts
Source: FactSet and Goldman Sachs Global Investment Research.
Global Equity Market performancePrice Return (%) US Dollar Local
Market 1-Wk 1-Mo 3-Mo YTD Currency
China (MSCI China) (9)% (20)% (17)% (18)% (19)%
U.S. (S&P 500) (3) (29) (25) (25) (25)Japan (TOPIX) (7) (23) (27) (26) (25)
Europe (DJ Stoxx 600) (6) (34) (33) (34) (31)
Spain (IBEX 35) (3) (37) (36) (36) (33)
Mexico (Bolsa) (11) (40) (38) (37) (19)
Germany (Dax) (9) (38) (37) (38) (35)
France (CAC 40) (8) (37) (38) (39) (36)
UK (FTSE 100) (9) (38) (39) (40) (32)
Australia (ASX 200) (16) (41) (40) (40) (28)
Korea (KOSPI) (25) (39) (40) (40) (34)
Brazil (Bovespa) (11) (50) (53) (54) (41)
Average (10)% (36)% (35)% (36)% (30)%
EURO YEN
High-Yield (HY) spread
OIL
Investment Grade (IG) spread
$1.07
$1.08
$1.10
$1.15
$1.05
$1.07
$1.09
$1.11
$1.13
$1.15
$1.17
Dec
-18
Dec
-19
Dec
-20
Dec
-21
EUR/USD
¥110
¥102
¥105 ¥105
¥100
¥102
¥104
¥106
¥108
¥110
¥112
¥114
Dec
-18
Dec
-19
Dec
-20
Dec
-21
USD/JPY
GS forecast
$45
Futures market
$38
$10
$20
$30
$40
$50
$60
$70
$80
Dec
-18
Dec
-19
Dec
-20
Dec
-21
Brent Crude ($/bbl)
335 bp
160 bp
90 bp
170 bp
250 bp
330 bp
410 bp
490 bp
Dec
-18
Dec
-19
Dec
-20
Dec
-21
Investment Grade(IG) spread
USD982 bp
515 bp
300 bp
500 bp
700 bp
900 bp
1100 bp
1300 bp
Dec
-18
Dec
-19
Dec
-20
Dec
-21
High-yield (HY) spread
USD
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Disclosure Appendix Reg ACWe, David J. Kostin, Ben Snider, Arjun Menon, CFA, Ryan Hammond, Cole Hunter, CFA, Nicholas Mulford, and Jamie Yang, hereby certify that all of the views expressed in this report accurately reflect our personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.
DisclosuresEquity basket disclosuresThe ability to trade this basket will depend upon market conditions, including liquidity and borrow constraints at the time of trade.
Regulatory disclosures Disclosures required by United States laws and regulations See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.
The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the analyst’s area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as officer or director: Goldman Sachs policy generally prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director or advisor of any company in the analyst’s area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman Sachs & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts.
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Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request.
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Any trading recommendation in this research relating to an equity or credit security or securities within an industry or sector is reflective of the investment theme being discussed and is not a recommendation of any such security in isolation.
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20 March 2020
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