13 January 2025 | 8:15PM EST

The Goldman Sachs Group, Inc.

Where to Invest Now

Four more years

January 2025

David J. Kostin
Chief US Equity Strategist Goldman, Sachs & Co. 1-212-902-6781 [email protected]

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.
2025 US Equity Strategy Outlook
Backdrop: S&P 500 index will rise by 12% to 6500 at year-end 2025

Investment recommendations

1. Benchmark ‘Magnificent 7’ and own S&P Mid-Cap 400

2. The Art of the Deal: Own US M&A Candidates

3. Own stocks with Small- and Medium-size Business Exposure

4. AI Phase 3 stocks: AI-enabled revenue beneficiaries

5. Sectors: Software & Services, Materials, Utilities

2
 Path of S&P 500 earnings and index level
We expect the S&P 500 will reach 6500 by year-end 2025

7000 $300
2025E
6500 6500
$280
Current 2026E
6000 5918 $288
$260
2025E
5500 S&P 500 $268
price $240
(left axis) 2024E
5000 $241
$220
4500
$200
4000 GS forecast
$180
3500
$160
3000
S&P 500 adjusted EPS
2500 (right axis) $140

2000 $120

1500 $100
2016 2018 2020 2022 2024 2026 2028

Source: FactSet, Goldman Sachs Global Investment Research. As of January 8, 2025. Global Investment Research 3
 US equities price an optimistic growth environment
Returns of Cyclicals vs. Defensives imply growth well above rate of economic growth

125 6%

120
5%
115

110 4%

105
4Q GDP
3%
100 tracker

95 2%

90
1%
85

80 Indexed return of 0%

75 Cyclicals vs. Defensives

ex. commodities GS US Current
(1)%
70 (left axis) Activity Indicator
(right axis)
65 (2)%
2010 2012 2014 2016 2018 2020 2022 2024 2026
* Hard CAI data only since 2023
Cyclicals: S&P 500 stocks with beta to US GDP growth (via US MAP score of economic data surprises) greater than the S&P 500 beta, excluding Energy and Materials.
Defensives: S&P 500 stocks with beta to US GDP growth lower than the S&P 500 beta excluding commodity input cost and other equities impacted by the macro environment.

Source: Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 4
 Small business sentiment has surged
NFIB Small business sentiment jumped at start of first Trump administration

115
NFIB Small Business
110 Optimism Index

105

100

95

90 2016
election

85

80
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: NFIB, Goldman Sachs Global Investment Research. As of November 30, 2024. Global Investment Research 5
 US equity Sentiment Indicator is in stretched territory
Based on positioning and flows of mutual and hedge funds, foreign, retail investors

3.0
US Equity Sentiment Indicator
2.5
2.0
1.5
+1 stdev 1.1
1.0
0.5
0.0
(0.5)
(1.0)
-1 stdev
(1.5)
(2.0)
(2.5)
(3.0)
(3.5)
2010 2012 2014 2016 2018 2020 2022 2024 2026

Source: Goldman Sachs Global Investment Research. As of January 3, 2025. Global Investment Research 6
 Market pricing of tariff risk has receded
Investors initially focused on potential tariff impact, but the trades have unwound

108 2.8%

US tariff-insulated vs.
106 tariff-exposed baskets
(left axis)
104 2.7%

102
1y1y inflation swap
100 (right axis) 2.6%

98

96 2.5%

SPW vs. DAX

94 Election (left axis)
Day
92 2.4%
Oct-24 Nov-24 Dec-24 Jan-25 Feb-25

Source: Goldman Sachs Global Investment Research. As of January 6, 2025. Global Investment Research 7
 Real yields have jumped by 40 bp in last month
Every 50 bp increase in bond yields is a roughly 3% hit to S&P 500 valuation

5%
Real Change
Real 10-year 10 yr. Implied S&P 500 vs.
4%
UST yield UST yield P/E Index current
1.0 23.7x 6525 9%
3% 1.5 22.9x 6300 5
2.0 22.2x 6100 2
2.3 % 2.5 21.4x 5900 (1)
2% 3.0 20.8x 5700 (4)
3.5 20.1x 5525 (7)
1% 4.0 19.5x 5375 (10)

0%

(1)%

(2)%
1990 1995 2000 2005 2010 2015 2020 2025 2030

Based on GS valuation model, holding all other variables constant. S&P 500 index closed at 5909 on January 7, 2025.

Source: Goldman Sachs Global Investment Research. As of January 8, 2025. Global Investment Research 8
 Speed and drivers of yield moves matter for stocks
Equities typically struggle to digest swift and sharp increases in interest rates

3%

2%

1%
2σ today
S&P 500 1-month return

≈ 60 bp
0%

(1) %

(2) % Average 1-month S&P 500 return

vs. change in 10-year US Treasury yields
(3) % Nominal yield Real yield

(4) %
Rates falling Rates rising

(5) %
<(2) (2)-(1) (1)-(0.5) (0.5)-0 0-0.5 0.5-1 1-2 >2
Z-score of interest rate change (1-month change vs. past 3 years)

Source: Goldman Sachs Global Investment Research. Global Investment Research 9

 S&P 500 cap-weighted index trades at P/E of 22x
Large valuation gap between cap-weighted and equal-weight S&P 500 indices

26 x

24 x S&P 500 forward P/E

22x
22 x

20 x Aggregate
index
18 x 16x
16 x

14 x

12 x Equal-weight
10 x

8x

6x
1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: Goldman Sachs Global Investment Research. As of January 8, 2025. Global Investment Research 10
 Equities trade at narrowest risk premium since 2002
We expect the real yield gap will widen slightly to 280 bp by year-end 2025

1200 bp
S&P 500 EPS yield gap vs.
1000 bp real 10-year US Treasury

800 bp

600 bp

400 bp

232 bp
200 bp

0 bp

(200)bp
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: Goldman Sachs Global Investment Research. As of January 6, 2025. Global Investment Research 11
 S&P 500 earnings: Goldman Sachs vs. consensus
Margins are the key driver of the difference between GS and consensus

20 %
Annual S&P 500 EPS growth

15 % Consensus
14%
13%

10 % 11%
9%
Realized Goldman
6% 8% Sachs
7%
5%

Realized
1%
0%
2022 2023 2024 2025 2026

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 12
 Goldman Sachs top-down S&P 500 EPS forecasts
Our forecast is below top-down strategists and bottom-up analyst consensus

GS top-down Cons. BOTTOM-UP

2023 2024E 2025E 2026E 2024E 2025E 2026E
S&P 500 ex. Fin, RE, Utils
Sales growth 3% 6% 5% 4% 5% 5% 6%

Profit Margin 11.1% 11.5% 12.3% 12.6% 11.4% 12.5% 13.4%

Year/Year growth (50)bp 35 bp 78 bp 35 bp 30 bp 103 bp 90 bp

S&P 500 adjusted EPS $223 $241 $268 $288 $242 $273 $310
Year/Year growth 1% 8% 11 % 7% 9% 13 % 14 %

Cons. TOP-DOWN

2024E 2025E 2026E

$241 $271 300
8% 12 % 11 %

Source: FactSet, Goldman Sachs Global Investment Research. As of January 7, 2025. Global Investment Research 13
 Typical path of S&P 500 consensus EPS revisions
2024 and 2025 EPS revisions tracking better than historical median

2%

0%
2025
(2)%

(4)%
2024

(6)%
Median year
Typical bottom-up since 1985
(8)% consensus -8%
EPS revisions
(10)%
Mar Jun Sep Dec Mar Jun Sep Dec Mar

Year -1 EPS Year Year +1

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 14
 Consensus sector revisions to 2025E EPS
Upward revisions to Comm Services offset cuts in most other areas

Communication Services

Financials Bottom-up consensus

revisions to 2025 EPS
Utilities
since start of 4Q
Information Technology

Consumer Discretionary

Real Estate

S&P 500

Health Care

Consumer Staples

Industrials

Materials

Energy

(12)% (10)% (8)% (6)% (4)% (2)% 0% 2% 4%

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 15
 Consensus expects 8% EPS growth in 4Q 2024
4 percentage point average positive surprise during past 11 quarters

30%
27%

25% S&P 500 quarterly year/year EPS growth

21% relative to consensus expectations
20% Expected Actual
17%
15%
15%
12% 11%
10% 11% 11%
10% 8% 8%
7% 9% 8%
6% 4% 4%
5%
5%
3%
2%
-1% 0% 1%
0%
0%
-1%
-5% -3%
-6%
-7%
-10% -9%

-15%
4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2021 2022 2023 2024 2025

Source: FactSet, Goldman Sachs Global Investment Research. As of January 8, 2025 Global Investment Research 16
 S&P 500 4Q EPS, sales, and margins
Consensus expects aggregate EPS growth of 8% vs. 6% for the median stock

4Q 2024 bottom-up consensus (y/y)

EPS Sales Margin Median stock
Sector Growth Growth Level Change EPS growth
Comm Services 19 % 5% 17.2 % 205 bp 15 %
Info Tech 18 21 26.1 (51) 7
Financials 13 NM NM NM 14
Health Care 10 7 7.6 21 5
Utilities 9 NM NM NM 7
Real Estate 9 NM NM NM (3)
Consumer Discretionary 8 1 8.1 56 4
Materials (1) 1 8.8 (19) 6
Consumer Staples (2) 1 6.3 (21) (1)
Industrials (5) (4) 10.0 (14) 6
Energy (31) (7) 7.9 (275) (16)
S&P 500 8% 6%
ex. Financials and Utilities 7 4% 11.5 % 31 bp 5

Source: FactSet, Goldman Sachs Global Investment Research. As of January 8, 2025. Global Investment Research 17
 Firms report fewer sales beats when USD strengthens
Year/year change in trade-weighted USD vs. frequency of sales beats

70%
Year/year change in USD
% of stocks beating consensus sales

vs. frequency of
60%
reported sales beats

50%
estimates

40%

30%

20%

10%
R² = 0.38
0%
(15)% (10)% (5)% 0% 5% 10 % 15 % 20 %
Year/year change in trade-weighted USD

Source: FactSet, Goldman Sachs Global Investment Research. As of January 9, 2025. Global Investment Research 18
 GSTHAINT beats GSTHINTL when USD appreciates
Domestic sales typically outperforms International sales when USD strengthens

115 130
Domestic sales outperforming International sales /
Trade-weighted US dollar strengthening
110 Trade-weighted
US dollar 125
105 (right axis)

100 120

95
115
90

85 110

80
High US sales
(GSTHAINT) vs.
105
high international
75
sales (GSTHINTL)
(ex. Semis since 2023, left axis)
70 100
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Source: Goldman Sachs Global Investment Research. As of January 9, 2025. Global Investment Research 19
 S&P 500 firms generate 28% of sales internationally
Info Tech (59%) has the highest international sales exposure of any sector

Revenues ($bn) Sales Exposure

Sector Total Foreign Foreign Explicit EM
Information Technology $1,601 $942 59 % 17 %
Materials 469 221 47 12
Energy 1,301 469 36 3
Industrials 1,666 531 32 5
Communication Services 1,236 369 30 2
Consumer Discretionary 2,011 546 27 3
Consumer Staples 2,211 576 26 3
Real Estate 154 36 23 3
Financials 1,973 437 22 1
Health Care 3,039 419 14 1
Utilities 420 10 2 2

S&P 500 $16,082 $4,556 28 % 4%

Source: Goldman Sachs Global Investment Research. Global Investment Research 20

 Fall in China share of US manufacturing imports
US manufacturing imports have moved away from China since 2017

30%
Share of US Manufacturing Imports, by Country

2017: 25%
25%

4Q 2019:
20% 19%

3Q 2024:
15%
15%

10%

5%

0%
Canada China Mexico Euro Area S Asia ex.
China

Source: Department of Commerce, Goldman Sachs Global Investment Research. As of 3Q 2024. Global Investment Research 21
 Domestic Sales basket constituents (GSTHAINT)
Median stock in the US sales basket generates 100% of its sales in the US

2024 Mkt cap Sales Non-U.S. 2024 Mkt cap Sales Non-U.S. 2024 Mkt cap Sales Non-U.S.
Company Ticker return ($, bn) ($, bn) sales Company Ticker return ($, bn) ($, bn) sales Company Ticker return ($, bn) ($, bn) sales
COMMUNICATION SERVICES FINANCIALS INFORMATION TECHNOLOGY
Verizon Communications VZ 13 % $175 $134 0% Wells Fargo & Co. WFC 46 % $253 $83 0% Tyler Technologies TYL 38 % $25 $2 0%
T-Mobile US Inc. TMUS 40 275 79 0 Allstate Corp. ALL 41 52 57 0 First Solar Inc. FSLR 2 20 3 4
Charter Communications CHTR (12) 56 55 0 Capital One Financial COF 38 71 37 0 Intuit Inc. INTU 1 192 14 8
Fox Corp. FOXA 66 16 15 0 PNC Financial Svc. Grp PNC 29 83 32 0 CDW Corp. CDW (23) 24 21 12
AT&T Inc. T 44 163 122 4 Charles Schwab SCHW 9 143 26 0 Roper Technologies ROP (4) 59 6 14
Truist Financial TFC 24 62 23 0 Arista Networks ANET 88 118 6 23
Basket median 0% Skyworks Solutions SWKS (19) 13 5 24
Sector median 35 Basket median 0% Cognizant Tech Solutions CTSH 3 38 19 26
Sector median 20 Fair Isaac Corp. FICO 71 55 2 27
CONSUMER DISCRETIONARY Super Micro Computer SMCI 7 11 7 32
Lowe's Companies LOW 13 % $154 $86 0% HEALTH CARE VeriSign Inc. VRSN 0 18 1 33
D.R. Horton Inc. DHI (7) 53 35 0 CVS Health Corp. CVS (41)% $67 $358 0% Gartner Inc. IT 7 40 6 34
Lennar Corp. LEN (7) 41 34 0 Elevance Health ELV (21) 93 171 0 Motorola Solutions MSI 49 82 10 34
CarMax Inc. KMX 7 12 27 0 Centene Corp. CNC (18) 30 154 0 Palo Alto Networks PANW 23 125 7 36
Ross Stores Inc. ROST 10 47 20 0 Humana Inc. HUM (44) 33 106 0 Enphase Energy Inc. ENPH (48) 8 2 36
Molina Healthcare MOH (19) 17 34 0 Gen Digital Inc. GEN 22 18 3 37
Basket median 0% Quest Diagnostics DGX 12 18 9 0
Sector median 29 Basket median 27 %
Basket median 0% Sector median 53
CONSUMER STAPLES Sector median 37
Kroger Co. KR 37 % $42 $150 0% MATERIALS
Target Corp. TGT (2) 70 107 0 INDUSTRIALS Nucor Corp. NUE (32)% $35 $35 0%
Dollar General DG (43) 17 39 0 Southwest Airlines LUV 19 % $20 $26 0%
Union Pacific Corp. UNP (5) 144 24 0 Basket median 0%
Basket median 0% Builders FirstSource BLDR (14) 21 17 0 Sector median 55
Sector median 21 Republic Services RSG 23 65 15 0
REAL ESTATE
ENERGY Basket median 0% Crown Castle Inc. CCI (16)% $45 $7 0%
Marathon Petroleum MPC (4)% $53 $148 0% Sector median 28
ONEOK Inc. OKE 50 64 18 0 Basket median 0%
Sector median 0
Basket median 0%
Sector median 3 UTILITIES
Duke Energy Corp. DUK 15 % $87 $29 0%

Basket median 0%
Sector median 0

GSTHAINT median 7% 0%
S&P 500 median 17 28

Source: Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 22
 International Sales basket constituents (GSTHINTL)
Median stock in the foreign sales basket generates 70% of its sales outside US

2024 Mkt cap Sales Non-U.S. 2024 Mkt cap Sales Non-U.S. 2024 Mkt cap Sales Non-U.S.
Company Ticker return ($, bn) ($, bn) sales Company Ticker return ($, bn) ($, bn) sales Company Ticker return ($, bn) ($, bn) sales
COMMUNICATION SERVICES FINANCIALS INFORMATION TECHNOLOGY
Meta Platforms Inc. META 66 % $1,211 $135 63 % Mastercard Inc. MA 24 % $478 $25 70 % QUALCOMM Inc. QCOM 8% $179 $36 96 %
News Corp. NWSA 13 14 10 62 Aflac Inc. AFL 28 62 17 62 Monolithic Power Systems MPWR (6) 28 2 95
Netflix Inc. NFLX 83 354 34 59 MSCI Inc. MSCI 7 47 3 59 Lam Research Corp. LRCX (7) 91 17 90
Electronic Arts EA 7 43 7 58 Visa Inc. V 22 517 33 57 NXP Semiconductors NXPI (8) 55 13 89
Match Group Inc. MTCH (10) 8 3 54 Aon Plc AON 24 82 13 56 KLA Corp. KLAC 9 83 10 88
Marsh & McLennan Cos. MMC 14 109 23 52 Jabil Inc. JBL 13 15 35 86
Basket median 59 % Applied Materials AMAT 1 140 27 85
Sector median 35 Basket median 58 % Teradyne Inc. TER 17 17 3 84
Sector median 20 ON Semiconductor ON (25) 28 8 81
CONSUMER DISCRETIONARY Broadcom Inc. AVGO 110 767 36 81
Las Vegas Sands LVS 6% $35 $10 100 % HEALTH CARE Microchip Technology MCHP (35) 34 8 75
Booking Holdings BKNG 41 167 21 89 Moderna Inc. MRNA (58)% $14 $7 72 % TE Connectivity TEL 3 45 16 74
BorgWarner Inc. BWA (10) 8 14 84 Viatris Inc. VTRS 20 15 11 69 Intel Corp. INTC (60) 104 54 74
Aptiv PLC APTV (33) 14 20 65 Waters Corp. WAT 13 21 3 69 Fortinet Inc. FTNT 61 72 5 70
McDonald's Corp. MCD 0 210 25 59 Agilent Technologies A (3) 37 7 65 Western Digital WDC 14 21 12 69
Mettler-Toledo Intl MTD 1 25 4 64 Corning Inc. GLW 61 40 14 67
Basket median 84 % Abbott Laboratories ABT 5 202 40 61
Sector median 29 Basket median 82 %
Basket median 67 % Sector median 53
CONSUMER STAPLES Sector median 37
Philip Morris Intl PM 34 % $200 $35 100 % MATERIALS
Estee Lauder Companies EL (48) 15 16 76 INDUSTRIALS Newmont Corp. NEM (8)% $47 $12 100 %
Bunge Global SA BG (21) 13 60 73 Otis Worldwide OTIS 5% $40 $14 72 %
Nordson Corp. NDSN (20) 15 3 66 Basket median 100 %
Basket median 76 % Expeditors Intl EXPD (12) 17 9 64 Sector median 55
Sector median 21 Emerson Electric EMR 30 73 15 58
REAL ESTATE
ENERGY Basket median 65 % Equinix Inc. EQIX 19 % $85 $8 62 %
Schlumberger Limited SLB (24)% $61 $33 84 % Sector median 28
Baker Hughes BKR 23 43 26 74 Basket median 62 %
Sector median 0
Basket median 79 %
Sector median 3 UTILITIES
AES Corp. AES (30)% $10 $13 65 %

Basket median 65 %
Sector median 0

GSTHINTL median 7% 70 %
S&P 500 median 17 28

Source: Goldman Sachs Global Investment Research. As of December 31, 2024 Global Investment Research 23
2. Investment strategies

24
 Market share of Top 7 stocks in S&P 500 is now 34%
Top 7 stocks comprise a record share of the index market capitalization

35%
34%

Market cap of the 7 largest S&P 500

30% companies as share of index total

25%

20%

15%

10%
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: Compustat, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 25
 EPS growth premium will narrow sharply in 2025
Mag 7 EPS growth premium will compress from 30 pp in 2024 to 7 pp in 2025

40%
36%
33%
Annual earnings growth
30%
Magnificent 7
20% 18%
16%
13%
S&P 11%
10% 493
3%
0%

(4)%
(10)%
2023 2024E 2025E 2026E

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 26
 Mag 7 outperformance vs. S&P 493 will narrow
From 63 pp outperformance in 2023, to 32 pp in 2024, to roughly 7 pp in 2025

100 pp
Magnificent 7 vs. S&P 493 relative return
80 pp
63 pp
60 pp
49 pp

40 pp 32 pp
25 pp
20 pp 16 pp
8 pp 7 pp

0 pp
Relative
return
(20)pp implied by
consensus
(29)pp earnings
(40)pp
2018 2019 2020 2021 2022 2023 2024 2025E

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 27
 Gap in earnings growth expected to shrink to 4 pp
A narrower earnings growth gap suggests a narrower relative return gap

80 pp
Magnificent 7 vs. S&P 493
relative return vs. 2023
60 pp relative earnings growth 2020

40 pp
Relative return

2019

20 pp
2018 2024 YTD
2021
0 pp

2026
(20)pp 2022 consensus
estimate
4 pp
(40)pp
(10) pp 0 pp 10 pp 20 pp 30 pp 40 pp
Relative NTM earnings growth

Source: Goldman Sachs Global Investment Research. As of November 15, 2024. Global Investment Research 28
 Premium valuation for Mag 7 stocks vs. S&P 493
Magnificent 7 forward P/E currently equals 31x vs. 19x for S&P 493

40x

36x Forward P/E Magnificent 7

32x
31x
28x

24x

20x S&P 493

19x
16x

12x
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 29
 Mag 7 expected to grow faster than the S&P 493
But valuation premium reflects the faster expected sales and EPS growth

Mkt cap Return Sales growth Earnings growth Valuation

Ticker Name ($ tn.) 2024 1-month 2025E 2026E 2025E 2026E EV/Sales P/E
NVDA NVIDIA $3.4 171 % 1% 49 % 22 % 47 % 26 % 17.8 x 32 x
META Meta 1.3 66 1 14 12 11 14 8.5 24
TSLA Tesla 1.3 63 1 16 17 33 24 11.5 118
AMZN Amazon 2.3 44 (2) 11 11 21 22 3.4 35
GOOGL Alphabet 2.2 36 11 11 11 10 14 6.1 22
AAPL Apple 3.7 31 (2) 10 7 12 5 9.0 32
MSFT Microsoft 3.1 13 (5) 13 15 10 19 10.6 30

Magnificent 7 $17.4 48 % (0)% 14 % 12 % 18 % 16 % 7.5 x 31 x

S&P 493 35.0 16 (3) 3 6 11 13 3.1 19
S&P 500 52.5 25 (2) 5 6 12 14 3.7 22

Source: Goldman Sachs Global Investment Research. As of January 7, 2025. Global Investment Research 30
 Trade policy risk favors the S&P 493
Magnificent 7 stocks are more exposed to global growth risks than S&P 493

60 %

Share of sales derived from 49%

50 % 46%
outside United States
40 %

30 % 28%
25% 26%
21%
20 %

10 %

0%
RUT MID S&P 493 SPX NDX Mag. 7
Source: Goldman Sachs Global Investment Research. As of November 15, 2024. Global Investment Research 31
 Small-, Mid-, and Large-cap equity indices at a glance
Long term performance of mid-caps, large-caps, and small-caps

8,000

Indexed performance
7,000 Mid-caps
1985 Consensus (S&P 400)
to 2024 2025E
6,000 return 2024 EPS NTM
Index CAGR return growth P/E
5,000 S&P 400 (MID) 11 % 12 % 13 % 16 x
S&P 500 (SPX) 9 23 15 22
Large-caps
4,000 Russell 2000 (RUT) 8 10 44 30
(S&P 500)

3,000

2,000

1,000
Small-caps
(Russell 2000)
0
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 32
 Mid-caps are positioned to benefit from US growth
Lower valuation: S&P mid-cap 400 trades at P/E of 16x vs. S&P 493 at 19x

24 x

22 x NTM P/E

20 x
S&P 493

18 x 19x

16 x
16x
14 x

12 x Mid-caps
(S&P 400)
10 x
2014 2016 2018 2020 2022 2024 2026

Source: Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 33
 We forecast 25% rise in completed US M&A in 2025
Strategic and sponsor M&A deals greater than $100 million in value

1,400
Number of completed US M&A transactions by deal size
$100 - $500 million $0.5 - $1 billion > $1 billion
1,200

GS 2025
1,000 forecast

800
+25%

600

400

200

0
1995 2000 2005 2010 2015 2020 2025

Source: Dealogic, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 34
 Modeled US M&A activity, 1996-2025E
Model is based on economic growth, CEO confidence, and financial conditions

100 %

Year/year change
80 %
in the number
of completed
60 %
US M&A deals
40 % Modeled
+25%
20 %

0%

(20)%

(40)%
Realized
(60)%
R2 = 0.64
(80)%
1996 2000 2004 2008 2012 2016 2020 2024 2028

Source: Goldman Sachs Global Investment Research. As of November 15, 2024. Global Investment Research 35
 US M&A Candidates basket (GSRHACQN) (1 of 2)
Stocks ranked 1 have 30-50% and those ranked 2 have 15-30% of merger

Market 2024 Consensus 2025E

M&A cap total NTM NTM Sales EPS
Ticker Name Sector rank (billions) return EV/Sales P/E growth growth
EA Electronic Arts Inc. Communication Services 2 $38.3 7% 5x 19x 6% 9%
TTWO Take-Two Interactive Software Communication Services 2 33.0 14 6 83 47 243
ON ON Semiconductor Corporation Information Technology 2 26.6 (25) 4 16 4 7
ZM Zoom Communications Information Technology 2 25.1 13 4 15 3 (2)
TRMB Trimble Inc. Information Technology 2 17.1 33 5 25 (6) 2
TWLO Twilio Information Technology 2 17.1 42 4 30 8 17
NBIX Neurocrine Biosciences Health Care 2 14.0 4 6 33 17 52
BMRN BioMarin Pharmaceutical Inc. Health Care 2 12.7 (32) 5 29 10 43
INSM Insmed Incorporated Health Care 1 12.5 123 30 NM 42 NM
SRPT Sarepta Therapeutics Health Care 1 12.1 26 7 55 72 398
TAP Molson Coors Beverage Company Consumer Staples 2 11.5 (3) 2 10 (0) 3
PSN Parsons Corporation Industrials 2 9.7 47 2 27 9 15
U Unity Software Information Technology 2 9.5 (45) 6 26 1 (18)
MDGL Madrigal Pharmaceuticals Health Care 1 6.9 33 36 NM 206 NM
WK Workiva Inc. Information Technology 2 6.2 8 8 118 16 37
BPMC Blueprint Medicines Corp. Health Care 1 5.6 (5) 11 NM 41 NM
SAIC Science Applications International Corp. Industrials 2 5.5 (9) 1 13 2 5
BBIO BridgeBio Pharma Health Care 1 5.3 (32) 30 NM (21) NM
HXL Hexcel Corporation Industrials 2 5.1 (14) 3 31 6 14
MGY Magnolia Oil & Gas Corp. Energy 2 4.6 12 3 12 1 (0)
BRZE Braze Information Technology 2 4.6 (21) 7 534 17 163
KRYS Krystal Biotech Health Care 1 4.5 26 14 57 61 112
KTOS Kratos Defense & Security Solutions Industrials 2 4.1 30 3 58 11 25
OPCH Option Care Health Inc Health Care 2 3.9 (31) 1 18 7 2
NCNO nCino Inc Information Technology 2 3.9 (0) 7 48 15 22
BL BlackLine Information Technology 2 3.8 (3) 7 28 9 4
RYTM Rhythm Pharmaceuticals Health Care 2 3.7 22 29 NM 45 NM
KNTK Kinetik Holdings Inc. Energy 2 3.6 83 8 35 26 40
MLTX MoonLake Immunotherapeutics Health Care 2 3.4 (10) NM NM NM NM
AVPT AvePoint Information Technology 2 3.2 101 9 101 18 39

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 36
 US M&A Candidates basket (GSRHACQN) (2 of 2)
Stocks ranked 1 have 30-50% and those ranked 2 have 15-30% of merger

Market 2024 Consensus 2025E

M&A cap total NTM NTM Sales EPS
Ticker Name Sector rank (billions) return EV/Sales P/E growth growth
XENE Xenon Pharmaceuticals Inc. Health Care 2 3.1 (15) NM NM NM NM
RNG RingCentral Information Technology 2 3.1 3 2 9 7 14
DNLI Denali Therapeutics Inc. Health Care 2 3.1 (5) 264 NM 490 NM
IRTC iRhythm Technologies Health Care 2 2.8 (16) 5 NM 16 NM
ARWR Arrowhead Pharmaceuticals Health Care 2 2.5 (39) 30 NM NM NM
SWI SolarWinds Corp. Information Technology 2 2.4 24 4 13 3 (2)
IOVA Iovance Biotherapeutics Inc Health Care 1 2.4 (9) 11 NM 184 NM
PRVA Privia Health Group Health Care 2 2.4 (15) 1 148 11 96
GERN Geron Corporation Health Care 2 2.2 68 21 NM 231 NM
TRIP TripAdvisor Communication Services 1 2.1 (31) 1 12 6 11
CGON CG Oncology Health Care 1 2.0 NM 966 NM 214 NM
AGIO Agios Pharmaceuticals Health Care 2 1.8 48 25 3 172 NM
SPT Sprout Social Information Technology 2 1.8 (50) 4 68 14 48
KOS Kosmos Energy Ltd. Energy 2 1.8 (49) 3 7 13 (5)
RCKT Rocket Pharmaceuticals Health Care 2 1.3 (58) NM NM NM NM
ARVN Arvinas Health Care 2 1.3 (53) 1 NM (19) NM
OLO Olo Information Technology 2 1.3 34 4 35 16 22
DAWN Day One Biopharmaceuticals Health Care 1 1.3 (13) 5 NM 40 NM
SNDX Syndax Pharmaceuticals Inc Health Care 2 1.2 (39) 21 NM 174 NM
ENFN Enfusion Information Technology 2 0.9 6 6 46 18 37
WOLF Wolfspeed Inc Information Technology 2 0.9 (85) 7 NM (2) NM
BASE Couchbase Information Technology 2 0.8 (31) 3 NM 14 NM
MRVI Maravai Lifesciences Holdings Health Care 1 0.8 (17) 4 NM 2 NM
RLAY Relay Therapeutics Health Care 2 0.7 (63) -15 NM (77) NM
MLYS Mineralys Therapeutics Health Care 2 0.6 43 NM NM NM NM
ALT Altimmune Health Care 1 0.5 (36) NM NM NM NM
BIGC BigCommerce Holdings Inc Information Technology 2 0.5 (37) 2 26 5 18
GRPN Groupon Consumer Discretionary 2 0.5 (5) 1 NM 0 NM
QTRX Quanterix Corporation Health Care 2 0.4 (61) 1 NM 16 NM
KLTR Kaltura Information Technology 2 0.4 13 2 NM 2 NM
OLMA Olema Pharmaceuticals Health Care 2 0.3 (58) NM NM NM NM
MTW Manitowoc Company Industrials 2 0.3 (45) 0 19 2 78

GSRHACQN median $3.1 (5)% 5x 28x 11 % 18 %

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 37
 Small & Medium Business exposure (GSRHSMBX)
Relative performance of stocks with elevated revenue exposure to SMB

50 pp

40 pp
Annual excess return of the
SMB exposure basket vs.
equal-weight S&P 500
30 pp

20 pp

10 pp

0 pp
First Trump
administration
(10)pp

(20)pp
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Goldman Sachs Global Investment Research. As of January 6, 2025. Global Investment Research 38
 Valuation of stocks with SMB exposure
Election results and operating environment has boosted low SMB sentiment

90% 36%
SMB Exposure basket
forward P/E premium 34%
80% vs. equal-weight S&P 500
NFIB Survey:
32%
Net % of small biz.
planning to increase
70% 30%
capital outlays
(right axis)
28%
60%
26%
50%
24%

40% 22%

20%
30%
18%

20% 16%
2019 2020 2021 2022 2023 2024 2025 2026

Source: FactSet, NFIB, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 39
 Small- and medium-size business exposure basket
Stocks with at least 50% of revenues tied to SMBs (GSRHSMBX) (1 of 2)

Total return Consensus Share of

Mkt cap Since 2024 Forward 2025 sales revenues
Company Ticker Sector (bn) Nov. 5 return P/E growth from SMBs
ACV Auctions, Inc. Class A ACVA Industrials $4 22 % 43 % NM 25 % 100 %
AGCO Corporation AGCO Industrials 7 4 (20) 19 (18) 100
Corteva Inc CTVA Materials 39 (8) 20 18 3 100
DigitalOcean Holdings, Inc. DOCN Information Technology 3 (5) (7) 20 13 100
EverCommerce, Inc. EVCM Information Technology 2 0 (0) NM 4 100
Groupon, Inc. GRPN Consumer Discretionary 0 13 (5) NM 1 100
IDEXX Laboratories, Inc. IDXX Health Care 34 (1) (26) 35 7 100
Payoneer Global Inc. PAYO Financials 4 (3) 93 36 8 100
Weave Communications, Inc. WEAV Information Technology 1 21 39 NM 16 100
BILL Holdings, Inc. BILL Information Technology 9 43 4 51 12 95
Deere & Company DE Industrials 115 6 8 22 (6) 95
Toast, Inc. Class A TOST Financials 21 18 100 45 23 95
Yelp Inc. YELP Communication Services 3 11 (18) 17 5 95
Upwork, Inc. UPWK Industrials 2 14 10 14 2 94
Brown & Brown, Inc. BRO Financials 29 (5) 44 25 8 90
Patterson Companies Incorporated PDCO Health Care 3 45 13 13 3 90
Align Technology, Inc. ALGN Health Care 16 (2) (24) 21 6 85
Henry Schein, Inc. HSIC Health Care 9 0 (9) 14 4 85
Paycor HCM, Inc. PYCR Industrials 3 15 (14) 33 10 81
Cintas Corporation CTAS Industrials 74 (12) 22 40 7 80
Global Payments Inc. GPN Financials 29 5 (11) 9 4 80
HubSpot, Inc. HUBS Information Technology 36 20 20 79 16 80
Klaviyo, Inc. Class A KVYO Information Technology 11 5 48 83 25 80
NCR Atleos Corporation NATL Financials 2 23 40 9 2 80
PACCAR Inc PCAR Industrials 55 (1) 11 14 3 80
SEMrush Holdings, Inc. Class A SEMR Information Technology 2 (11) (13) 37 21 80
Shift4 Payments, Inc. Class A FOUR Financials 7 15 40 24 28 80
Shopify, Inc. Class A SHOP Information Technology 137 34 36 76 23 80
Block, Inc. Class A SQ Financials 52 17 10 20 12 75
Meta Platforms Inc Class A META Communication Services 1,478 2 66 24 15 75

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 40
 Small- and medium-size business exposure basket
Stocks with at least 50% of revenues tied to SMBs (GSRHSMBX) (2 of 2)

Total return Consensus Share of

Mkt cap Since 2024 Forward 2025 sales revenues
Company Ticker Sector (bn) Nov. 5 return P/E growth from SMBs
Zoetis, Inc. Class A ZTS Health Care 74 (7) (17) 27 4 75
Elanco Animal Health, Inc. ELAN Health Care 6 (4) (19) 14 2 74
Trimble Inc. TRMB Information Technology 17 15 33 24 (6) 74
Herc Holdings, Inc. HRI Industrials 5 (12) 29 13 4 70
United Rentals, Inc. URI Industrials 46 (12) 24 16 4 70
Intuit Inc. INTU Information Technology 176 2 1 32 13 66
Arthur J. Gallagher & Co. AJG Financials 62 0 27 26 21 60
Cloudflare Inc Class A NET Information Technology 37 23 29 NM 25 60
Dropbox, Inc. Class A DBX Information Technology 9 13 2 12 0 60
Fiverr International Ltd. FVRR Industrials 1 9 17 13 7 60
GFL Environmental Inc GFL Industrials 18 6 29 50 6 60
Martin Marietta Materials, Inc. MLM Materials 32 (11) 4 26 9 60
Republic Services, Inc. RSG Industrials 63 (0) 23 31 5 60
Vulcan Materials Company VMC Materials 34 (6) 14 30 9 60
W. R. Berkley Corporation WRB Financials 22 2 27 14 8 60
Waste Connections, Inc. WCN Industrials 44 (4) 16 33 8 60
Waste Management, Inc. WM Industrials 81 (6) 14 26 10 60
RingCentral, Inc. Class A RNG Information Technology 3 (4) 3 9 7 57
Terex Corporation TEX Industrials 3 (11) (19) 9 5 56
Zillow Group, Inc. Class A ZG Real Estate 17 17 25 44 14 54
Bright Horizons Family Solutions, Inc. BFAM Consumer Discretionary 6 (4) 18 29 8 50
BrightView Holdings, Inc. BV Industrials 2 (7) 90 19 3 50
DENTSPLY SIRONA, Inc. XRAY Health Care 4 (18) (45) 10 (2) 50
Envista Holdings Corp. NVST Health Care 3 (9) (20) 19 3 50
Fortinet, Inc. FTNT Information Technology 72 21 61 40 12 50
TransUnion TRU Industrials 18 (8) 36 21 8 50
Xometry, Inc. Class A XMTR Industrials 2 65 19 NM 19 50
ZipRecruiter, Inc. Class A ZIP Communication Services 1 (23) (48) NM (2) 50
Arrow Electronics, Inc. ARW Information Technology 6 (5) (7) 11 2 NA
Avnet, Inc. AVT Information Technology 5 (4) 6 12 4 NA
Basket median $10 0% 14 % 22x 7% 75 %
S&P 500 median 37 (2) 17 19 5 <50

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 41
 Performance of our AI baskets: Phases 1, 2, and 3
Phase 3 stocks with AI-enabled revenues outperformed in recent months

150
Indexed return vs.
equal-weight S&P 500
140
Infrastructure
(GSCBAIP2)

130

120

Enabled
110 revenues
(GSCBAIP3)

100 Productivity
(GSTHLTAI)

90
Jun-2023 Sep-2023 Dec-2023 Mar-2024 Jun-2024 Sep-2024 Dec-2024

Source: Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 42
 The drivers of AI Phase 2 and Phase 3 returns
Returns of our AI Phase 2 (GSCBAIP3) and AI Phase 3 (GSCBAIP3) baskets

AI Phase 2 AI Phase 3

170 170

AI Phase 2: Infrastructure
160 Indexed return and consensus 160
forward 2-year EPS relative to Return
150 equal-weight S&P 500 150

140 140
EPS
130 Return 130

120 120

110 110 AI Phase 3: Enabled revenues

EPS Indexed return and consensus
100 100 forward 2-year EPS relative to
equal-weight S&P 500

90 90
Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 43
 Hyperscaler capex growth is expected to slow
Capex growth will decelerate from 50% in 2024 to 21% in 2025

70 %
Hyperscaler annual capex growth
(MSFT, META, GOOGL, AMZN, ORCL)
60 %
50%
$231 bn.
50 %

40 %

30 %
21%
$280 bn.
20 %

10 %

0%
-2%
$154 bn.
(10) %
2023 2024 2025

Note: Based on consensus estimates.

Source: FactSet, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 44
 Constituents of AI Phase 3 basket (GSCBAIP3)
Companies with potential to monetize AI by generating incremental revenues

Mkt cap 2024 Forward 2025 growth (cons.)

Ticker Name Industry ($ billion) return P/E Sales EPS
QTWO Q2 Holdings, Inc. Software 6 132 % 37 x 11 % 29 %
CVLT Commvault Systems, Inc. Software 7 89 35 12 14
META Meta Platforms Inc Interactive Media & Services 1,512 66 21 14 12
FTNT Fortinet, Inc. Software 73 61 34 12 8
CARG CarGurus, Inc. Interactive Media & Services 4 51 16 10 12
NOW ServiceNow, Inc. Software 217 50 52 21 19
ACVA ACV Auctions, Inc. Commercial Services & Supplies 4 43 26 24 463
AAPL Apple Inc. Tech Hardware 3,686 31 29 6 19
NET Cloudflare Inc IT Services 39 29 108 26 11
NTNX Nutanix, Inc. Software 16 28 30 15 19
CRM Salesforce, Inc. Software 316 28 26 9 13
MA Mastercard Inc. Financial Services 479 24 28 12 12
BOX Box, Inc. Software 5 23 15 6 9
ADSK Autodesk, Inc. Software 63 21 28 12 11
HUBS HubSpot, Inc. Software 36 20 62 16 14
DDOG Datadog Inc Software 49 18 58 22 14
YEXT Yext, Inc. Software 1 8 13 9 61
WK Workiva Inc. Software 6 8 52 16 37
IT Gartner, Inc. IT Services 37 7 32 8 11
ACN Accenture Plc IT Services 218 2 24 6 7
INTU Intuit Inc. Software 174 1 27 12 14
DT Dynatrace, Inc. Software 16 (1) 32 15 13
UBER Uber Technologies, Inc. Ground Transportation 133 (2) 19 16 31
DOCN DigitalOcean Holdings, Inc. IT Services 3 (7) 16 13 6
GTLB GitLab, Inc. Software 9 (10) 55 25 31
ZS Zscaler, Inc. Software 28 (19) 47 21 4
SNOW Snowflake, Inc. IT Services 52 (22) 115 24 32
ADBE Adobe Inc. Software 194 (25) 19 9 11
BASE Couchbase, Inc. IT Services 1 (31) NM 14 NM
MDB MongoDB, Inc. IT Services 18 (43) 59 17 9

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 45
 Stocks within our 2025 investment strategies
Overlap between our US Portfolio Strategy recommended investment strategies

AGIO DAWN KRYS ON SWI

ALT DNLI KTOS OPCH TAP
ARVN EA MDGL PRVA TRIP
ARWR ENFN MGY PSN TTWO
AVPT GERN MLTX QTRX TWLO
BBIO HXL MLYS RCKT U US M&A Candidates
BIGC INSM MRVI RLAY WOLF (GSRHACQN)
BL IOVA MTW RYTM XENE
BMRN IRTC NBIX SAIC ZM
BPMC KLTR NCNO SNDX
BRZE KNTK OLMA SPT
CGON KOS OLO SRPT

GRPN
BASE RNG
WK TRMB
TRU
MLM UPWK
AAPL CVLT NOW DBX NATL URI
ACN DDOG NTNX ACVA AGCO DE NVST VMC
AI Phase 3 ADBE DT QTWO DOCN AJG ELAN PAYO WCN
US Small Medium
ADSK GTLB SNOW FTNT ALGN EVCM PCAR WEAV
(GSCBAIP3) BOX IT UBER HUBS ARW FOUR PDCO WM Business Exposed
CARG MA YEXT INTU AVT FVRR PYCR WRB
CRM MDB ZS META BFAM GFL RSG XMTR Companies
NET BILL GPN SEMR XRAY (GSRHSMBX)
BRO HRI SHOP YELP
BV HSIC SQ ZG
CTAS IDXX TEX ZIP
CTVA KVYO TOST ZTS

Source: Goldman Sachs Global Investment Research. As of November 15, 2024. Global Investment Research 46
3. Sectors

47
 Well-ordered market: Sector P/B vs. expected ROE
Price/Book valuations are generally consistent with forward ROE estimates

12 x
S&P 500 sector
10 x return on equity
vs. price/book valuation
Info Tech
Price / book value

8x
Cons Discret

6x
Cons Staples
Industrials
S&P 500 Health Care
4x
Real Estate
Materials Comm Svcs

2x Utilities
Financials Energy
R² = 0.92
0x
5% 10 % 15 % 20 % 25 % 30 % 35 % 40 %
Consensus forward 12-month ROE

Source: FactSet, Goldman Sachs Global Investment Research. As of January 3, 2024. Global Investment Research 48
 Distribution of sector historical relative P/E multiples
Comm Services, Health Care, and Staples trade at large discounts vs. history

1.7x

1.6x
Distribution of sector FY2 P/E ratios
relative to S&P 500 during last 30 years
1.5x 95th %ile

1.4x

1.3x Current

1.2x 75th

1.1x Median

1.0x
25th
0.9x

0.8x

0.7x 5th

0.6x

0.5x
Info Cons. Industrials Cons. Comm Materials Utilities Real Health Financials Energy
Tech Discret Staples Services Estate Care

Source: FactSet, Goldman Sachs Global Investment Research. As of January 3, 2025. Global Investment Research 49
 Median stock valuations vs. history
Health Care and Staples are inexpensive relative to history

Median S&P 500 stock

Premium/
Absolute (Discount) 20-year
NTM P/E to S&P 500 %ile rank
Health Care 16 x (14)% 0%
Consumer Staples 17 (7) 3
Media & Entertainment 19 (1) 16
Materials 17 (8) 20
Telecommunication Services 10 (44) 22
Energy 14 (28) 24
Real Estate 18 (6) 33
Financials 14 (28) 29
Utilities 18 (5) 51
Technology Hardware & Equipment 18 (5) 54
Semiconductors & Semiconductor Equipment 21 10 63
Consumer Discretionary 20 8 88
Software & Services 32 71 92
Industrials 22 20 99

Source: FactSet, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 50
 Goldman Sachs US sector recommendations
Overweight Software & Services, Materials, Health Care, Real Estate, Utilities

Materials

Software & Services

Health Care

Utilities

Real Estate

Media & Entertainment

Staples

Telecom Services

Energy Model-implied
probability of
Semis equal-weight sector
outperforming the
Financials
S&P 500 by 5 pp
Discretionary during the next
6 months
Tech Hardware
50%
Industrials
threshold
0% 20% 40% 60% 80% 100%

Source: FactSet, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 51
 Health Care trades at historically low relative valuation
Policy uncertainty remains a key risk to the sector’s performance

80%

Relative forward P/E

60% Health Care vs. S&P 500

40%

Median
20% stock

0%

Aggregate
-20%
cap-weighted
indices

-40%
1990 1995 2000 2005 2010 2015 2020 2025

Source: FactSet, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 52
 Materials has lagged its relationship with GSCI
Tariffs and economic growth in China remain key risks to the sector

20% 80%

Materials vs. S&P 500 GSCI

(equal-weight, 6m return) (6m return, RIGHT)
15% 60%

10% 40%

5% 20%

0% 0%

-5% -20%

-10% -40%

-15% -60%
2012 2014 2016 2018 2020 2022 2024 2026

Source: FactSet, Goldman Sachs Global Investment Research. As of January 2, 2025. Global Investment Research 53
4. The Economy

54
 US unemployment rate currently registers 4.1%
GS Economics expects the unemployment rate to recede to 4.0% in 2025

16%
GS
forecast
US unemployment rate
14%

12%

10%

8%

6%
Current:
4.1%
4%
2025E:
Recession 4.0%
2%
1960 1970 1980 1990 2000 2010 2020 2030

Source: Goldman Sachs Global Investment Research. As of January 9, 2025. Global Investment Research 55
 Real disposable income growth will average 2.5%
Positive real disposable personal income growth for all income cohorts in 2025

3.5%

GS 2025 real disposable income growth

forecast (Q4/Q4)
3.0%

2.5% 2.6% 2.5%

2.5% 2.4% 2.4%
2.3%

2.0%

1.5%

1.0%

0.5%

0.0%
Bottom Second Third Fourth Fifth
< $46k $46 - 63K $63 - 86K $86 - 126K > $126K Overall
By Income Cohort

Source: Goldman Sachs Global Investment Research. Global Investment Research 56

 The state of the US consumer
GS Consumer Dashboard shows consumer is reasonably healthy vs. history

100
Goldman Sachs US Consumer Dashboard
90

80

70
Current:
60 63rd %ile

50

40

30

20

10

0
1990 1995 2000 2005 2010 2015 2020 2025 2030
Average percentiles since 1980 of (1) Spending: 6MMA of real spending growth; (2) Employment: Unemployment rate vs. NAIRU; (3) Income: 6MMA of real
income growth; (4) Wealth: Ratio of household net worth to disposable income; (5) Debt: Household debt service ratio; (6) Confidence: Average of normalized
UMich and Conference Board measures.

Source: Goldman Sachs Global Investment Research. Global Investment Research 57

 Core PCE will fall; Services inflation will stay elevated
GS Economics expects core PCE will fall to 2.4% by the end of 2025

8%
GS 2025 forecast
7% Core PCE inflation
(year/year)
6%

5%

4% 3.8%
Services
3% 3.1%

2.8% Core PCE

2%
2.4%
1%
(0.1)%
0% Goods
0.2%
(1)%

(2)%
2017 2019 2021 2023 2025 2027

Source: Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 58
 The path of Fed policy
We expect Fed will cut rates and reach 3.5-3.75% terminal rate by end of 2026

6%

Federal funds rate

5%

Market
pricing
4%

GS
3% forecast

2%

1%

0%
2014 2016 2018 2020 2022 2024 2026

Source: Goldman Sachs Global Investment Research. Global Investment Research 59

5. Money flow

60
 Investor allocation to equities at an all-time high
Investors currently allocate more than half of their financial assets to equities

60%
Aggregate financial asset allocation
55% across households, mutual funds, 54%
pension funds, and foreign investors
50%

45% Equity

40%

35%

30%
Debt
25%

20%
18%
15% Cash 13%

10%
1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: EPFR, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 61
 Ownership of the US equity market
Passive mutual funds and ETFs own roughly 15% of the US equity market

100%

Ownership
90%
breakdown of
80%
US equity market Households 39%
($92 trillion)
70%

60% Passive mutual funds

6%

50% ETFs 9%
Active mutual funds
40% 12%
Pension and govt
30% retirement funds 10%

20%
Foreign investors 18%

10% Hedge funds 2%

Business hldgs 4%
0% Other 2%
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: EPFR, Goldman Sachs Global Investment Research. As of 3Q 2024. Global Investment Research 62
 Secular shift from active to passive continuing
ETFs and passive mutual funds now comprise more than a half of US fund AUM

90 %
Share of $18.8 trillion of US equity
80 % hedge fund, mutual fund, and ETF AUM

70 % ETFs and
passive mutual
60 % funds
55%
50 %
45%
40 %
Hedge funds &
active mutual funds
30 %

20 % ETF
$5.1 tn

10 %

0%
2005 2010 2015 2020 2025 2030

Source: EPFR, Goldman Sachs Global Investment Research. As of November 1, 2024. Global Investment Research 63
 Only 29% of mutual funds outperformed in 2024
38% of large-cap mutual funds typically outperform their style benchmarks

20
% outperf
Mutual Fund Style YTD Distribution of Large-Cap Core
Large-Cap Core 21% Mutual Fund YTD returns
% of Large-Cap Core Mutual Funds

Large-Cap Growth 25
15 Large-Cap Value 46 S&P 500
25.0%
Total 29% Average YTD
return
18.7 %
10

0
6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0 30.0
YTD total return (%)

Source: Goldman Sachs Global Investment Research. As of January 1, 2025. Global Investment Research 64
6. Forecasting long-term US equity returns

65
 Equities will return 3% annualized over next 10 years
The distribution around our forecast ranges from -1% to +7%

25%
S&P 500 annualized 10-year returns (1930-2034E)

20%
Realized
2014-2024A
15% 13%
Modeled 13%
GS forecast
2024-2034E
10%
+2σ:
7%
5%
Baseline
3%
0% -2σ:
(1)%

(5)%
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Source: Robert Shiller, Goldman Sachs Global Investment Research. Global Investment Research 66
 Annualized 10-year total return has averaged 11%
Our S&P 500 annualized 10-year total return forecast ranges from -1% to +7%

12%
Distribution of S&P 500 annualized 10-year returns since 1930
Past decade
10% (2014-2024A):
13%
% of rolling 10-year periods

GS forecast Average:
8% 2024-2034E 11%
(1)% 7%
6%
Baseline:
3%
4%

2%

0%
(5)% 0% 5% 10% 15% 20% 25%
Annualized 10-year S&P 500 total return

Source: Robert Shiller, Goldman Sachs Global Investment Research. Global Investment Research 67
 S&P 500 cyclically adjusted P/E (CAPE)
Valuations currently rank in the 97th percentile relative to history

50x (5) %
S&P 500 Cyclically Adjusted P/E vs. S&P 500 CAPE
10-year annualized forward returns (left axis)
0%
40x 38x

5%
30x

10 %

20x
15 %

10x S&P 500 10-year 20 %

annualized forward return
(right axis, inverted)
0x 25 %
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Source: Robert Shiller, Goldman Sachs Global Investment Research. Global Investment Research 68
 Relationship between valuation and forward returns
High starting valuations are associated with low forward returns

25%
10-year forward return (annualized)

S&P 500 CAPE vs. 10-year

20%
annualized forward returns
15%

10%

5%

0%
Current
(5)%
5x 15x 25x 35x 45x
S&P 500 CAPE

Source: Goldman Sachs Global Investment Research. Global Investment Research 69

 100 years of equity market concentration
The equity market is currently near its most concentrated level in 100 years

900x 40%

Market cap of the largest stock 38%

800x
1932 relative to the 75th percentile stock 36%
(left axis)
700x 34%
32%
600x 2000 2020
30%
1964 1973
500x 28%
1939 2009 26%
400x
24%
300x
22%

200x 20%
18%
100x
Weight of top 10 stocks in S&P 500 16%
(right axis)
0x 14%
1925 1935 1945 1955 1965 1975 1985 1995 2005 2015 2025 2035

Source: Compustat, Kenneth R. French, Goldman Sachs Global Investment Research. Global Investment Research 70
 Relationship between valuation and forward returns
High starting valuations are associated with low forward returns

25%
S&P 500 market concentration vs. 10-year annualized
10-year forward return (annualized)

forward returns
20%

15% Gray observations

= Recessions

10%

5%
Best fit line
ex-Recession
0%
Current
(5)%
0x 200 x 400 x 600 x 800 x
S&P 500 market concentration

Source: Goldman Sachs Global Investment Research. Global Investment Research 71

 Relationship between valuation and concentration
Market concentration and valuation are not perfectly correlated over time

1.5
10-year correlation between market concentration and
S&P 500 CAPE
1

0.5

-0.5

-1
1935 1945 1955 1965 1975 1985 1995 2005 2015 2025

Source: Goldman Sachs Global Investment Research. Global Investment Research 72

 Our forecast excluding vs. including concentration
Excluding concentration would boost our baseline forecast and range by 5 pp

Annualized S&P 500 total return, 2024-2034E

Baseline forecast Forecast excluding
(includes concentration) concentration variable
Percentile Percentile
Return since 1930 Return since 1930
+2σ 7% 22 % 11% 50 %
Baseline 3% 7% 7% 22 %
-2σ -1% 2% 3% 7%

Source: Goldman Sachs Global Investment Research. Global Investment Research 73

 Absolute P/E of top 10 stocks below DotCom peak
10 largest stocks trade at P/E of 31x vs. 47x at peak of DotCom bubble in 2000

50x
47x
Median company P/E multiple
45x

40x

35x
31x
30x
10 largest stocks
25x

20x 16x 19x

15x

10x S&P 500 excluding

the top 10 stocks
5x
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 74
 Relative valuation: negative risk premia for top stocks
Current yield gap vs. bonds for top 10 stocks equals -130 bp vs. -431 bp in 2000

1000 bp
Median stock EPS yield gap vs.
800 bp nominal 10-year Treasury

600 bp S&P 500 excluding the

top 10 stocks
400 bp

200 bp
82 bp
0 bp
-31 10 largest stocks
(200)bp -130 bp

(400)bp
-431 bp
(600)bp
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 75
 Stocks with high expected growth trade at high P/Es
Top 10 stocks have forecast long-term growth of 20%+ and trade at P/E of 30x+

45x 25 %
Growth expectations and valuation for
40x top 10 stocks in S&P 500

35x NTM P/E 20 %

(left axis)
30x

25x 15 %

20x

15x 10 %
Consensus long
term growth
10x expectations
(right axis)
5x 5%
1995 2000 2005 2010 2015 2020 2025

Source: FactSet, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 76
 Difficulty of maintaining rapid sales growth
Only 3% of companies have been able to maintain 20+% growth for a decade

100%

90% 91% Share of unique S&P 500 companies

with fast sales growth for
80% consecutive years
77%
(1985-present)
70% 72% 10%+ sales
growth
60%
55%
50%
43%
40% 39%
31%
30%
20%+ sales 26%
23% 21%
20% growth 18%
15% 14%
11% 11%
10% 9% 7% 6%
4% 3%
0%
1 2 3 4 5 6 7 8 9 10
Consecutive years

Source: Compustat, Goldman Sachs Global Investment Research. Global Investment Research 77
 Difficulty of maintaining high profit margins
0.1% of firms are able to maintain >50% EBIT margins for a decade

3.0%

Share of unique S&P 500 companies

with >50% EBIT margins for
2.3% consecutive years
(1985-present)
2.0%

1.1%

1.0%
0.8%

0.5%
0.4%
0.3%
0.2%
0.1% 0.1% 0.1%
0.0%
1 2 3 4 5 6 7 8 9 10
Consecutive years

Source: Goldman Sachs Global Investment Research. Global Investment Research 78

 Superstar firms and regulatory scrutiny
Valuations typically fall regardless of the outcome of litigation

Lawsuit Impact between Resolution

Company filing year lawsuit & resolution year Resolution Impact post-resolution
Growth slows,
IBM 1969 Valuations fall 1982 Dropped lawsuit
valuations initially rise
Growth slows,
AT&T 1974 Valuations fall 1982 Breakup ordered
valuations rise
Growth slows,
2000/ Settlement, ordered
Microsoft 1998 Valuations fall valuations continue to
2001 to change practices
fall in settlement era

Source: Compustat, Goldman Sachs Global Investment Research. Global Investment Research 79
 US labor productivity
A sharp increase in labor productivity represents an upside risk to our forecast

4.5%
Development Personal computer
4.0% of electric invented: 1981
motor:
~1890
3.5%
GS AI
estimate
3.0% +1.5 pp

2.5%

2.0%

1.5%

1.0% Gray =
Resulting
0.5% productivity
US labor productivity boom
(10 year-annual percent change)
0.0%
1885 1905 1925 1945 1965 1985 2005 2025

Source: US Bureau of Labor Statistics, Goldman Sachs Global Investment Research. Global Investment Research 80
 S&P 500 constituent turnover over time
Historically 36% of S&P 500 firms turn over across a decade

50%
10-Year Turnover of
45% S&P 500 Constituents

40%

35%
Average = 36%

30%
31%

25%

20%
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024

Source: Compustat, Goldman Sachs Global Investment Research. Global Investment Research 81
 Household asset allocation over time
Household allocations to equities currently stands at an all-time high

55%

50% US households 48% 50%

aggregate financial
45% asset allocation Equity
40%

35%

30%

25%
Debt
20%
15%
15%
Cash 15%
10%

5%
1960 1970 1980 1990 2000 2010 2020 2030

Source: Federal Reserve Board, Goldman Sachs Global Investment Research. As of December 31, 2024. Global Investment Research 82
 Corporate tax rates over time
Corporate tax rates represent a risk to our long term return forecast

55%
United States corporate income tax rate
50%

45%
Statutory rate
(incl. federal and local)
40%

35%

30%
Median S&P 500
company effective rate 26%
25%

20% Aggregate S&P 500 19%

effective rate 18%
15%
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: Compustat, OECD, Goldman Sachs Global Investment Research. Global Investment Research 83
 Market concentration and equal-weight performance
Higher market concentration implies stronger relative equal-weight performance

1000 10 pp
Equal-weight vs. Aggregate S&P 500 Current: 709x
10-year trailing relative returns
(right axis, annualized)
8 pp
Market concentration (log scale)

Market
concentration 6 pp
(left axis)
Equal-weight
outperforms 4 pp
aggregate

2 pp
50-year average:
2 pp
0 pp

(2)pp
2014-2024A
(3) pp
100 (4)pp
1970 1980 1990 2000 2010 2020 2030 2040

Source: Goldman Sachs Global Investment Research. Global Investment Research 84

 S&P 500 equal-weight index typically outperforms
Equal-weight (SPW) has beat cap-weight (SPX) index 78% of 10-year periods

12 pp 2024-2034E
Equal-weight vs. Aggregate S&P 500 implied
10 pp annualized 10-year returns relative return
Based on
(1970-2024) market
8 pp concentration:
8 pp
6 pp
Equal-weight
outperforms
4 pp aggregate
Based on
mean
2 pp reversion:
2 pp
(0)pp

(2)pp
2014-2024A
(4)pp Equal-weight underperformed (3) pp
aggregate 22% of the time
(6)pp
1970 1980 1990 2000 2010 2020 2030 2040 2050

Source: Goldman Sachs Global Investment Research. Global Investment Research 85

 Return implications vs. bonds and inflation
Our forecast implies a 72% probability of underperforming bonds

S&P 500 annualized 10-year return forecast (2024-2034E)

Baseline:+3%

-2σ: +2σ:
(-1)% +7%
Probability

Probability
S&P 500 index
underperforms:

Bonds
72%
Inflation
33%

Zero 4%

-5% 0% 2.2% 4% 5% 10%

S&P 500 10-Year Annualized Return

Source: Goldman Sachs Global Investment Research. Global Investment Research 86

7. Global equity markets

87
 Global equity market returns, valuation, and growth
Local return: Japan (+14%), MXAPJ (+12%), S&P 500 (+12%), Europe (+7%)

Index level Adjusted P/E multiple

Current price/ 12m GS Forecast
12 month EPS Growth Consensus price target/ Div total return
Current target 2024 2025 NTM EPS GS 2025 EPS Yield Local USD

TOPIX 2785 3100 9 % 11 % 14.1 x 15.1 x 2.5 % 14 % 13 %

MXAPJ 567 620 20 10 13.4 15.0 2.8 12 12

S&P 500 5869 6500 8 11 21.4 24.2 1.3 12 12

STOXX Europe
511 530 3 3 13.3 14.3 3.6 7 8
600

Source: FactSet, Goldman Sachs Global Investment Research. As of January 3, 2025. Global Investment Research 88
 Global equity market valuation vs. history
US trades above historical median valuation while Europe trades below

24 x
High
Distribution of NTM P/E multiple
22 x
21.4 during last 10 years
Current
20 x

18 x

YE 2022 16.7 +1σ

16 x

Median
14 x
Low 14.1
13.3 13.4
-1σ 13.0
12 x 12.0 12.0

10 x
S&P 500 Stoxx 600 Japan APxJ

Source: FactSet, Goldman Sachs Global Investment Research. As of January 3, 2025. Global Investment Research 89
 Goldman Sachs global macro forecasts
Equities, rates, credit, currencies, and commodities

Change
units Current 3m 6m 12m to target
Equities
TOPIX level 2770 3000 3000 3100 12 %
S&P 500 level 5918 6100 6300 6500 10
MXAPJ level 568 575 590 620 9
STOXX Europe 600 level 514 500 520 530 3
10-year rates
Japan % 1.2 1.3 1.4 1.6 43 bp
US % 4.7 4.5 4.4 4.4 (32)
Euro Area (Germany) % 2.5 2.1 2.0 1.9 (60)
Corporate bonds
High yield bp 277 285 290 300 23 bp
Investment grade bp 83 82 83 85 2
Currencies
Sterling / US dollar £/$ 1.23 1.32 1.32 1.30 5%
US dollar / Yen $/¥ 158 155 157 159 0
Euro / US dollar EUR/$ 1.03 1.06 1.05 1.03 (0)
Commodities
LME copper $/mt 8847 9600 9740 10650 20 %
COMEX gold $/troy oz 2672 2700 2780 2930 10
Brent crude oil $/bbl 76 75 78 74 (3)
NYMEX nat. gas $/mmBtu 4 3 3 3 (11)

Source: FactSet, Goldman Sachs Global Investment Research. As of January 9, 2025. Global Investment Research 90
Disclosure Appendix
January 13, 2025

91
 Disclosure Appendix

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