Transcript Presentation Title

Changing International Financial
Environment
From Jim O’Neill’s, Chairman, Goldman Sachs
Asset Management Presentation at the City Week
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,
London, 7 February 2012
Goldman Sachs. All rights reserved
1
Country Classification by
2010 GDP Share
N11
World
Emerging
Markets
12%
Developed
Markets
65%
Source: GSAM
Growth
Markets
23%
Bangladesh
Egypt
Iran
Nigeria
Pakistan
Philippines
Vietnam
Mexico
Korea
Turkey
Indonesia
Growth Markets
Mexico
2% Korea
2%
Turkey
1%
Indonesia
1%
China
9%
Brazil
3%
India
2%
Russia
3%
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
GDP Forecasts
2012
GSAM Consensus
2.2
2.5
1.7
3.0
US
0.5
1.0
0.9
1.4
UK
2.0
2.2
2.3
3.2
Canada
-0.3
-0.4
1.5
1.8
Euroland
1.9
1.9
-0.6
4.0
Japan
3.3
3.6
2.9
7.5
Brazil
8.4
8.2
9.2
10.3
China
7.0
7.2
7.2
10.1
India
3.5
3.0
4.2
4.0
Russia
3.3
3.6
3.9
5.4
Mexico
3.4
3.4
3.6
6.2
Korea
5.9
6.0
6.4
6.1
Indonesia
1.3
1.0
7.8
8.9
Turkey
1.3
1.4
1.3
2.9
Advanced
7.0
6.9
7.5
8.9
BRICs
6.3
6.2
7.0
8.3
Growth Markets
3.5
3.5
3.8
5.1
World
* Consensus Economics. Data as of January 2012.
Source: GSAM and Consensus Economics
2010
2011*
2013
GSAM Consensus
2.5
2.5
1.8
1.8
2.3
2.5
1.0
1.0
1.4
1.3
4.3
5.0
8.6
8.0
7.3
8.0
3.9
4.8
3.4
3.8
4.1
4.8
6.4
6.1
4.9
4.0
1.8
1.8
7.3
7.3
6.7
6.8
4.0
4.0
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
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
4
Share of Global GDP in 2020
45
40
Share, %
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
5
Growth Market / Emerging Market
Split 2050 Forcast
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
6
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
Corruption
Political Stability
Govt. Deficit
Ext Debt
Inflation
Life Exp
Computers
Mobiles
Internet
Investment
Schooling
Openness
5.1
4.3
2.6
0.7
8.3
7.3
5.7
0.4
3.0
0.6
7.0
4.4
2.7
3.9
3.6
3.7
4.2
7.5
8.8
7.2
0.3
6.2
1.1
5.5
6.5
2.7
3.5
2.8
3.6
2.1
8.0
7.1
6.6
1.8
10.0
4.3
4.4
6.9
2.1
5.2
5.2
3.2
1.7
6.9
8.4
7.4
0.8
8.9
4.6
4.0
7.1
2.5
3.9
4.5
3.6
3.8
8.4
8.7
8.0
1.9
7.1
3.0
4.4
6.9
3.4
4.3
3.9
4.1
3.9
9.3
10.0
7.6
0.8
4.8
3.0
8.4
6.1
3.3
4.6
4.9
5.6
3.3
8.6
8.8
7.5
2.1
7.8
5.0
3.8
7.9
1.7
7.0
6.0
5.4
6.1
..
9.3
9.0
7.7
9.4
10.0
5.9
9.5
4.5
8.1
7.4
5.8
0.0
..
10.0
8.7
10.0
8.9
10.0
3.6
8.7
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
7
Budget Deficits and Government
Debt in Advanced Economies
Cyclically
adjusted budget
deficit (%GDP)
Gross General
Govt. Debt (%
GDP)
Germany
-1.5
82.6
France
-4.4
86.9
Italy
-2.5
121.1
Spain
-4.6
67.4
Netherlands
-3.3
65.5
Belgium
-2.6
94.6
Austria
-3.2
72.3
Greece
-6.9
165.6
Finland
0.7
50.2
Ireland
-6.8
109.3
Portugal
-4.0
106.0
Slovakia
EMU Average
-4.2
-3.0
44.9
83.2
UK
-6.3
80.8
US
-6.4
100.0
Canada
-3.0
84.1
Japan
-8.1
233.1
Note, data are 2011 estimates apart from EMU gross govt. debt which is for 2010
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
8
Budget Balances and Government
Debt in the Growth Markets
Cyclically adjusted
budget deficit
(%GDP)
Gross General
Govt. Debt (%
GDP)
Brazil
-2.6
65.0
India
-8.3
64.9
Mexico
-3.4
42.9
Turkey
-2.1
40.3
Korea
2.1
32.0
China
-1.8
26.9
Indonesia
-1.7
25.2
Russia
-0.3
11.7
Note, data are 2011 estimates
Source: IMF
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
Current Estimates for the Equity
Risk Premium*
Real
Bond
Yield
-0.1
Implied
ERP
Expected
Inflation
4.8
2.0
Expected
Nominal
Return
6.6
2.1
Expected
Real
Return
4.6
2.3
3.3
5.6
-1.1
6.7
2.0
7.6
2.0
2.0
3.8
5.8
1.1
4.7
2.0
7.8
Japan
1.5
1.5
2.5
4.0
1.0
3.0
0.5
4.5
Brazil
5.0
5.0
4.1
9.1
5.7
3.4
4.5
13.6
China
8.0
8.0
3.5
11.5
0.4
11.1
3.0
14.5
India
8.0
8.0
1.6
9.6
4.2
5.4
4.0
13.6
Russia
5.0
5.0
2.6
7.6
2.7
4.9
6.0
13.6
Advanced
2.1
2.1
2.9
5.0
0.4
4.6
1.8
6.8
BRICs
7.0
7.0
3.2
10.2
2.2
8.0
3.8
14.1
World
3.5
3.5
3.0
6.5
0.9
5.5
2.3
8.8
Advanced
2.2
2.2
2.8
5.0
0.4
4.6
1.8
6.8
BRICs
7.3
7.3
3.0
10.4
2.1
8.3
3.7
14.1
World
4.2
4.2
2.9
7.1
1.1
6.1
2.6
9.7
US
Real
GDP
Growth
2.5
Real
Earnings
Growth
2.5
UK
2.3
Europe ex UK
+
Dividend
Yield
=
-
=
GDP-weighted
PPP-weighted
* As of 10 January 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
10