Global Themes and Risks - STANYAbby Joseph Cohen, CFA Goldman, Sachs & Co. 1-212-902-4095...
Transcript of Global Themes and Risks - STANYAbby Joseph Cohen, CFA Goldman, Sachs & Co. 1-212-902-4095...
Abby Joseph Cohen, CFA Goldman, Sachs & Co. 1-212-902-4095 [email protected]
Rachel Siu Goldman, Sachs & Co. 1-212-357-0493 [email protected]
Global Themes and Risks
The Goldman Sachs Group, Inc.
April 2013
The Global Markets Institute is the public policy research unit of Goldman Sachs Global Investment Research. Its mission is to provide research and
high-level advisory services to policymakers, regulators and investors around the world. The Institute leverages the expertise of Research and other
Goldman Sachs professionals, as well as highly regarded partners, to offer written analyses and host discussion forums.
Goldman Sachs Research
Goldman Sachs Global Investment Research 2
Composition of US GDP, 2006-2014
Reduced government spending a drag on GDP growth
Source: Goldman Sachs Economics Research.
2006 2007 2008 2009 2010 2011
GDP 2.7 % 1.9 % (0.3) % (3.1) % 2.4 % 1.8 % 2.2 % 2.2 % 2.9 %
Domestic Final Demand 2.6 1.2 (1.5) (4.0) 2.8 1.7 2.1 2.0 3.0
Personal Consumption 2.9 2.3 (0.6) (1.9) 1.8 2.5 1.9 2.1 2.5
Residential Fixed Investment (7.3) (18.7) (23.9) (22.4) (3.7) (1.4) 12.1 15.1 15.0
Business Fixed Investment 8.0 6.5 (0.8) (18.1) 0.7 8.6 8.0 5.0 9.0
Government 2.1 1.3 7.2 6.1 4.5 (2.8) (2.2) (5.2) (5.9)
Exports 9.0 9.3 6.1 (9.1) 11.1 6.7 3.2 2.1 4.6
Imports 6.1 2.4 (2.7) (13.5) 12.5 4.8 2.4 2.1 4.6
2013(E)2012 2014(E)
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Consumer debt service payments as a percentage
of DPI at lowest levels since mid-1990s
Source: Federal Reserve Board, Goldman Sachs Research.
10
11
12
13
14
15
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
De
bt s
erv
ice
pay
me
nts
as
% o
f d
isp
osa
ble
pe
rso
nal
inco
me
DSP as a % of DPI back to mid-1990s levels
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Exports and business equipment lead all other GDP sectors
Private construction showing life; reduced government spending is a
drag on overall GDP and employment
Source: Bureau of Economic Analysis.
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
1Q 03 3Q 03 1Q 04 3Q 04 1Q 05 3Q 05 1Q 06 3Q 06 1Q 07 3Q 07 1Q 08 3Q 08 1Q 09 3Q 09 1Q 10 3Q 10 1Q 11 3Q11 1Q 12 3Q 12
Index: 2
003 Q
1=
100
Data from 2003 Q1 through 2012 Q4
Exports
Personal Consumption Expenditures
Government Expenditures
Business Structures
Business Equipment
and Sof tware
Goldman Sachs Global Investment Research 5
Total IT spending still a source of strength
Source: Goldman Sachs IT Spending Survey, February 2013.
24% 76%
Note: Due to rounding, totals may not add up to 100 percent.
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Employment changes during selected
recessions and recoveries
Source: Brookings, Bureau of Labor Statistics, Goldman Sachs Global Markets Institute.
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
0 5 10 15 20 25 30 35 40 45 50 55 60 65
Perc
en
t Jo
b L
osses R
ela
tive t
o P
eak E
mp
loym
en
t
Months from Peak Employment
Current 2001 1958
The current weakness is linked to the combination of both
cyclical and structural factorsCyclical
Structural
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Employment gap by education
Unemployment rates for adults, 25 years and over
Source: Bureau of Labor Statistics.
0
2
4
6
8
10
12
14
16
Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Less than a high
school diploma
High school diploma
Some college or associate degree
Bachelor's degree and higher
Un
em
plo
ym
en
tra
te (
%)
Goldman Sachs Global Investment Research 8
Median household income, inflation adjusted
Trending lower since 2000
Source: Census Bureau.
44,000
46,000
48,000
50,000
52,000
54,000
56,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Infl
ati
on
-ad
juste
d d
oll
ars
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Median household income by educational
attainment of head of household
Source: Census Bureau.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
No high school
Some high school
High school diploma
Some college Associate degree
Bachelor's degree and
higher
Infl
atio
n-a
dju
ste
d d
olla
rs
1995 2000 2005 2011
Goldman Sachs Global Investment Research 10
US productivity gains are driven by
investment in equipment and people
Source: Bureau of Labor Statistics.
0.6 0.6
1.21
1.2
0.4 0.5
0.2
0.2
0.4
0.50.5
1.3
1.40.4
0
0.5
1
1.5
2
2.5
3
1987-1990 1990-1995 1995-2000 2000-2007 2007-2011
Perc
ent
Capital intensity Labor composition Multifactor productivity
Percentage point contributions to growth in output per hour
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Technology wages are higher and have
grown more quickly
Source: New York State Department of Labor, QCEW Data. Data for New York City.
$40
$50
$60
$70
$80
$90
$100
$110
$120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Annual w
ag
es (
in t
ho
usand
s U
SD
)
Total Private High Tech
Annual Average Wages Sector Growth since 2000Total Private 32.8%High Tech 42.3
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$137,455
$120,825
$107,670
$93,816$87,674 $85,867 $85,489
$82,029
$68,560$61,070 $58,093
$41,002
$59,590
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Employment and annual average wages by
tech occupation
Source: US Bureau of Labor Statistics, Occupational Employment Statistics.
Note: Only tech-related occupations are included in each category.
New York City, 2010
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Shale technology is driving a resurgence in US
oil and gas production, creating a competitive
advantage
Source: IEA, Goldman Sachs Global ECS Research.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1918 1927 1936 1945 1954 1963 1972 1981 1990 1999 2008 2017
Th
ou
sa
nd
b/d
US NGL production
US conventional crude oil production
US biofuel and oxygenates production
US non-conventional crude oil production
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The US outspends the rest of the world
Source: Haver Analytics, Goldman Sachs Global ECS Research.
Global energy production in volume and value and capex (2011)
CountryTotal Liquids
(thousands of barrels
per day)
Natural Gas (billion cubic feet)
Thermal Coal (million tons)
Market Value($ billions)
E&P Capex ($ billions)
US 10,107 23,000 1,094 $696 $138
China 4,303 3,629 3,829 663 35
Russia 10,229 23,647 372 617 10
Saudi Arabia 11,153 3,504 0 475 5
Iran 4,234 5,161 1 206 n/a
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Global growth outlook
Global GDP projected at 3.3% in 2013, with recession in Europe
Source: Goldman Sachs Economics Research.
($ Billions)
US 15,076 (0.3) % (3.1) % 2.4 % 1.8 % 2.2 % 2.2 % 2.9 %
Eurozone 12,993 0.3 (4.3) 1.9 1.5 (0.5) (0.5) 0.8
Germany 3,572 0.8 (5.1) 4.0 3.1 0.9 0.7 1.9
France 2,753 (0.2) (3.1) 1.6 1.7 0.0 (0.7) 0.4
Italy 2,181 (1.2) (5.5) 1.8 0.6 (2.2) (1.2) 0.5
Japan 5,788 (1.0) (5.5) 4.7 (0.6) 2.0 1.2 1.5
United Kingdom 2,393 (1.0) (4.0) 1.8 0.9 0.3 1.3 2.0
China 7,318 9.6 9.2 10.4 9.3 7.8 8.2 8.4
Canada 1,736 0.7 (2.8) 3.2 2.4 1.9 2.2 2.5
Brazil 2,426 5.2 (0.3) 7.5 2.7 0.9 3.3 4.4
Mexico 1,159 1.2 (6.0) 5.3 3.9 3.9 3.6 3.8
Korea 1,116 2.3 0.3 6.3 3.6 2.1 3.1 3.9
Australia 1,484 2.5 1.4 2.6 2.4 3.6 2.4 2.8
2014(E)2013(E)
Growth Rates
2012(E)2011 GDP 20112008 2009 2010
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Share of US foreign trade
February 2012 through January 2013
Source: Goldman Sachs Global Markets Institute, US Department of Commerce.
US Exports to US Imports from
$Billions % Share $Billions % Share
North America $510.6 32.9 % $603.1 26.5 %
Canada 293.6 18.9 330.1 14.5
Mexico 217.0 14.0 280.1 12.3
European Union 264.3 17.0 380.1 16.7
Japan 69.6 4.5 145.8 6.4
Central/South America 185.3 11.9 171.6 7.5
Brazil 43.8 2.8 32.4 1.4
Argentina 10.1 0.7 4.5 0.2
China 111.6 7.2 428.4 18.8
Korea 42.3 2.7 59.6 2.6
Total $1,552.4 $2,276.9
Aggregate trade deficit of $724.5 billion.
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Selected foreign exchange rates
The Chinese yuan has been rising
Source: Federal Reserve Board, Goldman Sachs Global Markets Institute.
70
80
90
100
110
120
130
01/07 07/07 01/08 07/08 01/09 07/09 01/10 07/10 01/11 07/11 01/12 07/12
Ind
ex: J
anuary
2007 =
100
Canadian Dollar
Chinese Yuan
Mexican Peso
Euro
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S&P 500 performance: Staircase pattern
June 1995 – March 2013
Source: Standard & Poor’s, FactSet, Goldman Sachs Global Markets Institute.
525
600
675
750
825
900
975
1050
1125
1200
1275
1350
1425
1500
1575
6/95 6/96 6/97 6/98 6/99 6/00 6/01 6/02 6/03 6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12
Dail
y c
losin
g p
rice
Daily closing price from 6/1/95 through 3/28/2013
Top of prior bull market
9/11 af termath
Accounting scandals and beginning of Iraq engagement
Higher volatilitybegins
Financial crisis worries reach climax - Q1 2009
2002 economic and market troughs
2009 economic and market troughs
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Annual share price performance for major
indices
Source: FactSet.
S&P 500 13.6 % 3.5 % (38.5) % 23.5 % 12.8 % (0.0) % 13.4 % 10.0 %
Dow Jones EURO STOXX 50 15.1 6.8 (44.4) 21.1 (5.8) (17.1) 13.8 (0.5)
FTSE 100 10.7 3.8 (31.3) 22.1 9.0 (5.6) 5.8 8.7
Deutsche Aktien Xchange 30 22.0 22.3 (40.4) 23.8 16.1 (14.7) 29.1 2.4
Nikkei 225 6.9 (11.1) (42.1) 19.0 (3.0) (17.3) 22.9 18.7
KOSPI 200 34.2 39.3 (48.3) 52.0 5.3 (20.0) 10.3 (0.3)
Hang Seng Index 4.5 30.1 (39.3) 51.6 22.2 (12.2) 22.9 (1.6)
* As of 3/28/2013.
2013 YTD*2012201120102006 2007 2008 2009
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Share price performance for major indices
Significant divergences have emerged
Source: FactSet.
30
50
70
90
110
130
150
170
190
210
230
Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12
S&P 500
Dow Jones EURO STOXX 50
FTSE 100
Deutsche Aktien Xchange 30
Nikkei 225
Hang Seng Index
KOSPI 200
Ind
ex: S
ep
tem
ber
22,
2005 =
100
Nikkei 225
Heng Seng Index
KOSPI 200
Deutsche Aktien Xchange 30
S&P 500
FTSE 100
Dow Jones EURO STOXX 50
Goldman Sachs Global Investment Research 21
Realized volatility for major indices
Volatility sharply declined following Euro-zone worries in late
2011; may return as worries resume
Source: Goldman Sachs Options Research.
0
10
20
30
40
50
60
70
80S
ep-0
5
Dec-0
5
Mar-
06
Jun-0
6
Sep-0
6
Dec-0
6
Mar-
07
Jun-0
7
Sep-0
7
Dec-0
7
Mar-
08
Jun-0
8
Sep-0
8
Dec-0
8
Mar-
09
Jun-0
9
Sep-0
9
Dec-0
9
Mar-
10
Jun-1
0
Sep-1
0
Dec-1
0
Mar-
11
Jun-1
1
Sep-1
1
Dec-1
1
Mar-
12
Jun-1
2
Sep-1
2
Dec-1
2
Mar-
13
Ro
llin
g 3
-Mo
nth
Re
alize
d V
ola
tility
(%
)
S&P 500
Dow Jones EURO STOXX 50
FTSE 100
Deutsche Aktien Xchange 30
Nikkei 225
Hang Seng Index
KOSPI 200
S&P 500
Nikkei 225
KOSPI 200
Deutsche Aktien Xchange 30
FTSE 100
Hang Seng Index
Dow Jones EURO STOXX 50
Earthquake/Tsunami
Goldman Sachs Global Investment Research 22
Inflation and P/E multiples(a)
The S&P 500 now at 15.5X 2013 estimated median EPS
Source: Standard & Poor’s, Bureau of Labor Statistics, Goldman Sachs Global Markets Institute.
Inflation
Less than 2.5% 18.6 X
2.5% - 3.5% 17.6
3.5% - 4.5% 12.1
4.5% - 5.5% 14.2
5.5% - 6.5% 12.8
6.5% - 7.5% 10.0
Greater than 7.5% 8.6
(a) For the period 1950-2007
S&P 500 P/E
Average
Goldman Sachs Global Investment Research 23
Source: Goldman Sachs Portfolio Strategy Research, Standard & Poor’s.
GDP and profits are substantially higher than
at prior stock market peak
Nominal GDP, $ billions $9,709.50 $16,030.70 65.1 %
S&P 500 Operating Earnings, per share 54.18 108.00 99.3
S&P 500 Price 1,498.58 1,569.19 (a) 4.7
(a) Closing price as of 3/28/2013.
2000 Q1 2013 Q12000 Q1 - 2013 Q1
% Change
Disclosure Appendix
April 3, 2013
Goldman Sachs Global Investment Research 25
Disclosure Appendix
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