June 10, 2016

United States

US Weekly Kickstart
Portfolio Strategy Research

Improving economic growth will benefit stocks with high operating leverage
The Current Activity Indicator (CAI) has slowed to 1.3% but we expect GDP growth will accelerate to 2.3% in 2H. Firms with the
highest operating leverage will benefit most from improving activity and the associated pickup in sales growth. Since February, our
high operating leverage basket (GSTHOPHI) has returned 23% vs. 17% for low operating leverage (GSTHOPLO). This trend should
persist. However, improving economic growth brings with it the risk of wage inflation and margin headwinds. Low Labor Cost firms
typically beat High Labor Cost firms when wages rise, but the pattern has not been exhibited recently. This trend should reverse.

Performance Sector views and performance

David J. Kostin
The S&P 500 was down 0.1% this week. Telecom Domestic Cyclicals down 1.0% vs. Global Cyclicals
(212) 902-6781 david.kostin@gs.com
Services was the best-performing sector (+2.8%) up 4.9% YTD. O/W Information Technology and Goldman, Sachs & Co.
while Financials was the worst-performing sector Financials. U/W Consumer Staples, Energy,
(-1.5%). We expect the S&P 500 will likely trade at Utilities, and Materials. Ben Snider
2125 in 12 months (+1.4%). See pages 8-18 for (212) 357-1744 ben.snider@gs.com
Key pages for portfolio managers Goldman, Sachs & Co.
performance charts by sector, style, size, themes.
Markets and Money flow (page 8)
S&P 500 earnings and valuation Brett Sanchez
Absolute and risk-adjusted returns for markets, (801) 884-4794 brett.sanchez@gs.com
Goldman Sachs Consensus sectors, styles, and strategies (page 9) Goldman, Sachs & Co.
Portfolio Strategy Bottom-Up
Momentum, correlation, and dispersion (page 22)
Arjun Menon
2016E 2017E 2016E 2017E (212) 902-9693 arjun.menon@gs.com
Chart of the week: Large-cap vs small-cap
EPS $110 $123 $119 $133 Goldman, Sachs & Co.
Small caps continue outperformance (page 14)
Growth 9% 12 % 1% 12 %
Ryan Hammond
NTM 2017E NTM 2017E US Portfolio Strategy recommendations (212) 902-5625 ryan.hammond@gs.com
P/E 18.4x 17.1x 17.0x 15.7x Buy S&P 500 / Sell 10-year Treasury: -3.1% YTD Goldman, Sachs & Co.

Buy US vs. International Sales: -0.5%

* Consensus Bottom-Up reflects adjusted EPS; GS reflects
operating EPS Buy Dividend Growth vs. S&P 500: +0.2%
Source: I/B/E/S, FirstCall, and Goldman Sachs Investment Research Buy NDX vs. S&P 500: -0.7%

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. 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. Analysts employed by non-US
affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Goldman Sachs Global Investment Research 1

The Goldman Sachs Group, Inc. Global Investment Research
June 10, 2016
Conversations we are having with clients: Operating leverage and wage inflation
Strategically, we expect S&P 500 will rise during the next several years
as the US economy slowly expands at a roughly 2% annual pace. Sales and
earnings will increase but the P/E multiple will decline as the Fed tightens. At
2097, S&P 500 stands only 1.6% below its May 2015 all-time high of 2131.
Our year-end 2016 target of 2100 reflects a flat price return from the current
level. The index should climb to 2200 by the end of 2017 (+5%) and reach
2300 by the end of 2018 (+5%). We expect the forward P/E will decline by 9%
during the next six months from the current 17.2x consensus bottom-up EPS
to 15.7x at year-end 2016 (top down P/E will fall by 7% from 18.4x to 17.1x).
Tactically, the risk of a 5%-10% drawdown to 1900-2000 remains a near-
term concern. Potential catalysts include a tightening Fed, US Presidential
election uncertainty, seasonal buyback deceleration, and a starting point of
elevated valuation. Collectively, these factors create an asymmetric
risk/return trade-off. Futures imply a 18% likelihood of a July hike while GS
Economics assigns a 35% probability. The buyback window closes mid-
June: By the end of next week roughly 50% of stocks in the S&P 500 will be
in a blackout period and 75% will be on the sidelines by June 20, just ahead
of the Brexit vote on June 23. During the six drawdowns greater than 5%
that have occurred during the last four years, the S&P 500 forward P/E has
troughed at an average of 15x, which on expected EPS implies a level of 1900.
(See the June 7 report for strategies to manage equity drawdown risk).
Client discussions this week focused on economic growth, operating
leverage, and wage inflation. The Goldman Sachs Economics US Current
Activity Indicator (CAI) is a proxy for real-time GDP growth and the metric
has slowed to 1.3%. Our economics colleagues expect GDP growth will
accelerate to a 3.2% pace in 2Q and average 2.3% during 2H 2016.
Companies with the highest operating leverage stand to benefit most
from accelerating GDP growth and the associated pickup in sales
growth. Conversely, investors who fear the economy is decelerating and
view last weeks dismal 38K jobs report as a harbinger of weakening activity
should own stocks with the lowest degree of operating leverage.
A company with a high degree of operating leverage has high fixed
costs relative to variable costs. We calculate each companys degree of
operating leverage (DOL) as the ratio of revenue after variable operating
costs to revenue after variable and fixed operating costs [DOL = (Sales
COGS) / (Sales COGS SGA Depreciation)]. Operating leverage has
trended down since 1990, but recently has risen to the long-term average.
Goldman Sachs Global Investment Research
United States
S&P 500 sales growth and DOL tend move in opposite directions. Falling
sales increases the weight of fixed costs versus variable costs and vice versa.
As sales growth decelerated during the last year, operating leverage jumped.
S&P 500 sales fell by nearly 4% in 2015, while operating leverage increased
from 2.7 at the beginning of 2015 to its current level of 2.9. We expect S&P
500 sales to grow modestly (+2%) in 2016 and rise by roughly 6% in 2017. As
sales growth improves, operating leverage should decline. Operating
leverage is highest in Health Care and lowest in Materials and Energy.
Low operating leverage stocks outperformed high operating leverage
from June of 2014 to February of 2016 by 800 bp (-2% vs. -10%; S&P 500
returned -3%). However since mid-February, our 50-stock sector-neutral high
operating leverage basket (ticker: GSTHOPHI) has returned 23%, outpacing
our low operating leverage basket (GSTHOPLO) (+17%) by 600 bp (S&P 500
returned 17% during the same time period). We expect this trend will persist.
Improving economic growth brings with it some risks for stocks as well.
Persistently slow wage growth has helped lift corporate profit margins to
record levels this cycle. But wages have begun to accelerate and will
become an increasing headwind to profits. During the last five years, wages
have grown at an annual rate of 2%, well below the 30-year average of 3%.
However, US wages are escaping their stagnation. The Goldman Sachs
Economics wage tracker now stands at 2.8%, the fastest rate since 2008.
Growth in Unit Labor costs was revised up to 3.0% on a year/year basis.
Compensation growth per hour was revised up to 3.7%.
Rising labor costs will weigh on S&P 500 EPS and have a differentiating
effect on the profits and performance of US equities. Sectors with labor-
intensive businesses and already-low margins such as Industrials and
Consumer Discretionary appear most vulnerable. Although rising wages
should be a net negative for US corporate profits, we also identify some
parts of the equity market that may benefit from the trend. Our Low Labor
Cost (GSTHLLAB) and High Labor Cost (GSTHHLAB) baskets each consist of
50 S&P 500 stocks, on a sector-neutral basis, with the highest and lowest
estimated US labor costs as a share of revenues (25% vs. 3%). Both intuition
and our historical analysis suggest that Low Labor Cost firms typically
outperform High Labor Cost firms during periods of rising wages. However,
this pattern has not been exhibited during the past year as Low Labor Cost
firms have trailed by 130 bp QTD and by roughly 400 bp YTD. The debate
around income inequality has kept wages in the headlines and we expect
the pattern will reverse and High Labor Cost firms will soon underperform.
2
Charts we are watching: Economic growth, operating leverage, and wage inflation
Exhibit 1: US Current Activity Indicator (CAI) has slowed to 1.3% Exhibit 2: Operating leverage should decline as sales growth improves
as of June 9, 2016 as of June 9, 2016
5.5 30 4.5
Revenues growing
5.0 Breakdown of US Housing 25 Degree of
Operating leverage
Current Activity Indicator Consumer increasing Operating 4.0
4.5 Economy-wide

Degree of Operating Leverage

20 Leverage

(ex-Financials and Utilities)

(ex-Financials and Utilities)
Percent change (annual)

4.0 Services (RHS) 3.5

Industry 15
3.5

Revenue Growth
10
3.0 3.0
2.5 5
2.5
2.0 0
1.5 (5)
1.3% Revenue 2.0
1.0 Growth GS
(10) Revenues declining Forecast
0.5 Operating leverage (LHS)
1.5
(15) declining
0.0
May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16
(20) 1.0

1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Source: Goldman Sachs Global Investment Research. Source: Compustat and Goldman Sachs Global Investment Research.

Exhibit 3: GS Wage Tracker at 2.8%, highest level since 2008 Exhibit 4: Performance of operating leverage and wage inflation baskets
as of June 9, 2016 as of June 9, 2016

10% 105

GS Wage Tracker 104 High <GSTHOPHI> vs.

Indexed relative performance

8% 103 Low <GSTHOPLO>
Operating Leverage
Percent Change (yoy)

102
101
6%
100
99 Low <GSTHLLAB> vs.
High <GSTHHLAB>
4% 98 Labor Cost
2.8% 97
96
2%
95
94
0%

Mar-16

May-16

Jul-16
Jan-16

Feb-16

Apr-16

Jun-16
1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Source: Goldman Sachs Global Investment Research. Source: Factset and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 3

June 10, 2016 United States

Constituents of our High Operating Leverage basket (GSTHOPHI)

Exhibit 5: Goldman Sachs High Operating Leverage basket (GSTHOPHI)
as of June 9, 2016
Market Degree of Market Degree of
Cap 2016E Growth Operating Cap 2016E Growth Operating
Company Ticker ($ bil) EPS Sales Leverage Company Ticker ($ bil) EPS Sales Leverage
Consumer Discretionary (14% of the Basket) Industrials (10% of the Basket)
Netflix Inc. NFLX $ 42 (9)% 29 % 23.7 Ryder System Inc. R $4 0% 3% 4.8
Amazon.com Inc. AMZN 343 343 25 14.0 FedEx Corp. FDX 45 17 9 4.7
Expedia Inc. EXPE 15 39 34 13.8 Robert Half Intl RHI 5 9 7 3.8
News Corp. NWSA 6 33 (2) 12.0 Jacobs Engineering Group JEC 6 (7) (3) 3.6
Staples Inc. SPLS 6 1 (3) 6.5 Tyco Intl TYC 19 (2) 0 3.3
Best Buy Inc. BBY 10 (3) (1) 6.4
PVH Corp. PVH 8 (7) 2 5.3 Basket Median 0% 3% 3.8
Signet Jewelers Limited SIG 7 20 3 4.7 Sector Median 5 1 2.4

Basket Median 10 % 2% 9.2 Information Technology (26% of the Basket)

Sector Median 12 4 2.8 Qorvo Inc. QRVO $7 (2)% 4% 40.4
NetApp Inc. NTAP 7 (5) (6) 7.8
Consumer Staples (13% of the Basket) Computer Sciences CSC 7 10 (24) 7.4
Kroger Co. KR $ 36 8% 6% 6.8 Red Hat Inc. RHT 14 20 19 6.3
Whole Foods Market WFM 11 (10) 3 6.4 Xerox Corp. XRX 10 11 (3) 5.1
Wal-Mart Stores WMT 228 (6) 1 5.5 EMC Corp. EMC 54 (0) (1) 4.8
Estee Lauder Companies EL 20 6 5 5.4 Citrix Systems Inc. CTXS 14 12 3 4.6
Walgreens Boots Alliance WBA 85 13 7 5.1 Adobe Systems Inc. ADBE 49 40 24 4.4
Sysco Corp. SYY 28 14 5 4.9 Juniper Networks JNPR 9 (4) 0 3.6
Intuit Inc. INTU 28 22 7 3.4
Basket Median 7% 5% 5.5 Autodesk Inc. ADSK 13 (180) (19) NM
Sector Median 6 1 2.6 Yahoo! Inc. YHOO 35 (19) (9) NM

Energy (9% of the Basket) Basket Median 5% (0)% 5.0

Hess Corp. HES $ 19 NM (30)% NM Sector Median 7 6 2.7
Pioneer Natural Resources PXD 27 NM (31) NM
Murphy Oil Corp. MUR 5 NM (36) NM Materials (2% of the Basket)
ConocoPhillips COP 58 NM (22) NM Sherwin-Williams SHW $ 27 12 % 5% 3.4

Basket Median NM (30)% NM Basket Median 12 % 5% 3.4

Sector Median (60) (20) 1.9 Sector Median 4 1 2.3

Health Care (22% of the Basket) Telecommunication Services (4% of the Basket)
Allergan plc AGN $ 98 (8)% (8)% 11.4 CenturyLink Inc. CTL $ 15 (9)% (2)% 3.6
Bristol-Myers Squibb BMY 121 27 12 6.0 AT&T Inc. T 247 6 12 3.2
Boston Scientific BSX 31 17 9 4.6
Eli Lilly & Co. LLY 82 3 5 4.5 Basket Median (1)% 5% 3.4
Henry Schein Inc. HSIC 15 10 9 4.2 Sector Median (2) 2 2.9
Abbott Laboratories ABT 57 1 3 3.8
DENTSPLY SIRONA XRAY 16 81 44 3.8
PerkinElmer Inc. PKI 6 6 3 3.6
Agilent Technologies A 15 8 4 3.5
Mallinckrodt MNK 7 6 2 2.0

Basket Median 7% 4% 4.0 High Operating Leverage <GSTHOPHI> Median 6% 3% 4.8

Sector Median 8 7 3.1 S&P 500 (ex-Financials and Utilities) Median 6 3 2.6

Source: Factset and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 4

June 10, 2016 United States

Constituents of our Low Operating Leverage basket (GSTHOPLO)

Exhibit 6: Goldman Sachs Low Operating Leverage basket (GSTHOPLO)
as of June 9, 2016
Market Degree of Market Degree of
Cap 2016E Growth Operating Cap 2016E Growth Operating
Company Ticker ($ bil) EPS Sales Leverage Company Ticker ($ bil) EPS Sales Leverage
Consumer Discretionary (16% of the Basket) Industrials (13% of the Basket)
Marriott Intl MAR $ 17 17 % 8% 1.1 Lockheed Martin LMT $ 74 3% 10 % 1.2
Omnicom Group Inc. OMC 20 7 4 1.1 Union Pacific Corp. UNP 76 (6) (9) 1.3
Interpublic Grp of Cos. IPG 10 16 4 1.2 United Parcel Service UPS 72 6 4 1.3
McDonald's Corp. MCD 111 9 (3) 1.5 Norfolk Southern NSC 26 8 (5) 1.3
Comcast Corp. CMCSA 153 9 6 1.5 CSX Corp. CSX 26 (14) (8) 1.4
Starbucks Corp. SBUX 82 19 11 1.6 Fluor Corp. FLR 7 (17) 3 1.4
Chipotle Mexican Grill CMG 12 (70) (7) 1.8
Walt Disney DIS 160 6 5 1.8 Basket Median (1)% (1)% 1.3
Sector Median 5 1 2.4
Basket Median 9% 4% 1.5
Sector Median 12 4 2.8 Information Technology (25% of the Basket)
Visa Inc. V $ 156 11 % 7% 1.1
Consumer Staples (14% of the Basket) MasterCard Inc. MA 106 2 9 1.1
Altria Group Inc. MO $ 129 9% 3% 1.3 VeriSign Inc. VRSN 9 13 8 1.5
Reynolds American RAI 73 (3) 19 1.5 Apple Inc. AAPL 553 (10) (7) 1.5
Monster Beverage MNST 31 33 14 1.7 Skyworks Solutions SWKS 13 1 (1) 1.6
Philip Morris Intl PM 158 1 1 1.7 Linear Technology LLTC 11 4 2 1.8
Constellation Brands STZ 27 18 13 1.8 Amphenol Corp. APH 18 7 11 1.8
Hormel Foods Corp. HRL 18 13 3 1.8 Paychex Inc. PAYX 20 11 8 1.9
Texas Instruments TXN 62 8 (1) 2.0
Basket Median 11 % 8% 1.7 Alliance Data Systems ADS 13 8 10 2.0
Sector Median 6 1 2.6 Fiserv Inc. FISV 24 12 6 2.0
Harris Corp. HRS 10 7 18 2.3
Energy (8% of the Basket)
Columbia Pipeline Group CPGX $ 10 (22)% 7% 1.3 Basket Median 7% 7% 1.8
ONEOK Inc. OKE 10 18 6 1.3 Sector Median 7 6 2.7
Valero Energy Corp. VLO 25 (38) (22) 1.5
Ensco plc ESV 3 (47) (27) 1.5 Materials (3% of the Basket)
LyondellBasell Industries LYB $ 35 (11)% (10)% 1.3
Basket Median (30)% (8)% 1.4 CF Industries Holdings CF 7 (47) (2) 1.8
Sector Median (60) (20) 1.9
Basket Median (29)% (6)% 1.6
Health Care (17% of the Basket) Sector Median 4 1 2.3
Regeneron Pharmaceuticals REGN $ 39 (9)% 25 % 1.1
Universal Health Svc. UHS 12 8 9 1.3 Telecommunication Services (4% of the Basket)
Gilead Sciences GILD 117 (9) (4) 1.4 Frontier Communications FTR $6 (163)% 74 % 2.4
HCA Holdings Inc. HCA 32 13 6 1.4 Level 3 Communications LVLT 19 3 2 2.9
Tenet Healthcare THC 3 (10) 4 1.6
Express Scripts Holding ESRX 49 7 1 1.8 Basket Median (80)% 38 % 2.6
Biogen Inc. BIIB 55 9 5 1.9 Sector Median (2) 2 2.9
DaVita HealthCare Partners DVA 16 3 7 2.1
Waters Corp. WAT 11 7 5 2.2
Varian Medical Systems VAR 8 9 3 2.5

Basket Median 7% 5% 1.7 Low Operating Leverage <GSTHOPLO> Median 7% 5% 1.5

Sector Median 8 7 3.1 S&P 500 (ex-Financials and Utilities) Median 6 3 2.6

Source: Factset and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 5

June 10, 2016 United States

Constituents of our Low Labor Cost basket (GSTHLLAB)

Exhibit 7: Goldman Sachs Low Labor Cost basket (GSTHLLAB)
as of June 9, 2016
NAICS Implied NAICS Implied
Mkt avg. ann. # of FY0 labor cost Mkt avg. ann. # of FY0 labor cost
cap YTD % US comp. employ. revenue as % of P/E cap YTD % US comp. employ. revenue as % of P/E
Ticker Company (bn) return sales ('000) ('000) (bn) revenue (NTM) Ticker Company (bn) return sales ('000) ('000) (bn) revenue (NTM)
Consumer Discretionary Industrials
NFLX Netflix Inc. $42 (15)% 76 % $22 4 $7 1% 243 x EXPD Expeditors Intl $9 12 % 26 % $61 15 $7 4% 21 x
DHI D.R. Horton Inc. 12 (0) 100 50 6 11 3 13 PCAR PACCAR Inc. 20 19 53 65 23 19 4 14
NKE NIKE Inc. 74 (12) 46 39 63 31 4 24 FLR Fluor Corp. 7 14 35 70 39 18 5 15
HAS Hasbro Inc. 11 31 48 69 5 4 4 22 CHRW C.H. Robinson Worldwide 11 21 88 61 13 13 5 19
PHM PulteGroup Inc. 7 11 100 50 5 6 4 12 DE Deere & Co. 27 15 53 55 57 28 6 24
LEN Lennar Corp. 9 (2) 100 50 8 9 4 12
Information Technology
Consumer Staples QCOM QUALCOMM Inc. $82 12 % 1% $99 33 $24 0% 12 x
TAP Molson Coors Brewing $22 11 % 2% $57 9 $4 0% 25 x SWKS Skyworks Solutions 13 (11) 2 99 7 3 0 12
ADM Archer-Daniels-Midland 26 22 49 75 32 68 2 16 LRCX Lam Research Corp. 13 6 14 78 7 6 1 12
MJN Mead Johnson Nutrition 16 7 24 58 8 4 3 23 AAPL Apple Inc. 553 (4) 38 109 110 234 2 12
MDLZ Mondelez Intl 71 1 18 49 99 30 3 24 AMAT Applied Materials 28 32 22 78 16 10 3 13
COST Costco Wholesale 68 (4) 71 25 205 117 3 28 TXN Texas Instruments 62 15 12 99 30 13 3 21
NVDA NVIDIA Corp. 25 45 17 99 9 5 3 28
Energy MU Micron Technology 13 (12) 16 99 32 15 3 60
VLO Valero Energy Corp. $25 (22)% 70 % $137 10 $88 1% 8x INTC Intel Corp. 151 (6) 18 99 107 55 3 13
PSX Phillips 66 43 1 69 137 14 85 2 13 V Visa Inc. 156 5 54 80 11 14 3 27
XOM Exxon Mobil Corp. 377 18 38 137 74 237 2 27
DO Diamond Offshore Drilling 3 21 15 86 3 2 2 23 Materials
LYB LyondellBasell Industries $35 (6)% 52 % $74 13 $33 2% 8x
Financials ex REITs DOW Dow Chemical 60 5 33 88 49 49 3 15
AFL Aflac Inc. $29 18 % 0% $89 10 $0 0% 10 x
XL XL Group Plc 10 (14) 0 84 7 0 0 13 Telecommunication Services
LUK Leucadia National 6 3 0 36 13 0 0 NM LVLT Level 3 Communications $19 (2)% 70 % $82 13 $8 9% 27 x
MET MetLife Inc. 48 (8) 0 89 69 0 0 8
PRU Prudential Financial 34 (6) 0 89 49 0 0 8 Utilities
LNC Lincoln National 11 (11) 0 89 9 0 0 7 AES AES Corp. $8 22 % 22 % $114 21 $15 4% 10 x
NRG NRG Energy Inc. 5 43 100 114 10 15 8 29
REITs
HST Host Hotels & Resorts $12 3% 95 % $40 0 $5 0% 9x
HCN Welltower Inc. 26 9 84 40 0 4 0 16

Health Care
ESRX Express Scripts Holding $49 (12)% 100 % $40 26 $102 1% 12 x
ABC AmerisourceBergen 17 (26) 100 112 18 139 1 14
GILD Gilead Sciences 117 (15) 73 124 8 33 2 7
CAH Cardinal Health 26 (11) 96 112 35 112 3 14
MCK McKesson Corp. 43 (5) 80 112 70 189 3 14
ALXN Alexion Pharmaceuticals 31 (28) 34 124 3 3 5 25 Low Labor Cost Basket Median 26 2 42 83 13 13 3 14
CELG Celgene Corp. 83 (11) 58 124 7 9 5 18 S&P 500 Median 18 7 71 84 20 9 11 18

Source: Factset and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 6

June 10, 2016 United States

Constituents of our High Labor Cost basket (GSTHHLAB)

Exhibit 8: Goldman Sachs High Labor Cost basket (GSTHHLAB)
as of June 9, 2016
NAICS Implied NAICS Implied
Mkt avg. ann. # of FY0 labor cost Mkt avg. ann. # of FY0 labor cost
cap YTD % US comp. employ. revenue as % of P/E cap YTD % US comp. employ. revenue as % of P/E
Ticker Company (bn) return sales ('000) ('000) (bn) revenue (NTM) Ticker Company (bn) return sales ('000) ('000) (bn) revenue (NTM)
Consumer Discretionary Industrials
DRI Darden Restaurants $9 9% 100 % $17 149 $7 37 % 18 x SRCL Stericycle Inc. $9 (16)% 70 % $69 19 $3 30 % 20 x
HBI Hanesbrands Inc. 11 (8) 85 33 65 6 32 13 LLL L-3 Communications Hldgs 12 25 76 109 38 10 30 19
TGNA TEGNA Inc. 5 (11) 100 90 10 3 29 11 CTAS Cintas Corp. 10 5 100 41 32 5 28 22
ORLY O'Reilly Automotive 25 4 100 29 72 8 26 24 VRSK Verisk Analytics 13 4 100 72 8 2 27 25
OMC Omnicom Group Inc. 20 13 53 96 75 15 25 17 UPS United Parcel Service 72 11 75 46 444 58 26 18
TWC Time Warner Cable 60 13 100 102 57 24 24 27
Information Technology
Consumer Staples ADP Automatic Data Processing $40 5% 81 % $97 55 $11 38 % 24 x
DPS Dr Pepper Snapple Group $17 (0)% 88 % $52 19 $6 14 % 21 x FISV Fiserv Inc. 24 17 94 97 22 5 38 24
WFM Whole Foods Market 11 5 97 23 91 16 13 23 PAYX Paychex Inc. 20 6 100 69 13 3 32 25
GIS General Mills Inc. 39 15 70 73 42 17 12 22 HRS Harris Corp. 10 (5) 92 97 22 6 31 14
K Kellogg Co. 27 9 61 73 34 13 11 21 CRM salesforce.com, inc. 56 6 68 142 20 7 29 80
WBA Walgreens Boots Alliance 85 (6) 87 40 360 113 11 17 YHOO Yahoo! Inc. 35 12 66 193 10 5 27 73
TDC Teradata Corp. 4 8 53 106 11 3 25 12
Energy CA CA Inc. 14 17 61 142 12 4 25 13
HP Helmerich & Payne $7 29 % 90 % $86 7 $3 20 % NM EMC EMC Corp. 54 9 53 164 72 25 25 15
PXD Pioneer Natural Resources 27 31 100 163 4 3 19 NM INTU Intuit Inc. 28 12 95 142 8 4 23 25
CPGX Columbia Pipeline Group 10 29 100 127 2 1 19 39
HAL Halliburton 39 35 51 86 65 24 12 NM Materials
ARG Airgas Inc. $10 4% 98 % $72 17 $5 23 % 28 x
Financials ex REITs SHW Sherwin-Williams 27 14 80 70 41 11 20 23
ETFC E*TRADE Financial $7 (11)% 0% $208 3 $0 0% 16 x
ZION Zions Bancorp 6 6 0 74 10 0 0 15 Telecommunication Services
RF Regions Financial 12 2 0 74 24 0 0 11 FTR Frontier Communications $6 12 % 100 % $82 19 $6 28 % NM
PFG Principal Financial Grp 13 (2) 0 274 15 0 0 10
MS Morgan Stanley 51 (17) 0 271 56 0 0 10 Utilities
HBAN Huntington Bancshares 8 (7) 0 74 12 0 0 12 PPL PPL Corp. $26 17 % 77 % $114 20 $8 23 % 17 x
PNW Pinnacle West Capital 9 22 100 114 6 3 21 20
REITs
EXR Extra Space Storage $11 2% 100 % $33 3 $1 13 % 23 x
VNO Vornado Realty Trust 18 (1) 100 76 4 3 12 19

Health Care
UHS Universal Health Svc. $12 16 % 100 % $60 75 $9 49 % 18 x
THC Tenet Healthcare 3 (1) 100 60 135 19 43 15
DGX Quest Diagnostics 11 12 98 59 44 7 34 15
HCA HCA Holdings Inc. 32 20 94 60 233 40 33 13
LH Laboratory of America 13 6 95 59 50 9 32 15
DVA DaVita HealthCare Partners 16 11 100 67 60 14 29 19 High Labor Cost Basket Median 14 7 89 75 23 6 25 18
MYL Mylan 22 (15) 58 124 35 9 27 9 S&P 500 Median 18 7 71 84 20 9 11 18

Source: Factset and Goldman Sachs Global Investment Research.

Pricing in this report as of June 9, 2016, unless otherwise indicated.

Goldman Sachs Global Investment Research 7

June 10, 2016 United States

Markets and Money Flow

S&P 500 level and EPS 10-yr. Treasury Yields Fed Funds Target Rate
2400 5.0 % 7%
S&P 500 US 10-Year GS
2300 145 Fed Funds
Price 4.5 %
Treasury Yield forecast 6%
2018E Target Rate
Current
2200 2300
4.0 %
2115
2017E 135 2018E 5% GS forecast
S&P 500 Price

2100 2200 3.30%

S&P 500 EPS

2016E 3.5 %
2018E 2017E 2018E:
2000 2100 4%
$130 125
3.0 % 2.75% 2.6%
2017E 2016E
1900 $123 3% 2017E:
2.40%
115 2.5 % 1.6%
1800
2016E 2% 2016E:
$110 2.0 % Futures
1700 0.9%
105 Futures market
Goldman Sachs 1.5 % 1% Current:
1600 2015A Current market
$100
EPS Forecast 1.7% 0.4%
1500 95 1.0 % 0%

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

2004

2008

2012

2016

2020

2024
Sentiment Indicator Rotation Index Volatility
100 (2.0) 44
>90 = HIGH net positions Risk on; favors EQUITY flows
VIX
(1.5) 40
S&P 500 Futures Sentiment

80
36
Standard deviations

(1.0)
6-month
trend 32
60 (0.5)
28
0.0
30 24
40
0.5
Rotation Index 20
Sentiment (4-wk moving avg)
1.0
20 Indicator (SI) 16
15
1.5
12
<10 = LOW net positions Risk off; favors BOND flows
0 2.0 8
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Jun-14

Jun-15

Jun-16
Dec-13

Mar-14

Sep-14

Dec-14

Mar-15

Sep-15

Dec-15

Mar-16

Sep-16

Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Note: Sentiment Indicator ranks net futures positioning versus the past 12 months. Readings Note: Rotation Index plots the first principal component of weekly reallocation activity
below 10 or above 90 indicate extreme positions that are significant in predicting future returns. across equity and debt mutual fund categories as a measure of retail risk appetite.

Source: Haver, Lipper, FactSet, CFTC, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 8

June 10, 2016 United States

Market Performance: 2016 YTD absolute and risk-adjusted returns

Total Return Risk Adjusted Return (Sharpe Ratio)

Brent Crude Oil 39 IG Credit 2.5
Gold 20 HY Credit 2.3
UTILITIES 18 UTILITIES 1.9
TELECOM SERVICES 16 TELECOM SERVICES 1.8
ENERGY 16 Gold 1.7
MATERIALS 11 10-year US Treasury 1.6
HY Credit 9 Brent Crude Oil 1.1
CONSUMER STAPLES 8 CONSUMER STAPLES 1.0
INDUSTRIALS 8 ENERGY 0.9
Russell 1000 Value 7 MATERIALS 0.8
IG Credit 6 INDUSTRIALS 0.7
10-year US Treasury 6 $/Euro 0.7
MSCI Emerging Markets 6 Russell 1000 Value 0.6
Russell 2000 5 MSCI Emerging Markets 0.5
Russell 1000 5 S&P 500 0.5
S&P 500 5 Russell 1000 0.4
$/Euro 4 Russell 2000 0.3
MSCI Developed Markets 3 MSCI Developed Markets 0.3
Russell 1000 Growth 3 Russell 1000 Growth 0.3
INFORMATION TECHNOLOGY 2 INFORMATION TECHNOLOGY 0.2
CONSUMER DISCRETIONARY 2 CONSUMER DISCRETIONARY 0.2
HEALTH CARE 1 HEALTH CARE 0.1
Global Macro HF Index (0) Global Macro HF Index (0.0)
FINANCIALS (1) FINANCIALS (0.1)
Nasdaq 100 (1) Nasdaq 100 (0.1)
Equity L/S HF Index (2) Equity L/S HF Index (0.4)

(20) (10) 0 10 20 30 40 50 60 (1.5) (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Source: Haver, Lipper, FactSet, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 9

June 10, 2016 United States

Sector Baskets Performance Relative to S&P 500

Cyclicals Defensives Domestic Global
102 118 108 102
Bloomberg <ticker> GSSBDEFS GSSBDOMS GSSBGLBL
GSSBCYCL 116
100 101
106
114

98 112 100
104
110
96 99
108 102
94 98
106
100
92 104 97

102
98
90 96
100

88 98 96 95
Jun-14

Jun-15

Jun-16

Jun-14

Jun-15

Jun-16

Jun-14

Jun-15

Jun-16

Jun-14

Jun-15

Jun-16
Dec-13
Mar-14

Sep-14

Dec-14
Mar-15

Sep-15

Dec-15
Mar-16

Sep-16

Dec-13
Mar-14

Sep-14

Dec-14
Mar-15

Sep-15

Dec-15
Mar-16

Sep-16

Dec-13
Mar-14

Sep-14

Dec-14
Mar-15

Sep-15

Dec-15
Mar-16

Sep-16

Dec-13
Mar-14

Sep-14

Dec-14
Mar-15

Sep-15

Dec-15

Mar-16

Sep-16
Domestic Cyclicals Global Cyclicals Domestic Defensives Global Defensives
104 104 120 118
GSSBDCYC GSSBGCYC GSSBDDEF GSSBGDEF
102 102 115
115
100
100
112
98
98 110
109
96
96
94 105 106
94
92
103
92 Autos 100 FoodRetailing
90 HealthCare
CapitalGoods 100
Banks 90 Energy RealEstate ConsumerDurables
88 Retailing
Financials Materials 95 ConsumerServices
Insurance TechHardware Professional Services 97 Food,Beverage&Tobacco
86 88
Media Semiconductors Telecom Household&PersonalProducts
Transportation Software Utilities Pharmaceuticals
84 86 90 94
Dec-13
Mar-14
Jun-14

Sep-14

Dec-14
Mar-15
Jun-15

Sep-15

Dec-15
Mar-16
Jun-16

Sep-16

Dec-13
Mar-14
Jun-14

Sep-14

Dec-14
Mar-15
Jun-15

Sep-15

Dec-15
Mar-16
Jun-16

Sep-16

Dec-13
Mar-14

Jun-14

Sep-14

Dec-14
Mar-15
Jun-15

Sep-15

Dec-15
Mar-16

Jun-16

Sep-16

Dec-13
Mar-14

Jun-14

Sep-14

Dec-14
Mar-15

Jun-15

Sep-15

Dec-15

Mar-16
Jun-16

Sep-16
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 10

June 10, 2016 United States

Sector Basket Performance

Cyclicals vs. Defensives Domestic vs. Global

105 105
CYCLICALS GLOBAL
100 outperforming outperforming

100
95

90
95
85

80
90

75
DEFENSIVES DOMESTIC
outperforming outperforming
70 85
Mar-14

Mar-15

Mar-16
Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16

Mar-14

Jun-14

Sep-14

Mar-15

Mar-16
Dec-13

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16
Performance and fundamentals of our sector baskets
Bloomberg % of
Ticker # of S&P 500 Non-US Earnings Growth Sales Growth NTM LTM Div Total Return
Basket <GSSBXXXX> Stocks Cap Beta Sales 2016E 2017E 2016E 2017E P/E P/B Yield 1 Wk 1 Mo 3 Mo LTM YTD

Defensives DEFS 229 44 % 0.9 22% 6% 10 % 6% 5% 18.4x 4.1x 2.3 % 0.7 % 2% 6% 10 % 5%

Cyclicals CYCL 271 56 1.1 41 (3) 16 (2) 8 16.3 2.3 2.0 0.4 4 8 (0) 4

Global GLBL 263 59 % 1.0 49% (2)% 16 % (2)% 8% 18.6x 3.6x 2.2 % 0.9 % 4% 7% 4% 5%
Domestic DOMS 237 41 0.9 16 4 11 7 5 15.4 2.1 2.1 (0.1) 2 7 4 4

Global Cyclicals GCYC 179 39 % 1.1 49% (6)% 19 % (3)% 8% 18.9x 3.2x 2.1 % 1.2 % 5% 8% 3% 6%
Domestic Defensives DDEF 145 23 0.8 12 7 9 7 6 18.6 3.5 2.2 1.1 2 7 13 7
Global Defensives GDEF 84 21 0.9 47 5 10 2 5 18.1 5.0 2.3 0.3 2 5 6 3
Domestic Cyclicals DCYC 92 18 1.0 23 1 12 2 5 12.6 1.4 1.9 (1.5) 2 7 (5) 0

S&P 500 500 100 % 1.0 33% 14 % 17 % 4% 6% 17.2x 2.8x 2.1 % 0.5 % 3% 7% 4% 5%

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 11

June 10, 2016 United States

Sectors Relative Performance vs. S&P 500

Consumer Discretionary Financials Information Technology Recommended Sector Positioning

112 104 116 Goldman S&P
102 Sachs 500 2016
108 112
100 Sectors Weighting Wgt YTD
104
98 108
Info Tech 20% 2%
100 96 Overweight
Financials 16 (1)
94 104
96
92 Health Care 15 1
100 Consumer Discr 12 2
92 Neutral
90
Industrials 10 8
88 88 96 Telecom Services 3 16

Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16
Sep-16
Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16

Sep-16
Dec-13
Mar-14
Jun-14
Sep-14

Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Consumer Staples 10 8
Energy 7 16
Underweight
Industrials Energy Materials Utilities 3 18
102 120 104 Materials 3 11
S&P 500 100% 5%
100 110 100
98
100 96
96
90 92
94
80 88
92
70 84
90
88 60 80

86 50 76

Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16
Sep-16
Jun-14

Jun-15

Jun-16
Dec-13
Mar-14

Sep-14

Dec-14
Mar-15

Sep-15
Dec-15
Mar-16

Sep-16

Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16

Sep-16
Consumer Staples Health Care Telecommunication Services Utilities
120 130 115 130

116 125 110 125

112 120 120

105
108 115 115
100
104 110 110
95
100 105 105

96 100 90 100

92 95 85 95
Dec-13
Mar-14
Jun-14
Sep-14

Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16

Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16

Sep-16
Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16
Sep-16
Dec-13
Mar-14
Jun-14

Sep-14
Dec-14
Mar-15
Jun-15
Sep-15

Dec-15
Mar-16
Jun-16

Sep-16

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 12

June 10, 2016 United States

S&P 500 Sector and Industry Group Performance

1 Week Prior Week 1 Month 3 Months Last 12 Months YTD
S&P 500 0.5 % 0.8 % 3.0 % 7% 4% 5%
Energy 3.2 % (0.6)% 6.9 % 14 % (6)% 16 % Top quartile

Utilities 2.9 1.1 3.4 6 24 18 Bottom quartile

S Telecommunication Services 2.5 0.6 2.3 3 17 16

E Industrials 1.9 0.4 3.1 7 6 8
C Materials 1.8 0.2 5.6 11 (1) 11
T Consumer Staples 1.6 0.6 1.0 4 16 8
O Information Technology 0.3 0.3 5.2 6 5 2
R Health Care (0.2) 2.4 3.5 8 (1) 1
Consumer Discretionary (0.4) 0.8 (0.2) 5 6 2
Financials (1.6) 0.9 1.7 8 (3) (1) Region Cycle

Energy 3.2 % (0.6)% 6.9 % 14 % (6)% 16 % Global Cyclicals

Utilities 2.9 1.1 3.4 6 24 18 Domestic Defensives

Transportation 2.6 0.8 2.6 4 (3) 4 Domestic Cyclicals

Telecommunication Services 2.5 0.6 2.3 3 17 16 Domestic Defensives

Food Beverage & Tobacco 2.1 0.4 1.6 6 24 10 Global Defensives

I Materials 1.8 0.2 5.6 11 (1) 11 Global Cyclicals

N Capital Goods 1.7 0.2 2.9 8 8 8 Global Cyclicals

D Technology Hardware & Equipment 1.6 (0.7) 8.9 2 (13) 1 Global Cyclicals

U Household & Personal Products 1.4 0.9 1.2 2 13 7 Global Defensives

S Health Care Equipment & Services 1.4 2.3 4.0 11 5 7 Domestic Defensives

T Consumer Durables & Apparel 1.2 0.6 (0.2) 2 3 2 Global Defensives

R Semiconductors & Semiconductor Equipment 1.2 1.1 11.1 10 7 5 Global Cyclicals

Y Commercial & Professional Services 1.0 1.4 6.0 9 13 13 Domestic Defensives

Real Estate 0.8 0.7 (1.9) 7 16 5 Domestic Defensives

G Consumer Services 0.6 (0.1) (2.2) 2 8 (1) Global Defensives

R Food & Staples Retailing 0.5 0.9 (0.6) 1 3 2 Domestic Defensives

O Automobiles & Components (0.2) (0.6) 0.5 2 (13) (6) Global Cyclicals

U Software & Services (0.4) 0.6 2.6 6 17 2 Global Cyclicals

P Retailing (0.7) 1.1 0.9 7 16 2 Domestic Defensives

Pharmaceuticals Biotechnology & Life Sciences (1.1) 2.4 3.1 7 (3) (2) Global Defensives

Media (1.2) 1.6 (1.2) 5 (2) 6 Domestic Cyclicals

Insurance (1.4) 0.9 2.7 9 5 3 Domestic Cyclicals

Diversified Financials (1.6) 0.3 1.5 7 (8) 0 Domestic Cyclicals

Banks (3.1) 1.5 3.4 8 (9) (7) Domestic Cyclicals

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 13

June 10, 2016 United States

Style and Size

Growth vs. Value Large-cap vs. Small-cap

115 125

Growth outperforming Russell 1000 outperforming

120
110

115

105
110

100 105

100
95

95
Value outperforming
90 Russell 2000 outperforming
90
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
Sectors: Russell 1000 Growth vs. Value Sectors: Russell 1000 vs. Russell 2000
Weight (%) 1-Week (% Return) YTD (% Return) Weight (%) 1-Week (% Return) YTD (% Return)
Russell Sector Growth Value Growth Value (bps) Growth Value (bps) Russell Sector R1000 R2000 R1000 R2000 (bps) R1000 R2000 (bps)
Financials 10 28 (0) (2) 162 5 (1) 587 Health Care 14 14 (0) (1) 38 0 (9) 961
Energy 1 14 4 3 79 7 15 (824) Consumer Staples 9 3 2 1 23 8 8 12
Consumer Staples 11 6 2 1 40 8 8 (12) Utilities 6 5 3 3 (7) 18 16 180
Industrials 12 10 2 2 30 8 7 40 Industrials 11 13 2 2 (16) 8 9 (161)
Cons Discretionary 22 6 (0) (0) 20 2 3 (167) Cons Discretionary 14 14 (0) 0 (70) 2 3 (97)
Technology 22 11 0 0 20 0 5 (456) Technology 17 15 0 1 (84) 2 5 (315)
Utilities 2 10 2 3 (37) 15 18 (299) Financials 19 27 (1) 0 (125) 1 6 (523)
Materials 4 3 1 3 (160) 9 19 (965) Materials 4 7 2 3 (180) 13 19 (564)
Health Care 16 12 (1) 1 (275) (4) 7 (1,146) Energy 7 3 3 6 (268) 15 10 516

Index 100 100 0 1 (35) 3 7 (395) Index 100 100 1 1 (43) 5 5 (10)

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 14

June 10, 2016 United States

US Portfolio Strategy Baskets

Bloomberg Total Return P/E P/B Div
YTD Performance Ticker 1 wk 1 mo YTD NTM LTM Yield
Macroeconomic
Dual Beta GSTHBETA (0.4)% 7% (2)% 14x 2.2x 1.1 %
High Hedge Fund Concentration 13
Interest Rate Sensitive GSTHUSTY 0.5 5 7 16 2.7 1.1
High Sharpe Ratio 12
High Operating Leverage GSTHOPHI 0.1 4 6 17 2.9 1.2
Low Hedge Fund Concentration 11 Low Operating Leverage GSTHOPLO 0.9 2 3 18 4.9 1.7
International Sales 9 High Tax GSTHHTAX 0.8 4 5 18 3.4 1.6
Low Tax GSTHLTAX 0.6 6 6 17 2.9 2.3
Mutual Fund Underweight Positions 7
High Labor Cost GSTHHLAB 0.6 4 NM 18 3.1 1.8
BRICs Sales 7
Low Labor Cost GSTHLLAB 0.0 5 NM 14 2.6 1.8
Interest Rate Sensitive 7 Geographic Sales
Capex and R&D 7 Domestic Sales GSTHAINT 0.8 % 2% 3% 19x 3.3x 1.5 %
Overseas Earnings 7 International Sales GSTHINTL 1.5 8 9 20 2.7 1.5
Low Tax 6 BRICs Sales GSTHBRIC 0.7 6 7 19 2.7 1.5
Western Europe Sales GSTHWEUR 1.0 3 6 19 3.5 1.4
Hedge Fund Very Important Shorts 6
Fundamental
High Operating Leverage 6
High Revenue Growth GSTHREVG 0.5 % 5% 3% 20x 3.4x 0.3 %
High Quality Stock 6
ROE Growth GSTHGROE 0.3 2 4 19 4.4 1.9
Western Europe Sales 6 High Quality Stock GSTHQUAL 0.7 3 6 19 4.2 1.5
Dividend Growth 5 Strong Balance Sheet GSTHSBAL 0.4 2 2 23 6.2 1.2
Weak Balance Sheet GSTHWBAL 0.9 6 5 15 2.5 1.2
High Tax 5
Shareholder Return
Weak Balance Sheet 5
Capex and R&D GSTHCAPX 0.8 % 6% 7% 14x 2.3x 1.2 %
S&P 500 5
Total Cash Return to Shareholders GSTHCASH (0.2) 3 1 13 2.6 2.5
ROE Growth 4 Buyback GSTHREPO (0.3) 3 1 12 2.6 1.9
Low Operating Leverage 3 Dividend Growth GSTHDIVG (0.3) 4 5 15 2.8 2.7
High Revenue Growth 3 Hedge Fund

Domestic Sales 3 Hedge Fund "VIP" List GSTHHVIP (0.0)% 4% (2)% 19x 3.6x 1.0 %
Hedge Fund Very Important Shorts GSTHVISP 1.0 3 6 16 3.1 2.7
Strong Balance Sheet 2
High Hedge Fund Concentration GSTHHFHI 2.0 8 13 19 2.6 0.0
Buyback 1
Low Hedge Fund Concentration GSTHHFSL 2.1 3 11 20 4.4 2.8
Total Cash Return to Shareholders 1 Mutual Fund
Mutual Fund Overweight Positions (0) High Sharpe Ratio GSTHSHRP 0.8 % 5% 12 % 16x 3.1x 1.9 %
Dual Beta (2) Mutual Fund Overweight Positions GSTHMFOW (0.8) 3 (0) 18 3.9 1.5
Hedge Fund "VIP" List (2) Mutual Fund Underweight Positions GSTHMFUW 1.1 1 7 19 3.2 3.1
Overseas Earnings GSTHSEAS 0.7 3 7 17 2.9 2.6
(6) (4) (2) 0 2 4 6 8 10 12 14 16
S&P 500 0.5 % 3% 5% 17x 2.8x 2.1 %
S&P 500 Average 20 5.1 2.0
S&P 500 Median 18 3.0 2.0

For details and constituents of our baskets see Strategy Baskets: Anatomy of our US Portfolio Strategy Thematic and Sector Baskets, September 10, 2015.

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 15

June 10, 2016 United States

US Portfolio Strategy Baskets Relative performance vs. S&P 500

Macroeconomic Geographic Sales

Dual Beta Interest Rate Sensitive US Sales International Sales
115 108 116 106
Bloomberg <ticker> GSTHUSTY GSTHAINT GSTHINTL
114 104
110 GSTHBETA
104
112 102
105
100 100
110
100
98
108
95 96
96
106
90 94
92
104
92
85
88 102
90
80
100 88
84
75 98 86

70 80 96 84
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
High vs. Low High vs. Low
Operating Leverage Tax Rate BRICs Sales Western Europe Sales
108 120 104 104
GSTHOPHI/ GSTHHTAX/ GSTHBRIC GSTHWEUR
GSTHOPLO GSTHLTAX 102
106 102
115 100
104
98 100
110
102 96
98
94
100 105
92
96
98 90
100
88 94
96

95 86
94 92
84

92 90 82 90
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 16

June 10, 2016 United States

US Portfolio Strategy Baskets Relative performance vs. S&P 500 (continued)

Fundamentals Shareholder Return

Revenue Growth ROE Growth Capex and R&D Total Cash Return
106 108 114 107
Bloomberg <ticker> GSTHGROE GSTHCAPX GSTHCASH
112 106
GSTHREVG
104 106 110
105
108
104
102 104 106

104 103

100 102 102 102

100 101
98 100 98
100
96
99
96 98 94

92 98

94 96 90 97
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
Strong vs. Weak
High Quality Balance Sheet Buybacks Dividend Yield & Growth
104 106 103 104
GSTHQUAL GSTHSBAL/ GSTHREPO GSTHDIVG
104 GSTHWBAL 102
103 102

101
102
102 100
100
100
101 98
99
98
100 98 96
96
97
99 94
94
96
98 92
92
95

97 90 90
94

96 88 93 88
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 17

June 10, 2016 United States

US Portfolio Strategy Baskets Relative performance vs. S&P 500 (continued)

Hedge Fund Ownership Mutual Funds

Hedge Fund VIP Short Positions Overweight Positions Underweight Positions
108 105 104 108
Bloomberg <ticker> GSTHVISP GSTHMFOW GSTHMFUW
106 GSTHHVIP 104 102
106
104
103 100
102
104
102 98
100

98 101 96 102

96
100 94
100
94
99 92
92
98
98 90
90

88 97 88 96
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
High Concentration Low Concentration High Sharpe Ratio Earnings Held Overseas
125 112 112 104
GSTHHFHI GSTHHFSL 111 GSTHSHRP GSTHSEAS
110 110
120 109 102
108 108
107
115 106 100
106
105
104
104
110 98
103
102
102
101
105 100 96
100
98 99
100 98 94
96 97
96
95 94 95 92
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 18

June 10, 2016 United States

S&P 500 Earnings, Sales and Revisions

GS Top-Down EPS vs. Consensus Bottom-Up Earnings & Sales Revisions (Consensus)
EPS REVISIONS SALES REVISIONS
Operating EPS Adjusted EPS
1 month 3 month 1 month 3 month
(GS Top-Down) (Consensus Bottom-Up)
16E 17E 16E 17E 16E 17E 16E 17E
Contribution EPS growth Contribution EPS growth
2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E Energy 1.1 % 1.0 % (18.6)% (2.0)% 2.7 % 0.4 % 0.4 % 0.4 %
Utilities $4 $4 26 % 4% $4 $4 5% 3% Consumer Staples 0.4 0.3 0.9 0.9 0.1 0.1 (0.2) (0.3)
Telecom Services 4 4 13 2 4 4 6 1 Materials 0.2 (0.2) 2.3 0.4 (0.0) (0.6) (0.0) (1.2)

Financials 26 29 9 10 25 28 4 13 Information Technology 0.1 0.1 (2.7) (2.9) 0.4 0.5 (0.9) (1.0)

Consumer Discretionary 14 15 9 6 14 16 10 12 S&P 500 (0.2) (0.3) (1.5) (1.1) 0.3 0.1 (0.1) 0.0

Health Care 16 17 9 6 19 20 8 5 Consumer Discretionary (0.2) (0.4) 0.7 0.1 (0.1) (0.1) 0.6 1.0

Consumer Staples 10 10 6 1 10 11 2 10 S&P 500 ex. Energy (0.2) (0.3) (1.2) (1.1) 0.1 0.1 (0.1) (0.1)

24 6 Industrials (0.2) (0.4) (1.1) (0.7) 0.1 0.1 (0.5) (0.4)

Information Technology 26 9 25 27 0 10
Telecom Services (0.4) (0.1) (0.3) (0.2) (0.1) (0.1) (0.9) (0.4)
Industrials 13 13 2 (0) 13 14 1 9
Utilities (0.4) (0.3) (0.8) (0.6) NM NM NM NM
Materials 2 2 (12) 20 3 4 (0) 15
Health Care (0.5) (1.2) 0.2 (0.9) (0.0) 0.1 0.3 0.4
S&P 500 ex-Energy 112 120 7 6 117 128 4 9
Financials (0.5) (0.2) (3.3) (1.3) NM NM NM NM
Energy (3) 3 NM NM 2 5 (65) 189
S&P 500 EPS $110 $123 9% 12 % $119 $133 1% 12 %

Earnings Growth (consensus bottom-up) Sales Growth (consensus bottom-up)

2016E Earnings Per Share Growth Annual 2016E Sales Per Share Growth Annual
1QE 2QE 3QE 4QE 2016E 2017E 1QE 2QE 3QE 4QE 2016E 2017E
Consumer Discretionary 18 % 8% 6% 10 % 10 % 12 % Health Care 13 % 9% 8% 6% 9% 5%
Health Care 11 4 8 9 8 5 Telecom Services 11 13 4 1 7 2
Telecom Services 18 7 (1) 3 6 1 Consumer Discretionary 8 5 6 6 6 5
Utilities (2) 6 6 15 5 3 Information Technology 6 7 3 6 5 6
S&P 500 ex. Energy 0 1 5 9 4 9 S&P 500 ex. Energy 6 5 4 5 5 5
Financials (10) 0 9 17 4 13 Consumer Staples 3 3 4 5 4 5
Consumer Staples (1) (3) 5 7 2 10 S&P 500 2 2 4 7 4 6
Industrials (5) 6 (0) 5 1 9 Industrials 1 3 1 3 2 3
S&P 500 (5) (3) 3 9 1 12 Materials (7) (8) (1) 4 (3) 4
Information Technology (4) (5) 4 5 0 10 Energy (32) (21) (2) 23 (9) 22
Materials (13) (9) 8 22 (0) 15
Energy (104) (75) (51) 14 (65) 189
Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 19

June 10, 2016 United States

Valuation: Absolute and Relative

S&P 500 NTM P/E S&P 500 Cost of Equity = ERP + 10-yr UST
30 10.0
25
P/E Cost of
NTM P/E (x)

20 Equity
17.2 8.0
15 7.5%
10
5
10-yr rolling avg 6.0 ERP
5.8%
0
1/76 1/81 1/86 1/91 1/96 1/01 1/06 1/11 1/16 1/21
4.0

10 Year
S&P 500 LTM P/B 2.0 UST
1.7%
6
5
P/B 0.0
LTM P/B (x)

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16
3 2.8
2
10-yr rolling avg
1
We estimate the equity risk premium (ERP) using our DDM framework to model expected future cash flows.
0
1/76 1/81 1/86 1/91 1/96 1/01 1/06 1/11 1/16 1/21 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. 10-year average (Z-score)
EV/ EV/ Price/ FCF PEG NTM EV/ EV/ Price/ FCF PEG Median
Sales EBITDA Book Yield Ratio P/E Sales EBITDA Book Yield P/E Ratio Z-Score
S&P 500 2.1x 11.1x 2.8x 4.5 % 1.4x 17.2x S&P 500 2.1 1.5 1.0 1.0 1.9 0.7 1.3
Energy 2.1 16.4 1.8 (1.0) 2.0 52.4 Financials NM NM (0.8) NM (0.9) 0.4 (0.8)
Consumer Staples 1.7 13.2 5.3 4.6 2.4 21.2 Information Technology (0.5) (1.2) (1.1) (0.6) (0.4) 0.7 (0.6)
Utilities NM 10.0 1.9 (0.6) 3.1 18.0 Consumer Discretionary (0.1) (1.9) 1.3 (0.0) (0.8) (1.1) (0.5)
Consumer Discretionary 1.7 9.8 4.8 4.1 1.0 17.9 Utilities NM (0.7) (0.2) (0.1) (0.4) (0.3) (0.3)
Materials 2.1 12.8 3.5 3.6 1.9 17.4 Health Care (0.6) 0.1 0.4 0.4 (0.8) (0.8) (0.3)
Information Technology 3.1 10.5 4.0 6.2 1.2 16.7 Industrials (1.9) (1.2) 2.3 0.6 (1.0) 2.7 (0.2)
Industrials 2.0 11.2 3.9 4.9 1.7 16.6 Telecommunication Services (0.6) (1.0) 1.5 0.4 (1.1) 0.5 (0.1)
Health Care 1.9 12.2 3.8 5.5 1.3 15.8 Materials 0.5 0.7 0.9 0.1 (0.5) 1.1 0.6
Telecommunication Services 2.4 6.6 3.2 7.7 3.0 14.0 Consumer Staples 0.4 0.3 2.2 (0.7) 1.4 1.9 0.9
Financials NM NM 1.3 NM 1.5 13.2 Energy 2.4 1.9 (1.4) 1.1 3.1 0.3 1.5

Source: FactSet, I/B/E/S, FirstCall, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 20

June 10, 2016 United States

Fund Flows, Fund Performance, and Short Interest

Domestic equity fund flows Mutual Fund Performance

35
Domestic equity fund flows Distribution of % outperf
12 Mutual Fund Style YTD
(4wk avg) 30 Large-Cap Core Large-Cap Core 24%

% of Large-Cap Core Mutual Funds

9 Mutual Fund Large-Cap Growth 9

ETFs 25 YTD returns Average YTD Large-Cap Value 20

6 return
Net 3.3% Total 18%
$ Billions

flows 20
3

0 15

(3) 10

(6) Mutual 5
funds
(9)
Mar-14

Mar-15

Mar-16
Dec-13

Jun-14

Dec-14

Jun-15

Jun-16
Sep-14

Sep-15

Dec-15

Sep-16
0
(2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
YTD total return (%)

Weekly fund flows Short Interest

3.0%
Lipper Mutual Fund Flows Lipper ETF Fund Flows
Total Total Total
Total 4-Wk Avg Flows Lipper 4-Wk Avg Flows 2.8%
Short interest % of market cap
($ billions) Assets Flows YTD Assets Flows YTD S&P 500 median 2.6%

Short interest % of cap

All Equity 3,894 (4.0) (58.3) 1,382 1.4 (19.7) 2.6%
Int'l Equity 856 (0.3) 5.9 292 (0.5) (10.8)
Equity Income 201 (0.1) (2.2) 51 0.2 3.1 2.4%
Real Estate 72 (0.2) (2.9) 26 0.4 1.6
Global 379 (0.2) (4.0) 13 0.0 (0.4) 2.2%
U.S. Equity 2,659 (3.5) (60.3) 1,076 1.8 (8.5)
2.0%
All Bonds 2,341 1.6 26.9 407 1.0 37.6
Municipal Bond 358 0.7 15.1 21 0.1 2.4
1.8%
All Taxable Bond 1,951 0.9 12.3 316 1.1 29.9

Mar-15

Mar-16
Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16
Gov't Treasury 32 (0.1) (0.5) 70 (0.2) 5.3
Money Market 2,356 4.8 (59.7) NA NA NA
Source: FactSet, Lipper, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 21

June 10, 2016 United States

Momentum, Breadth, Correlation and Dispersion

145
Momentum Factor Sector and Stock Correlation
0.9
GSMEFMOM
140 Average sector correlation
135 Goldman Sachs 0.8
Momentum Micro Equity Factor
130 0.7
(high vs. low)

Average Correlation
125
0.6
120

115 0.5

110 0.49
0.4
105
0.3
100

95 0.2
0.23
90 Average stock correlation
0.1
Apr-14

Feb-15
Jun-14

Aug-14

Oct-14

Dec-14

Apr-15

Feb-16
Jun-15

Aug-15

Oct-15

Dec-15

Apr-16

Jun-16

Aug-16

Mar-14

Mar-15

Mar-16
Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16
Goldman Sachs Breadth Index (GSBI) Return Dispersion
100 +/- 1 Standard Deviation
30-yr avg = 35
90 1-Month Returns 3-Month Returns
GS Breadth Index = 28
Goldman Sachs Breadth Index

80 Current 30-Year Historical Current 30-Year Historical

Jun 9 Average %ile Jun 9 Average %ile
70
S&P 500 13 pp 17 pp 26 % 27 pp 29 pp 54 %
60
Energy 15 pp 14 pp 68 % 47 pp 24 pp 98 %
50
Health Care 10 15 11 29 25 75
40 Current
Materials 11 15 20 26 26 62
30
Consumer Discretionary 14 17 25 27 29 46
20
13 Utilities 5 10 4 14 18 39
10 <5 = Narrow breadth
Telecom Services 6 13 12 15 23 32
0 Industrials 10 14 18 20 24 32
1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Financials 9 14 26 15 23 18
2 2 R = SPX return Information Technology 17 20 41 24 36 12
w = individual constituent weights
2 2 r = individual constituent returns Consumer Staples 11 12 46 15 21 10

Source: FactSet, Lipper, and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 22

June 10, 2016 United States

Economics

GDP Core PCE and CPI Employment

5.0 % 2.4 375
Consensus
Goldman Sachs Core CPI US Labor Market
3.9
GDP Growth (qoq annualized %)

4.0 % Economics 2.2 350

Initial Jobless Claims (thousands)

Year over Year change (%)
3.2
2.0
3.0 % 325
2.3 2.3
2.0 2.0 2.0 2.0
2.0 1.8 Initial Jobless
2.0 % Claims
300
1.4
1.6
1.0 % 0.8
0.6 275
1.4
0.0 %
250
1.2 Core PCE 4-Week Moving
(1.0)% Average
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1.0 225

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16
Mar-14

Mar-15

Mar-16
2015 2016 2017

Current Activity (CAI) Economic Surprise (MAP) Financial Conditions (FCI)

4.5 9.0 100 102.6
Rolling 1-Month Positive
Data Surprises Financial Conditions Tighter
US MAP Score Index
4.0 8.0 75 102.2
Rolling 1-Month US-MAP Score

3.5 7.0
50 101.8

3.0 6.0
China CAI 25 101.4
China CAI
US CAI

2.5 5.0
0 101.0
2.0 4.0
(25) 100.6
1.5 3.0

1.0
US CAI 2.0 (50) 100.2

0.5 1.0 (75) 99.8

Negative
Data Surprises Looser
0.0 0.0
(100) 99.4
Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16
Mar-14

Mar-15

Mar-16

Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16

Dec-13

Jun-14

Sep-14

Dec-14

Jun-15

Sep-15

Dec-15

Jun-16

Sep-16
Mar-14

Mar-15

Mar-16

Mar-14

Mar-15

Mar-16
Our Current Activity Indicator (CAI) measures the growth signal in major high-frequency activity indicators for the US economy, expressed in GDP-equivalent units.

Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 23

June 10, 2016 United States

Goldman Sachs Global Macro Forecasts

Goldman Sachs Global Macro Forecasts

Change
Goldman Sachs US Economics Forecasts
units Current 3m 6m 12m to Target % Annual Change
Equities 2015 2016E 2017E
TOPIX level 1337 1400 1425 1450 8% Real GDP 2.4% 2.0% 2.2%
MXAPJ level 419 420 420 425 1 Consumer Spending 3.1 2.6 2.4
STOXX Europe 600 level 341 335 340 345 1 Total Fixed Investment 4.0 1.5 4.5
S&P 500 level 2115 2050 2075 2125 0 Business Fixed Investment 2.8 (0.8) 3.7
Ten Year Rates Residential Investment 8.9 10.3 7.5
US % 1.7 2.2 2.4 2.6 92 bp Federal Government Spending (0.3) 0.8 (2.0)
Euro Area (Germany) % 0.0 0.4 0.5 0.7 67
State and Local Government 1.4 1.9 2.1
Net Exports (Bil.) (543) (575) (626)
Japan % (0.1) 0.0 0.1 0.2 33
Inflation
Currencies Headline CPI 0.1 1.5 2.6
US Dollar / Yen $/ 106 115 120 125 17 % Core CPI 1.8 2.2 2.1
Sterling / US Dollar /$ 1.45 1.47 1.49 1.50 4 Core PCE 1.3 1.7 1.8
Euro / US Dollar EUR/$ 1.13 1.12 1.10 1.05 (7) Unemployment Rate 5.3 4.8 4.4
Energy Fed Funds Rate 0.2 0.9 1.6
10-year Treasury Rate 2.3 2.4 2.8
NYMEX Nat. Gas $/mmBtu 2.62 2.45 2.75 3.30 26 %
Brent Crude Oil $/bbl 52 49 51 52 0
WTI Crude Oil $/bbl 51 49 51 50 (1) Real GDP
Metals 2014 2015E 2016E 2017E 2018E
COMEX Gold $/troy oz 1273 1200 1180 1150 (10)% China 7.3 % 6.9 % 6.6 % 6.4 % 6.1 %
LME Copper $/mt 4546 4500 4200 4000 (12) World 3.4 3.1 3.2 3.6 3.7
Spain 1.4 3.2 2.9 2.1 2.2
EPS Forecast EPS Growth NTM P/E
Australia 2.7 2.5 2.8 2.3 2.7
Div
UK 2.9 2.3 2.0 2.0 2.2
2015 2016 2017 2016 2017 Current YE 2016 Yield
USA 2.4 2.4 2.0 2.2 2.0
TOPIX 93 96 103 4% 7% 13.9 x 13.8 x 2.3 % Euro Area 0.9 1.5 1.5 1.5 1.6
Germany 1.6 1.4 1.5 1.2 1.3
MXAPJ $ 30 $ 29 $ 30 (3) 2 14.5 14.2 3.2 France 0.2 1.2 1.4 1.6 1.7
Italy (0.3) 0.6 1.2 1.4 1.2
STOXX
22 22 25 (2) 15 15.9 13.8 3.8 Japan (0.0) 0.5 0.6 1.0 1.1
Europe 600
Russia 0.7 (3.7) 0.5 3.0 2.3
S&P 500 $ 100 $ 110 $ 123 9 12 19.3 17.1 2.2 Brazil 0.1 (3.8) (3.1) 1.1 2.3
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 24

June 10, 2016 United States

Goldman Sachs Macro Forecasts

EURO YEN OIL
$1.50 150 $120
$115
$1.40
EUR/USD 140 $100 Brent
$1.30 crude
$1.13
130 $80 ($/bbl)
$1.20 GS
$1.12 128 forecast
$1.10 $1.10 120 125 $60 $52
$1.05 120
$1.00 $1.00 115
110 $40 Futures
$50
$0.90 market
106 54
100 $20
$0.80
USD/JPY
$0.70 90 $0
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18
Investment Grade (IG) spread High-Yield (HY) spread Global Equity Market performance
Price Return (%) US Dollar Local
210 bp 1000 bp
Market 1-Wk 1-Mo 3-Mo 2016 YTD Currency
190 bp 900 bp Brazil (Bovespa) 9% 5% 14 % 38 % 18 %
Korea (KOSPI) 5 4 9 5 3
170 bp
800 bp Australia (ASX 200) 5 2 3 4 1
150 bp U.S. (S&P 500) 0 3 6 4 4
700 bp
130 bp Mexico (Bolsa) 2 0 (0) 1 6
121 bp 600 bp 586 bp France (CAC 40) 0 1 2 (1) (5)
110 bp
98 bp 510 bp UK (FTSE 100) 1 2 3 (2) (0)
500 bp
90 bp Germany (Dax) 0 0 7 (2) (6)
Investment Grade High-yield
Japan (TOPIX) 2 4 6 (2) (14)
70 bp (IG) spread 400 bp (HY) spread
Europe (DJ Stoxx 600) 1 2 4 (3) (7)
USD USD
50 bp 300 bp Spain (IBEX 35) (1) 1 3 (4) (8)
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

China (MSCI China) 2 5 6 (5) (5)

Average 2% 3% 5% 3% (1)%
Source: FactSet and Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 25

June 10, 2016 United States

Equity Basket Disclosure

The ability to trade the basket(s) discussed in this research will depend upon market conditions, including liquidity and borrow
constraints at the time of trade.

Goldman Sachs Global Investment Research 26

June 10, 2016 United States

Disclosure Appendix
Reg AC
We, David J. Kostin, Ben Snider, Brett Sanchez, Arjun Menon and Ryan Hammond, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject
company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed
in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.

Disclosures
Distribution of ratings/investment banking relationships
Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships
Buy Hold Sell Buy Hold Sell
Global 32% 53% 15% 65% 58% 51%
As of April 1, 2016, Goldman Sachs Global Investment Research had investment ratings on 3,029 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment
Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups
and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.

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 prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,
director, advisory board member or employee 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. 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.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States
The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia
Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking
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Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of
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U74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such term is defined in clause 2 (h) the Indian
Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred to in this research report. Japan: See below. Korea: Further information on the subject company or
companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither "registered
banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for "wholesale clients" (as defined in the Financial
Advisers Act 2008) unless otherwise agreed by Goldman Sachs. Russia: Research reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are
information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further
information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: This material is for reference
only and must not be reprinted without permission. 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

Goldman Sachs Global Investment Research 27

June 10, 2016 United States

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.
European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/125/EC is available at
http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research.
Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho 69, and a member of Japan Securities Dealers
Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. Sales and purchase of equities are subject to commission pre-determined with clients plus
consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities
Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a
stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review
Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular
coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the
potential return or the likelihood of the realization of the return.
Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price target. Price targets are required for all
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June 10, 2016 United States

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Goldman Sachs Global Investment Research 29