Readtop of Mind - 2021 - 4 Themes in Charts

GLOBAL MACRO RESEARCH Special Issue | December 17, 2021 | 3:35 PM EST
TOPof
MIND 2021: 4 THEMES IN CHARTS
For the exclusive use of JOHN_KELLEHER@MCKINSEY.COM
In this very special year-end edition of Top of Mind,

Our favorite quotes and charts from our 2021 pieces you’ll find.
This report, which we hope you’ll bend at the seams,
Tells the story of four major 2021 themes.
We begin with inflation surprises across the globe,

Only some of which were driven by the pernicious microbe.
And in markets, stubbornly low interest rates led to risk-taking,
With SPACs, meme stocks and cryptos many investors chasing.
2021 also had US, EU and China policy shocks,

Some positive, some negative with various impacts on assets and stocks.
936cca857399443f899022e0080611c1
And the last theme revolved around the major crises of our time,
What COVID means for how we work, and solving climate change on the private sector’s dime.
We hope you’ve found our 2021 themes useful, and the charts we highlighted too,
We also include our annual crossword; in this year’s pieces, you’ll find answers to the clues.
Thank you for your readership, and sending you holiday cheer,
We look forward to engaging with you again in the New Year.
Allison Nathan Gabriel Lipton Galbraith Jenny Grimberg

allison.nathan@gs.com gabe.liptongalbraith@gs.com jenny.grimberg@gs.com
Investors should consider this report as only a single factor in making their investment decision. For
Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification,
or go to www.gs.com/research/hedge.html.
The Goldman Sachs Group, Inc.
Top of Mind Special Issue
Revisiting 2021 themes, crossword-style

El
Across: Down:
6. Nicholas Bloom, Professor of Economics at Stanford University, finds 1. According to Michele Della Vigna, GS Head of Energy Industry
that about_________ of all working days were spent working from home Research, capital markets are driving de-carbonization through a
during the height of the pandemic (Issue 100). _________ in the cost of capital between high and low carbon
7. Christian Mueller-Glissmann, GS Senior Multi-Asset Strategist, has found investments (Issue 104).
that_________ portfolios often suffer during or after periods of high and 2. Jan Hatzius, GS Head of GIR and Chief Economist, doesn’t find the
rising inflation (Issue 97). discussion of_________ very illuminating in the context of one-off spending
12. In the process of going public, a SPAC sells units consisting of a increases, because_________ are a longer-run concept (Issue 97).
common share and a fractional _________, with each whole _________ 3. According to Romano Prodi, former Prime Minister of Italy and former
allowing an investor to purchase one common share (Issue 95). President of the European Commission, _________ is the biggest
13. According to George Magnus, Associate at the China Center, Oxford obstacle to further EU integration (Issue 102).
University, President Xi Jinping’s personal agenda is to revamp the party- 4. Michael Klausner, Professor of Business and Professor of Law at
centered China model to put _________ back into the phrase “_________ Stanford Law School, believes that the shareholder _________ inherent in
with Chinese characteristics” (Issue 101). the structure of SPACs has made them a bad deal for post-merger
15. Mohamed A. El-Erian, Chief Economic Advisor at Allianz, argues that investors (Issue 95).
936cca857399443f899022e0080611c1
survey-based inflation _________ are not well anchored, as both short and 5. A wage-price _________ occurs when wage increases lead to prices
long-term _________ have risen lately (Issue 103). increases, which in turn lead to further wage increases (Issue 103).
17. The _________ Inflation Targeting framework was adopted by the Fed 8. Many Decentralized Finance (DeFi) applications currently live on this
at the 2020 Jackson Hole Symposium (Issue 97). network (Issue 98).
18. Enrico Moretti, Professor of Economics at the University of California, 9. Michael Novogratz, CEO of Galaxy Digital Holdings, believes that _________
Berkeley, argues that pandemic-related shifts in work are unlikely to cause adoption and the macro factors behind it are a mega bull trend (Issue 98).
a permanent shift in the economic _________ of the US (Issue 100). 10. A-Shares, which are RMB-traded shares of China-based companies,
19. David Brady, Professor of Political Economy at the Stanford Graduate represent the_________ of China’s equity market (Issue 101).
School of Business, argues that the Senate tends to be more _________ 11. A change of the _________ Treaty is required for a permanent change
than the House, and this more _________ tendency is apparent in the of EU fiscal rules (Issue 102).
historic pattern of failed legislation (Issue 99). 14. David Li, Professor at Tsinghua University, notes that China still has
21. _________ are the building blocks of technology, and are central inputs significant work to do to catch up with other countries in _________
in many everyday devices (Issue 103). technologies, like high-quality electronic components (Issue 101).
24. Jeff Currie, GS Global Head of Commodities Research, argues that a 16. Erik Brynjolfsson, Professor at the Stanford Institute for Human-
_________tax/price is the most efficient way to solve climate change (Issue 104). Centered AI, believes that despite the big jump in _________ over the
25. In order to be approved to receive funds from the EU Recovery Fund, course of the pandemic, the opportunities that technologies like AI and
EU member states must commit to spending a minimum of 20% of machine learning offer mean that we’re not even close to seeing peak
expenditures on ________ (Issue 102). _________ (Issue 100).
26. Dean Baker, Co-Founder of the Center for Economic Policy Research, 20. Evidence suggests that the volume and impact of _________ trading has
believes that there has been a permanent shift in thinking about the role of grown a lot since the advent of widespread commission-free trading (Issue 96).
_________ policy in supporting the economy (Issue 99). 22. A short _________ occurs when the price of a heavily-shorted security
27. Political _________ in the US has increased over the past several moves sharply higher, forcing short-sellers to buy it back in order to cover
decades as both the Democratic and Republican parties have become more their position (Issue 96).
ideological (Issue 99). 23. Arthur Levitt, former chair of the SEC, and Owen Lamont, Associate
28. A Special Purpose Acquisition Company (SPAC) takes a company public Director of Multi-Asset Research for Wellington Management’s
through a_________ (Issue 95). Quantitative Investment Group, believe that despite a perception that
30. Nouriel Roubini, Professor of Economics at NYU’s Stern School of short-sellers create volatility, they actually play a vital role in _________
Business, doesn’t believe that cryptocurrencies are _________, because discovery (Issue 96).
cryptocurrencies have no income or utility that can be used to determine 29. Chris James, Founder and Executive Chairman of Engine No. 1, has
their fundamental value (Issue 98). found a clear linkage between _________ criteria and a company’s ability
Puzzle made at http: www.puzzle-maker.com. Solutions on pg. 27. to create value over the long term (Issue 104).
Goldman Sachs Global Investment Research 2

In the words of our 2021 interviewees

El
"The volatility in individual stocks driven “The party is not looking to move away from markets
by casino-like trading is a by-product of wholesale; it wants and needs markets. Xi Jinping is
a culture of extreme risk-taking… But instead trying to ensure that markets are leveraged to
drive the strategic outcomes that serve the
today’s investors also don’t necessarily Communist Party and China’s national goals.”
understand the amount of risk that – Jude Blanchette,
they’re taking.“ Freeman Chair in China Studies, CSIS "All major
(Issue 101, September 13) commodity bull
– Arthur Levitt, Former Chair, US
markets and
Securities and Exchange Commission inflationary
“What’s good for stakeholders is ultimately good for
(Issue 96, February 25)
shareholders. The only difference between shareholder episodes have been
invariably tied to
primacy and stakeholder capitalism is duration.”
“Europe has seldom missed an opportunity to re-distributional,
– Chris James, Founder and Executive Chairman, or populist,
miss an opportunity over the last decade.”
– Timothy Garton Ash, Professor, Engine No. 1 policies that have
University of Oxford (Issue 104, December 13) reduced income and
wealth inequality."
(Issue 102, October 18) “A core group of crypto people see this as—and I quote
– Jeff Currie,
from the Blue Brothers here— “a mission from god”… GS Global Head of
“In surveying 50k They will never sell. And because of that, bitcoin and Commodities
full-time US and 15k Research
ether can’t go to zero.”
UK workers, we’ve (Issue 97, April 1)
actually found that – Michael Novogratz, Co-Founder and CEO,
20% of people don’t Galaxy Digital Holdings

want to work from (Issue 98, May 21) “Moore’s Law is slowing down,
home at all post- and how that impacts the tech cost
“The biggest obstacle [to further European
pandemic… Another 30% structure going forward is a
integration] is unanimity. The EU Council is
want to work from megatrend issue for the industry."
home five days a week
required to vote unanimously on matters that
– Rick Tsai, Vice Chairman and
and are happy to member states consider sensitive, including
CEO, MediaTek
never return to the fiscal and foreign policy decisions.”
(Issue 103, November 17)
office again.” – Romano Prodi, Former Prime Minister of Italy
– Nicholas Bloom, and President of the European Commission
Professor, Stanford (Issue 102, October 18) “The Fed’s delayed and slow reaction to
University inflationary pressures has unfortunately increased
(Issue 100, July 29) "It would be a mistake for the probability that it will have to slam on the
investors to ignore
“[SPACs] are by no means brakes by raising rates very quickly after tapering
opportunities in China
costless, in large part because and at a more aggressive pace than it would have if
consumer tech."
their structure typically creates
– Fred Hu, Founder, it started to tighten policy earlier.”
dilution for shareholders.”
– Jay Ritter, Professor,
Chairman and CEO, – Mohamed A. El-Erian, President, Queens’
936cca857399443f899022e0080611c1
Primavera Capital Group College, Cambridge University
University of Florida
(Issue 101, September 13) (Issue 103, November 17)
(Issue 95, January 28)
“To oversimplify somewhat, the private sector will “Bitcoin and other cryptocurrencies aren’t
assets. Assets have some cash flow or utility
need to provide the capital investments required to that can be used to determine their fundamental
execute the transition, and governments will need to value… Bitcoin and other cryptocurrencies have
provide the fiscal support to smooth the transition.” no income or utility.”
– Nouriel Roubini, Professor, New York
– Mark Carney, UN Special Envoy for Climate Action University’s Stern School of Business
(Issue 104, December 13) (Issue 98, May 21)
“[Chinese markets] are much riskier than what we thought six “The pandemic compressed about 20 years of
months ago. So caution should be the key watch word, and change into 20 weeks, marking the biggest shift in
investors should fully understand what they are buying, and the way people work since WWII.”
that prices are discounted to reflect this risk.” – Erik Brynjolfsson, Professor, Stanford Institute for
– George Magnus, Associate at the China Center,
Human-Centered AI
Oxford University (Issue 100, July 29)
(Issue 101, September 13)
“[Euro area] growth beyond 2022 will depend quite
significantly on fiscal policies, and I’m afraid some
“Bidenomics is big and progressive, but it’s still on the continuum countries may waste the opportunity to pursue
of policies proposed by recent Democratic administrations.” productive investments.”
– Jason Furman, Professor, Harvard Kennedy School – Otmar Issing, Former Chief Economist,
(Issue 99, June 29) European Central Bank
(Issue 102, October 18)
Note: All quotes came from interviews that appeared in GS Top of Mind reports in 2021.
Source: Goldman Sachs GIR.

2021: the year of inflation surprises

El
Inflation surprised sharply to the upside in 2021, and should decline, but remain elevated, in 2022
Inflation has surprised to the upside across most of G10… …but our GS trimmed core measure shows a more modest rise
2021 Q4 GS core inflation forecasts: G10, % change vs. year ago CB preferred vs. GS trimmed core inflation, % change vs. year ago
5 5
Latest Central Bank Preferred Core
GS Trimmed Core
4 As of Nov. 2020
4
3
3
2
2
1
1
0
Canada
Zealand
Sweden
Japan
Norway
Euro Area
Australia
US
UK
Switzerland
0
New
-1
US UK Euro area Japan
Source: Goldman Sachs GIR. Note: For more detail on CB preferred core measure see here; Central bank preferred core
inflation is equal to realized print.
Source: Goldman Sachs GIR.
We see US core PCE inflation falling to 2.4% by end-2022… …with a sizable swing in the boost from supply-constrained goods
Contributions to yoy core PCE inflation, bp Contribution to yoy core PCE from supply-constrained categories, bp
500 Shelter New Cars
Other Services Used Cars
GS Forecast 160 Rental Cars GS Forecast
Other Goods
Video/Audio/Photo & Info. Equip.
400 Travel 140
Sports & Recreational Vehicles
Supply-Constrained Categories 120 Sporting Equipment
Core PCE Furniture
100 Housing Appliances
300
80
60
200
40
20
100
0
-20
936cca857399443f899022e0080611c1
0 -40
-60
-100 -80
Jan-18 Oct-18 Jul-19 Apr-20 Jan-21 Oct-21 Jul-22 Apr-23 Jan-24 Jan-19 Oct-19 Jul-20 Apr-21 Jan-22 Oct-22 Jul-23
Source: US Bureau of Economic Analysis, Goldman Sachs GIR. Source: US Bureau of Economic Analysis, Goldman Sachs GIR.
US shelter inflation should peak ~5.5% yoy in mid-2022... …and high demand for workers should keep US wage growth >4%
% change vs year ago, % change ann. rate Wage growth, percent change vs year ago
GS Shelter Inflation Tracker (% change, year ago) 10
GS Wage Tracker
6 PCE Shelter Index, SA YoY (% change, year ago)
PCE Shelter Index, MoM SAAR (% change, ann. rate) 9 U/V Ratio Model
Forecast
5 8
4 7
3 6
5
2
4
1
3
0
2
-1
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 1
Note: GS Tracker is a weighted average of four alternative rent measures: Zillow 0
Observed Rent Index; CoStar National Asking Rent; REIS Effective Rent per 1965 1975 1985 1995 2005 2015 2025
Apartment; Census Vacant Multifamily Median Rent. Note: Composition-adjusted tracker shown post-2000; shading indicates recessions.
Source: Department of Commerce, Costar, Zillow, REIS, Goldman Sachs GIR. Source: US Department of Labor, Goldman Sachs GIR.

El
Supply chain bottlenecks were a key source of inflationary pressure, but they should ease next year
94 ships are currently anchored off the coast of California Long-haul truckers are in short supply amid high demand
Container ships anchored at Ports of LA and Long Beach Thousands (sa, lhs), index (rhs)
110 800 250
General freight trucking, long
100 distance, employment (lhs)
780
90 Market Demand Index (rhs) 200
80
760
70
150
60
740
50
100
40
720
30
20 50
700
10
0
680 0
Jan-19 Jun-19 Nov-19 Apr-20 Sep-20 Feb-21 Jul-21 Dec-21
2014 2015 2016 2017 2018 2019 2020 2021
Source: Marine Exchange of Southern California, Goldman Sachs GIR. Source: Truckstop, US Bureau of Labor Statistics, Goldman Sachs GIR.
Containers are dwelling for record times at WC ports Chassis dwell times remain high
Days (weighted average, lhs), % of total containers (rhs) Chassis street dwell times by size, week # (x-axis), days (y-axis)
6 50% 16
Container dwell time (lhs) 20 ft
45% 14
Containers dwelling for >5 days (rhs)
5 40/45 ft
40%
12
35%
4
10
30%
3 25% 8
20%
6
2
15%
4
10%
1
936cca857399443f899022e0080611c1
2
5%
0 0% 0
May-16 Mar-17 Jan-18 Nov-18 Sep-19 Jul-20 May-21 24 26 28 30 32 34 36 38 40 42 44 46 48
Source: Pacific Merchant Shipping Association, Goldman Sachs GIR. Source: Pool of Pools, Goldman Sachs GIR.
Warehouse space is very tight Rail velocity and dwell times have improved, but still lagging
LMI Warehouse Utilization and Capacity Indices UNP train speed (mph, lhs) and dwell time (hours, rhs)
90 28 45
Utilization Capacity
80 27
40
26
70
35
25
60
24
30
50
23
25
40 Speed (lhs)
22
Dwell (rhs)
30 21 20
Sep-17 Jun-18 Mar-19 Dec-19 Sep-20 Jun-21 Mar-17 Dec-17 Sep-18 Jun-19 Mar-20 Dec-20 Sep-21
Note: Capacity below 50 indicates capacity is contracting; utilization above 50 Source: STB, Goldman Sachs GIR.
indicates an increase in utilization.
Source: Logistics Managers’ Index, Goldman Sachs GIR.

El
Labor market gains should continue in 2022, paving the way for three Fed hikes next year
Employment is still ~3.9mn short of pre-pandemic level… …but we see unemployment falling below neutral rate in ‘22
Current vs. pre-pandemic employment, millions US unemployment rate and Fed SEP NAIRU estimates, %
155 15
Pre-pandemic level
14 Unemployment Rate
~3.9mn jobs short 13 Unemployment Rate, GS Forecast
150
SEP Median NAIRU (4%)
12
SEP Dovish NAIRU (3.5%)
11
145
10
9
140
8
7
135
6
5
130 4
3
125 2
Jan-2020 Aug-2020 Mar-2021 Oct-2021
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Source: US Bureau of Labor Statistics, Goldman Sachs GIR. Source: Federal Reserve, US Bureau of Labor Statistics, Goldman Sachs GIR.
Wage growth has accelerated in 2H2021… …and it's especially elevated for low-wage workers
% change vs year ago, % change QoQ ann. rate Percent change vs. year ago
7 14
GS Wage Tracker (composition-adjusted), YoY Average Hourly Earnings, Leisure & Hospitality
6 GS Wage Tracker (composition-adjusted), QoQ AR 12 Production & Nonsupervisory (composition-adjusted)
Wage Survey Leading Indicator GS Low-Wage Wage Tracker
10
5
8
4
6
3
4
2
2
1
936cca857399443f899022e0080611c1
0
0 -2
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Note: QoQ AR. based on quarterly data for av. hourly earnings and ECI. Source: US Department of Labor, Goldman Sachs GIR.
Source: US Department of Labor, Goldman Sachs GIR.
Labor force participation will likely remain below trend Non-economic reasons are still holding some workers back
Labor force participation rate decomposition, percent Reasons not urgently searching for a job, unemploy. workers, %
Demographic Trend
35
65 June July August September October November
Early Retirement
64 Other Pandemic Exits 30
Participation Rate
64
25
63
20
63
62 15
62
GS Forecast 10
61
61 5
60 0
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Care COVID Spouse Financial Unemp.
Source: US Bureau of Labor Statistics, Goldman Sachs GIR. responsibilities fears employed cushion benefits
Source: Indeed, Goldman Sachs GIR.

El
Top of Mind
10-year US Treasury yield
18
1913: Federal
Reserve System Fed Chairman Volcker increased the 1981:
created fed funds rate to a peak of 20% in 1981 15.8%
16
Goldman Sachs Global Investment Research

to get double-digit inflation under
control
1984:
13.9%
14 Volcker hiked rates to
2nd oil shock and Iran restrain the economic
Panic of 1857 hostage crisis recovery and ensure
Panic of 1837 (1979-1980) inflation would remain low
followed by followed by
depression depression
First
Stubbornly low rates set the stage for…
12 (1857-1860);
Bank of (1837-1843); Recession following
key causes key causes
the oil shock
were restrictive were declining Depression
United
lending international of 1920-1921; Unexpected rate-hiking
States Panic of 1796- 1st oil shock
policies in economy, Fed hiked cycle as economic growth
10 (1791) 1797; US real (1973-1974)
Great Britain, failure of a rates to improved following 1991
estate collapse Panic of 1907; Fed hiked as
1790: decline in large US bank, control post- recession
and ensuing failed attempt economy heated up
8.7% cotton prices, and downturn war inflation; 1994
1798: depression in the railroad to corner the returning 1969: Start of a rate
8.1% speculative market on the 7.9%
industry soldiers 7.9% hiking cycle as
8 lending stock of a weighed on inflation crept up
1842: 1861: large company wages with economy
6.6% 6.6% generated recovering from
bank losses, a Great Vietnam war; 2001 recession
The Great 1920: 1986:
crisis in Depression US combat
6 Railroad Strike 5.6% 7.0% 2004 2010:
confidence in (1929-1941) involvement
Low in policy 4.7% 2.5%
1877: banks, and (1965-1973)
1932: rate cycle QE2
4.5% bank runs 1971:
1864: 4.3% 5.5%
5.3% 1907: 1993:
4 1792: 1821: 3.3% US 5.5% Fed tapering;
4.7% 4.6% 1869:
1835: abrogation rate hiking
US 4.2% of Bretton Low in policy-
4.0% 1915: cycle
Panic of 1819 Civil War Woods rate cycle
Gold 3.7%
following the end (1860-1865); 1900: following 1991
US crash Yields rise,
2 of the War of US forced off of 2.9% WWI 2003: recession
1812 and mis- economic but remain
the gold (1914- 3.4%
boom 2008: low, as the
management of the standard 1918) 1945: Low in policy-rate 2.3% 2012: COVID
Second Bank of the 1.7% recovery
cycle following tech GFC; 1.6%
United States WWII (1939-1945) continues
bubble bursting QE1 QE3
0
2021 markets: SPACs, memes, cryptos
Source: Global Financial Data, Inc., Federal Reserve Board, Haver Analytics, Goldman Sachs GIR.
Special Issue
7
936cca857399443f899022e0080611c1
El
…the surge in SPAC IPOs at the start of the year, but SPAC momentum lost some steam
SPAC IPOs surged amid falling US real rates But the number of closed SPAC mergers has started to slow
# of SPAC deals by week (lhs), US 10 real rate (rhs), % SPAC capital seeking target (lhs), announced deals (rhs), $bn
40 0.2 % $ 200 $ 30
35 # of SPAC 0.0 % $ 180
deals by $ 25
US 10Y real week (LHS) $ 160
30 (0.2)%
rate (RHS) $ 140
SPAC capital $ 20
25 (0.4)%
$ 120 seeking target
20 (0.6)% $ 100 (LHS, $ $ 15
billions)
15 (0.8)% $ 80
SPAC IPO capital that $ 10
$ 60
10 (1.0)% announced a deal in
$ 40 each quarter
$5
5 (1.2)% (RHS, $ billions)
$ 20
0 (1.4)% $0 $0
Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 123412341234123412341234123412341234

2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Dealogic, Goldman Sachs GIR. Source: Dealogic, Goldman Sachs GIR.
A majority of SPAC IPOs have been <$500mn SPAC deals have been concentrated in Tech
Total US SPAC IPOs by IPO proceeds, # of deals 2020/21 US SPAC IPO acquisitions by target, % total funds raised
350
($ 73 )
300
Number of SPAC IPOs
250 ($ raised in billions)

($ 29 ) Unspecified, Information
200 Energy, 1 % 30 % Technology,
39 %
150 Communication
($ 41 ) Services, 2 %
100
Real Estate, 1 %
($ 25 )
($4)
936cca857399443f899022e0080611c1
Health
50 ($ 13 ) Utilities, 2 % Care, 9 %
($ 9 ) ($ 4 ) ($ 7 ) ($21 )
0 Consumer
Consumer Industrials, Financials,
$ 100 $ 200 $ 300 $ 400 $ 500 $ 600 $ 700 $ 800 $ 900 $1bn+ Discretionary, 5
Staples, 4 % 3%
Deal size ($ millions) 4% %
Source: Dealogic, Goldman Sachs GIR. Note: SPAC IPOs 2020-2021.
Source: Dealogic, Goldman Sachs GIR.
SPACs trade in line with other measures of retail activity SPAC returns are highly dependent on point in the lifecycle
SPAK ETF (lhs), index; US equity call option vol (rhs), 1mma, mns SPAC returns in excess of Russell 3000, pp
140 Next Gen SPAC- 35
US equity 150 pp
Derived ETF call option volume 33
130 indexed (1-month average,
performance millions, right 31
100 pp 90th %ile
(ticker: SPAK) axis) 29
120 (left axis)
27 50 pp
Median
110 25
(3)pp 75th %ile
(11)pp
23 0 pp
(21)pp
100 (42)pp
21 (10)pp
19 (50)pp
90 25th %ile
17
10th %ile
(100)pp
80 15 IPO to Announcement Close Close Close
Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 announcement to close +1 month +3 months +6 months
Note: Covers SPACs that have closed a merger since the start of 2000.
Source: Goldman Sachs GIR. Source: Dealogic, Factset, Goldman Sachs GIR.

El
For those of us who still don’t know what a SPAC is…

936cca857399443f899022e0080611c1

El
Amid the meme stock frenzy, retail traders left their mark on markets…
Retail activity: Up, but still a modest share of the market

While the dollar value of retail trades has continued to rise… …retail activity still accounts for a small share of the market
Shares volume from small trades, $bn % of shares volume from small trades
12 12
Retail's share
The dollar
10 10 of stock
value of small-
trading has
lot shares
remained
8 trading is up 8 relatively
25% since
stable since
February 2021
6 6 February 2021
4 4
2 2
0 0
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Note: We define a small-lot share trade as trades of less than $2,000 and use as a proxy for retail trading.
While all trading volumes are up, single stock options continue to see exceptional growth
Total options volumes are +122% of total share volumes… …and single stock call volumes have risen by $10bn+ since Feb
Single stock options volumes as % of share volumes (notional) Daily notional call/put options volume, $bn
210% 600
Investors have continued Single Stock Calls ($312bln/day)
to utilize options to Single Stock Puts ($222bln/day)
180% 500
express views on single
Call buying strategies are
150% stocks while putting
400 significantly less
limited captial at risk
120% concerning than buying
300 stocks on margin, as
90% buyers of call options risk
only their premium paid
200
60%
30% 100
0% 0
936cca857399443f899022e0080611c1
Jan-18 Oct-18 Jul-19 Apr-20 Jan-21 Oct-21 Jan-18 Oct-18 Jul-19 Apr-20 Jan-21 Oct-21
Retail trading activity has continued to be a valuable signal for stock differentiation
Highly retail-traded stocks have outperformed… …as have stocks with a high probability of a short squeeze
Total return of buying stocks in the top quintile and selling other Stock performance for each probability decile of our short squeeze model;
quintiles on the basis of % options volume from retail trades probability based on retail activity, volume and short interest metrics
0.5% 13%
60% 1-week outperformance (lhs)
13%
50% 0.4% % of obs with >1 std
outperformance (rhs) 12%
40% 0.3%
12%
30%
0.2% 11%
20%
11%
0.1%
10%
10%
0% 0.0%
10%
-10%
(0.1%) 9%
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
Note: We define a small-lot options trade as any trade where the number of contracts*stock price is less than 5,000.
Source: Ivy, Goldman Sachs GIR.
Special thanks to John Marshall, Head of Derivatives Research in GS Global Investment Research, and his team for these charts,
which they compiled using a proprietary ‘big data” approach of analyzing the size of every trade in every stock on every day to track
trends in retail trading activity.

El
…and cryptocurrencies remained all the rage…

.
BTC and ETH are the highest returning assets YTD… …and ETH has mostly recovered from the mid-year crypto selloff
Total returns YTD, % Total returns YTD, %
450 700 Bitcoin (lhs) 16,000
Ether (lhs)
Litecoin (lhs) 14,000
350 600 XRP (lhs)
Dogecoin (rhs)
250 12,000
500
150
10,000
400
8,000
50
300
6,000
-50
200
S&P 500
US 30y
US 10y
GSCI Gold
Bitcoin
GSCI Ind Metals
EUR/USD
German 30y
10y Inflation
US HY
Topix
Ether
GSCI Energy
Stoxx 600
MSCI World
MSCI EM
MXAPJ
4,000
100 2,000
0 0
Jan-21 Apr-21 Jul-21 Oct-21
Note: Total returns in USD; all market prices as of December 14, 2021. Note: Total returns in USD.
Source: Bloomberg, Goldman Sachs GIR. Source: Bloomberg, Goldman Sachs GIR.
Crypto remains far more volatile than other assets Activity on Bitcoin and Ethereum networks is around 2018 highs
Average daily volatility in ann. terms, % Total active addresses, million
1.4 BTC
Ether Ethereum
Bitcoin 1.2
Oil
1.0
Silver
0.8
Nasdaq
S&P 500 0.6

Gold
936cca857399443f899022e0080611c1
0.4
US 10y
DXY… 0.2
0 20 40 60 80 100
0.0
Note: Based on returns since 2014 and since 2015 for ether. 2015 2016 2017 2018 2019 2020 2021
Source: Bloomberg, Goldman Sachs GIR. Source: Coin Metrics, Goldman Sachs GIR.
The mkt cap of BTC & ETH is ~$1.4tn vs. ~$2.9tn for gold More than 75% of BTC is held in profit today
Crypto market cap. vs private investment gold stock, $tn Percent of total supply in the network with positive balance, %
3.5
Bitcoin Ether Gold 100
3.0
2.5 80
2.0
60
1.5
1.0
40
0.5
0.0
2015 2016 2017 2018 2019 2020 2021 20
2016 2017 2018 2019 2020 2021
Note: Private investment gold stock based on ETFs and bars/coins held privately.
Source: World Gold Council, CoinMarketCap, Goldman Sachs GIR. Source: Coin Metrics, Goldman Sachs GIR.

El
Top of Mind
2017-2021
$70,000 August 2017 November 2017 July 2019 May 2020 February 2021
Future Fed chair Jerome Powell US Congress holds The reward for BTC miners NY AG $18.5mn
A "hard fork" occurs as
$65,000 says BTC is not big enough to pose hearings on halves for the third time, falling Tether settlement.
Bitcoin Cash (BCH) splits April 2021
off of BTC; BCH promises a threat to the US economy. cryptocurrency from 12.5BTC to 6.25BTC; Coinbase IPO.
$60,000 speedier processing May 2018 regulation. investor Paul Tudor Jones
December 2017
times, as its blocks US DOJ opens criminal probe announces BTC holdings.
$55,000 BTC futures
contain 8x the data into cryptocurrency price November 2019
contracts begin August 2020
capacity of BTC blocks. manipulation; US and People's Bank of China
$50,000 trading on the MicroStrategy announces
Canadian regulators launches crackdown on
CBOE and CME adoption of BTC as primary
announce "Operation Crypto- cryptocurrencies.
$45,000 September exchanges. Treasury reserve asset.
Sweep" to police crypto
2017 January 2018 investment schemes. July 2019
$40,000 The Chinese

Chinese officials order President Trump tweets that October 2021
March 2017 October 2018
government mining operations to BTC and other SEC approves
$35,000 The SEC rejects two Fidelity announces July 2020
bans ICOs and close; cryptocurrencies are "based first Bitcoin
separate BTC ETF initiative to handle US Office of the
subsequently hackers steal more than on thin air". ETF in the US.
applications. trading and custody of Comptroller of
$30,000 closes the $500mn of XEM—
July 2018 crypto assets for September the Currency February 2021
nation's BTC another crypto—from
$25,000 exchanges. SEC rejects institutional investors. 2019 January 2020 (OCC) allows Tesla announces $1.5bn
the Japanese September 2021
April 2017 application for NYSE launches CME begins to nationally BTC position and
exchange, Coincheck. Bitcoin becomes
$20,000 Japan recognizes BTC as BTC ETF. BTC futures. trade options on chartered banks acceptance as payment;
legal tender, while bringing BTC futures to custody BNY Mellon announces it legal tender in El
…with bitcoin continuing its wild ride
the cryptocurrency under contracts. cryptocurrencies. will custody BTC. Salvador.

$15,000
AML/KYC rules and
$10,000 regulations.
October 2020
PayPal to accept BTC;
$5,000
Square announces $50mn BTC
investment, acceptance as payment.
$0
Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21
2013-2016
$1,200 After being unveiled December 2013
in 2009, BTC's Media attention
price remains pushes BTC to an January 2014 February 2016
relatively flat, all-time high. Zynga and Influential members in August 2016
peaking at about Overstock.com begin the BTC community Bitfinex, the
$1,000 $30 in 2011. accepting BTC. meet in Hong Kong to largest BTC
discuss a possible exchange by
March 2013 change in BTC's
An accidental fork occurs in the volume, is
transaction format that hacked;
BTC blockchain; due to the would effectively
$800 introduction of a flawed software September 2015 cybercriminals
increase the size of capture $72m
update, the correct version of the The US Commodity BTC blocks; the aim is
public ledger becomes unclear for June 2015 Futures Trading worth of BTC.
to speed up transaction
nearly 6 hours. The New York State Commission (CFTC) processing times.
March 2013 January 2015 Department of defines BTC as a
$600 FinCen says that BTC will be Financial Services commodity, which falls
Coinbase
treated in the same way as launches its own unveils the first set under its regulatory
money for the purposes of AML US-licensed BTC of state-level purview.
laws. exchange regulations targeting July 2016
October 2013 February 2014
$400 (GDAX). cryptocurrencies. The reward for BTC
April 2013 US law Attacks on
miners halves for the
Mt. Gox exchange enforcement exchanges lead to
second time, falling
goes down for a officials shut a halt on some April 2014 from 25BTC to
day. down the Silk withdrawals; Reports indicate that the 12.5BTC.
Road. Mt. Gox exchange PBOC plans to shut down
$200 collapses. October 2015
the bank accounts of
Chinese BTC exchanges. The EU decides not to impose a value-added tax (VAT) on
crypto transactions, effectively regulating BTC (and other
cryptocurrencies) in the same way as fiat currencies.
$0
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Source: CoinDesk, 99bitcoins, Bloomberg, various news sources, Goldman Sachs GIR.
Special Issue
12
936cca857399443f899022e0080611c1
2021: positive, and negative, policy shocks

El
US: Biden's fiscal revolution faced reality in Congress…
White House proposals: Congressional bills:

$XX Figures as originally
American Jobs Plan: ~$2.5tn 1. Enacted infrastructure bill: $536bn
proposed
2. Senate competitiveness bill: $240bn
American Families Plan: ~$1.9tn 3. Build Back Better Act: ~$2.06tn Figures based on the
$XX
Total: $4.4tn Total: ~$2.72tn* updated legislation
Community college, Expanded Earned

higher education & Income Tax Credit
workforce investments Paid leave $105bn
$280bn $225bn
$13bn
*$65bn $206bn
Child care &
universal pre-K
$438bn Child and dependent
Expanded Child Tax Social benefits $393bn care tax credit
Credit $1.7tn $104bn
$557bn
$771bn
$0bn
$159bn
American Families Plan Extend more

$1.9tn generous ACA
tax credits
$845tn Health care
$163bn
$74bn
Transportation
Hard infrastructure
Total tax provisions $365bn
infrastructure
-$3.6tn
Medicare benefit $580bn
$302bn
expansion -$1.6tn
Medicaid expansion $450bn
+$37bn
$400bn
Close ACA funding gap $166bn

+$60bn
936cca857399443f899022e0080611c1
Social benefits American Jobs Plan
$87bn $2.5tn Clean energy & climate
$677bn Water, sewer,
*$65bn Economic incentives $1.78tn & broadband
$582bn
$430bn $215bn
$318bn
Construction $148bn
Power, renewables
$327bn & efficiency
Community college,
higher education & $168bn $428bn
workforce
R&D incentives & funding $400bn
investments
$180bn
$189bn
Housing & construction
Other subsidies
manufacturing Supply chain
$212bn
& business incentives
$50bn $168bn
incentives
$120bn $16bn EVs and zero-emissions technology
$21bn Semiconductor $182bn
School construction
manufacturing incentives $100bn
$87bn
$50bn
$0bn
$50bn Other infrastructure and resilience
Hospital
Pandemic $67bn
construction
preparedness & public $29bn
health $82bn
$30bn $42bn $0
Note: All figures represent total over 10yrs; updated figures based on measures passed in enacted infrastructure bill or currently under consideration in the Senate Competitiveness bill and BBB Act as passed in the
House; $2.7tn total figure for Congressional bills includes some figures (partial reinstatement of SALT deduction and additional healthcare measures) that aren’t included in the diagram; immigration-related fiscal
effects included in the BBB Act total but excluded from the total from all Congressional proposals; the $65bn in spending for community college, higher ed. and workforce incentives listed twice because relevant
proposals were included in both the AJP and the AFP, but to avoid double counting these measures are included in the updated total for AJP-related measures only.
Source: White House, Congressional Budget Office, Goldman Sachs GIR.

El
…where politics is quite polarized
The Progressive Era was marked by relatively ideological parties and political polarization…
Ideological scores of Senate (left) and House (right) members of the 59th Congress (1905-1907)
24 Democrats Republicans 120
Democrats
21 More liberal More
conservative 100 Republicans
18
Bigger overlaps
indicate less 80
15
polarization and
more compromise
12 between parties 60
9
40
6
20
3
0 0
-1.0 0 +1.0 -1.0 0 +1.0
...but by the New Deal Era, both parties had become more moderate and Congress was less polarized…
120 120
Democrats Democrats
100 Republicans 100 Republicans
80 80
60 60
40 40
936cca857399443f899022e0080611c1
20 20
0 0
-1.0 0 +1.0 -1.0 0 +1.0
...while Democrats moved slightly left during Johnson’s Great Society, the decline in polarization continued…
24 120
Democrats Democrats
21
Republicans 100 Republicans
18
80
15
12 60
9
40
6
20
3
0 0
-1.0 0 +1.0 -1.0 0 +1.0

El
…but by the Reagan years, polarization increased again as Republicans became more ideological…
24 120
Democrats Democrats
21
18
80
15
12 60
9
40
6
20
3
0 0
-1.0 0 +1.0 -1.0 0 +1.0
…and both parties became more ideological during the Obama years, increasing polarization further…
24 120
Democrats Democrats
21
18
80
15
12 60
9
40
6
20
3
0 0
936cca857399443f899022e0080611c1
-1.0 0 +1.0 -1.0 0 +1.0
...a trend which has continued and even grown today

Ideological scores of Senate (left) and House (right) members of the current Congress
24 120
Democrats Democrats
21
18
80
15
12 60
9
40
6
20
3
0 0
-1.0 0 +1.0 -1.0 0 +1.0
Note: Ideological scores are calculated using methodology developed by Keith T. Poole and Howard Rosenthal, which aggregates all roll call votes cast in each legislative
session; vote scores of each member of Congress range from most liberal (-1 to 0) to most conservative (0 to +1); y-axis is a frequency measure for each score range;
analysis excludes votes by independents and any third parties.
Source for all charts: Jeffrey B. Lewis, Keith Poole, Howard Rosenthal, Adam Boche, Aaron Rudkin, Luke Sonnet (2021), Voteview: Congressional Roll-Call Votes
Database, Pew Research Center, Goldman Sachs GIR.

El
Top of Mind
130 January 22: SAMR June 21: PBOC

February 20: CBIRC instructs several major October 29: CAC
fines Simcere Pharma
further tightens banks and payment publishes draft guidelines
for abusing market
regulations on online May 10: SAMR companies to curtail that will subject companies
leadership
lending businesses announces fines on cryptocurrency trading with >1mn users in the
125 by commercial banks Alibaba and Tencent- country to a security
July 4: CAC removes
backed businesses for review before they can
Didi and associated
March 3: SAMR imposes misleading pricing and send user data abroad
apps from app store
fines on five community false marketing August 17: SAMR

120 group purchase August 3: A state issues draft rules
companies for improper May 10: CAC announces media outlet calls online aimed at halting December 8:
behavior violations in personal data gaming "spiritual opium" unfair competition Policymakers
collection by 84 apps in an editorial; article is on internet reported to be
across phone security and subsequently deleted platforms drafting a
115 February 7: SAMR and republished without blacklist that is
online borrowing
releases official guidance references to "opium" August 17: expected to
for anti-monopoly rules President Xi chairs restrict tech
targeting platform August 3: SAMR the 10th meeting startups from
economics for the Central using VIEs to
China: all about the regulatory surprises…
110 announces it will launch

price-gouging Government raise intl capital
February 8: SAMR investigations into chip Financials and and listing
imposes fines on Vipshop distributors and Economics overseas
for unfair competition chemical fertilizer Committee aimed
105 at, among other
manufacturers/dealers November 26:
February 8: 4th batch of April 10: SAMR things, investigating SAMR publishes
Centralized Procurement March 22: imposes fines on "wealth draft Measures for
of Drugs is annouced, CAC finalizes Alibaba for redistribution for the Admnistration of
100 with average price new policy on monopolistic common prosperity"
June 1: SAMR Internet
reductions of 52% personal data behaviors
announces fines on 15 Advertisements
collection by
mobile apps afterschool tutoring (AST)
January 13: CBIRC companies for misleading
95 sets rating pricing and false
standards for marketing
consumer loan
companies July 8: PBOC announces that
90 measures against Ant Financial
Antitrust April 6: CBIRC issues will be applied to other payment
Fintech/capital markets consultation paper further platforms; CSRC reported to be
Data security tightening capital reqs for working on changing overseas
systemically important banks August 30: NPPA September 24: PBOC says that
Social equality listing rules implemented in 1994
85 publishes new rules cryptocurrencies have no legal tender
to now require variable-interest
to limit online status. 10 other agencies list cryptocurrency
entities (VIEs) to seek approval
MSCI China Index (Large+Mid Cap) before overseas IPO
gaming times for mining as a sector to be entirely phased out
minors following the PBOC notice
80
01/01/21 02/01/21 03/01/21 04/01/21 05/01/21 06/01/21 07/01/21 08/01/21 09/01/21 10/01/21 11/01/21 12/01/21
Source: MSCI, Goldman Sachs GIR.
Special thanks to the GS Asia Strategy team for their help with this exhibit.
Special Issue
16
936cca857399443f899022e0080611c1
El
…that caught China tech in the crosshairs
China has seen an unprecedented regulatory tightening China tech has lost ~$1.5tn in market cap since February
POE (privately owned enterprise) regulatory proxy, z-score Total listed market cap of Chinese internet/tech stocks, $tn
2.5 Feb 17:
3.0
2.0 Tightening 2.99tn
policy stance
1.5 2.5
1.0
0.5 2.0
0.0
1.5
-0.5 Dec 16:
-1.0 1.54tn*
1.0 (1.48tn **)
-1.5 2018 Current
Episode Episode
-2.0 COVID 0.5
-2.5 Disruption
-3.0 0.0
2015 2016 2017 2018 2019 2020 2021 2010 2012 2014 2016 2018 2020
Note: POE regulation proxy reflects the text-mining results of news among POE Note: *Includes all stocks, *excluding stocks listed after Feb 17.
heavy sectors. Data points during Mar-Jun 2020 have been removed due to Source: FactSet, MSCI, Bloomberg, Goldman Sachs GIR.
COVID disruptions.
Source: Factiva, MSCI, FactSet, Goldman Sachs GIR (Asia Strategy team).
China's Internet stocks trade at a sizable discount to US peers Consensus EPS for offshore Internet has fallen ~38% YTD
Forward P/E, multiple MXCN EPS revision (Average of 2021/22 EPS, CNY) %
US Internet/Software
40 120
Forward
China Internet 12M P/E 115
(Offshore)
32.4X
Forward (+1.1s.d.) 110
35 12M P/E SOE: +12% (16%)
105
100 MXCN: -8% (14%)
95
30 90
85
936cca857399443f899022e0080611c1
80
25 75 POE: -22% (12%)
24.1X 70
(-1.6s.d.)
Offshore Internet:
65
-38% (15%)
20 60
2013 2014 2015 2016 2017 2018 2019 2020 2021 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21
Note: POEs are privately-owned enterprises and SOEs are state-owned enterprises;
Source: FactSet, MSCI, Goldman Sachs GIR.
bracketed numbers represent 2020-22E EPS CAGR on consensus estimates.
Source: FactSet, Goldman Sachs GIR.
Fair value of China POEs depends on profit profile Offshore Chinese IPO volumes have fallen since June
MSCI China fair value (current=100) based on ROE assumption Number of IPOs of mainland Chinese companies by venue
(Yr3-8 Avg ROE
90 China A HK US
for POEs)
+20% 17.0% 80 1 US/
120 26 HK
0%
16.0% 70
100 (Current)
-14% 15% 60
80 -28% (moderate)
14% 50
60 -43% (bear case)
40
12.5%
40 (Covergence 30
to SOEs)
20 20
0 10
0 5 10 15 20 25 30 0
May-…
May-…
Cumulative Present Value for # of future years (end at year-30)

Nov-19
Dec-19
Feb-20
Nov-20
Dec-20
Feb-21
Nov-21
Jul-20
Aug-20
Sep-20
Jul-21
Aug-21
Sep-21
Oct-20
Oct-21
Apr-20
Apr-21
Jan-20
Mar-20
Jun-20
Jan-21
Mar-21
Jun-21
Note: Under a DCF model, with fixed ERP (= current market implied),
near-term growth (consensus) and other model assumptions.
Source: FactSet, Goldman Sachs GIR. Source: Wind, Bloomberg, Goldman Sachs GIR.

El
Level of government: Regulatory focus:
Departmet of State Council (cabinet level) Antitrust/competition
Top of Mind
Sub-ministry level Industrial policy/

Agency of the State Council State Council of the Chinese Communist Party (CCP) foreign investment
Supra-ministerial coordination body People's Republic of China Macroeconomic/markets
Ruling political party with legal power
Chief administrative authority guaranteed by the national Constitution Cyber
Ministry of
National Development Ministry of
Industry and People’s Bank of China Central Cyberspace
and Reform Commission Commerce

Information (PBOC) Affairs Commission (CCAC)
(NDRC) (MOFCOM)
Technology (MIIT)
• Responsible for monetary policy and • Policy body comprised of top leaders from CCP
• Oversees domestic • Oversees regulation of major financial stability (Central Committee) responsible for overseeing
• Oversees China's macroeconomic
and foreign trade, domestic industries, • Supervises non-financial sector internet issues, including censorship, online
planning, economic/social
FDI into China, and including internet, payments system, including FinTech services, and security
development, and pricing policy,
Chinese companies telecommunications, platforms • Chaired by President Xi Jinping
including antitrust enforcement
operating abroad broadcasting, postal • Oversees inter-bank bond market
• Plays a leading role in China's industrial
• Responsible for delivery, and • Governor: Yi Gang
policy and economic development
national security hardware/software
• Publishes list of sectors and industries, Cyberspace Administration
review of foreign • Responsible for industrial
such as news, broadcasting and
investments in policy relating to information State Administration of of China (CAC)
movies, where foreign investment is
China, especially technology, robotics, clean
restricted or prohibited Foreign Exchange (SAFE)
those relating to energy, among other areas
• Regulates investment projects in fixed • Oversees cybersecurity, data security, and online
military technology, • Generated “Made in China
assets in China; projects with foreign content regulation
agriculture, tech, 2025” state-led industrial • Oversees FX management, cross-
funding must receive NDRC approval • Conducts cybersecurity review with guidance of
and energy plan border payments/capital flows, and
Central Cyberspace Affairs Commission of CCP
FX reserves
• Focused on risks of foreign governments affecting,
controlling, or maliciously using data following
companies’ foreign listings
For those of us who need a refresher on how China regulates…
State Administration China Banking and Insurance China Securities Regulatory • Established: 2011
for Market Regulation Regulatory Commission Commission
(SAMR) (CBIRC) (CSRC)
Cybersecurity Review Office
(CRO)
• Main regulator for market competition, •Main banking and insurance industry
• Main securities market regulator
intellectual property, drug safety and regulator
• Oversees regulation and supervision of cash and • Directly responsible for cybersecurity review of
commercial bribery, among other areas •Oversees domestic commercial banks,
futures securities markets foreign listings; review typically takes 45-60
• Spearheaded latest antitrust actions financial asset management companies, trusts
• Authorizes offerings of securities and funds business days, and special review ~3 more months
against China's digital platform and other depository institutions
• Licenses intermediaries, credit rating agencies, • Based on recently amended Cybersecurity Review
companies • Monitors insurance agencies and establishes
auditors and other financial service providers Measures, will conduct review of companies with
• Introduced paper on antitrust risk control mechanisms for insurance industry
• Chairman: Yi Huiman personal information of over 1mn users
compliance of digital platforms in Nov. •Chairman: Guo Shuqing
2020 •Established in 2018 via merger of banking and • Prior to foreign listings, companies subject to the
• Established in 2018 via regulatory merger insurance regulators review submit IPO materials to the CRO
Note: After-school tutoring (AST) restrictions were initiated by the Ministry of Education (not shown here); State Council manages the day-to-day work of the CCAC; other ministries and government agencies not shown
here but that are involved in various regulations include the Ministry of Public Security and the Ministry of State Security.
Source: IMF, US-China Business Council, Reuters, China Briefing, iStockPhoto, Goldman Sachs GIR.
Special Issue
18
936cca857399443f899022e0080611c1
El
EU: the Recovery Fund that bolstered fiscal support was a positive development…
What is it? How are funds disbursed to member countries?

EU countries submit National Recovery and Resilience Plans (NRRP) to the
The Recovery and Resilience Facility (RRF) is the European Commission. Within these plans, member states request their
desired amount of grants and loans.
centerpiece of the Next Generation EU (NGEU) fund, a
€807bn (in current prices) temporary recovery instrument
The Commission assesses the plans across 11 critieria, including whether the
aimed to help repair the economic and social damage to the plans meet the 37% climate expenditure target and the 20% digital
expenditure target outlined in the RRF Regulation.
EU from the COVID-19 pandemic. Beyond repairing the
immediate damage from the pandemic, the RRF is Following each assessment, the Commission adopts a proposal for a Council
Implementing Decision, and the European Council then has four weeks to
designed to make EU economies more sustainable, adopt the Commission's proposal.
resilient, and better prepared for the green and digital

transitions underway around the world. As a part of this, Once the Council has adopted the proposal, the Commission concludes the
financing/loan agreement with the member country.
each country that is approved to receive funds from the
RRF must commit to spending a minimum of 37% of After signature, the Commission makes a 13% (of the total grant and loan
allocation) pre-financing payment available to the member country.
expenditures on climate investments and reforms, and a
minimum of 20% to support their digital transitions. Further payments are linked to performance. Disbursements will be
authorized at most twice a year based on satisfactory fulfillment of set
milestones and targets.
Funding mix How will this be paid for?

To finance NGEU, and the RRF by extension, the European
€338bn €385.8bn Commission, on behalf of the EU, borrows money on the capital
of grants of loans markets at more favorable rates than individual member states. Net
Loans are borrowing operations are scheduled to end by 2026, and repayment
Grant disbursed
allocation with light to start in 2028 and continue until 2058. The loans will be repaid,
takes into conditionality
account
through the Commission, by the borrowing member states, and the
at very low
population, the rates. grants by the EU budget (any grants requested over the maximum
inverse of Countries
GDP per RRF total: can request a amount allowed per country will be financed by that country). To do
capita, and €723.8bn loan worth up so, the Own Resources Decision (ORD), which establishes how the
average to 6.8% of
unemployment 2019 GNI as EU budget is financed and was ratified on May 31, 2021 by all
rate (for 70% part of
936cca857399443f899022e0080611c1
of grant), and submission member states, raised the maximum level of resources that can be
observed loss of NRRPs or called for from member states from 1.2% to 1.4% of EU GNI. It also
in real GDP until August
instead of 2023 if provides for a temporary increase in the ORD ceiling by an additional
unemployment NRRPs have
for remaining 0.6%, to be used exclusively for servicing the RRF debt. Additional
already been
30% submitted sources of revenue are expected to be linked to a carbon border
adjustment mechanism, a digital tax, and the EU Emission Trading
System, although these have not yet been approved.
Southern European countries at the forefront 22 countries have been authorized to receive funds so far*
€ billions (lhs), % (rhs) Funds received as advance on total requested, € billions
200 Grants (lhs) 18% 27 First batch (7/13/21) 7/28/21 9/8 10/29/21
180 Loans (lhs) 16% 24
160 % of GDP (2019) (rhs) 14% 21
140 18
12%
120
10% 15
100
8% 12
80
6% 9
60
4% 6
40
20 2% 3
0 0% 0
Belgium
Slovakia
Portugal
Spain
Czechia
Estonia
Austria
France
Luxembourg
Lithuania
Finland
Germany
Greece
Latvia
Italy
Denmark
Croatia
Romania
Cyprus
Slovenia
Belgium
Czechia
Estonia
Slovakia
Austria
Finland
Portugal
Spain
France
Germany
Greece
Latvia
Lithuania
Luxembourg
Croatia
Cyprus
Italy
Romania
Denmark
Slovenia
Ireland
Malta
*Ireland was approved to receive funds at the same time as Czechia and Malta was approved to receive funds on 10/5/2021, but no funds have yet been disbursed.
Source for all exhibits: European Commission, European Council, Goldman Sachs GIR.

El
Jul 1, Jan 1, 1994 – Jan 1, 1999 – present
1990 – Dec 31, 1998 EMU: Stage 3
1981 Dec 31, EMU: Stage 2 Jan 31, 2020
Sep 9, 1929 1969/1970 Irrevocable fixing of conversion rates; introduction of the Brexit
9 become 10 1993 Strengthening Euro; conduct of the single monetary policy by the
The first Hague Summit; EMU EMU: UK leaves the EU.
suggestion Greece joins of cooperation European System of Central Banks (ESCB) made up of the
objective is defined; the EEC. Stage 1
Top of Mind
German Werner report between national central banks and the ECB. Mar 2020
Freedom central banks, ECB expands asset
politician 1967 At the summit in The Hague, of capital
Gustav the Heads of State and aided by the purchases and
Current institutions flows; creation of the introduces pandemic
Stresemann form Government define a new free use
asks the objective of European European emergency purchase
The institutions of the of the Monetary program (PEPP)
League of three European integration: EMU. Pierre European
Nations Werner, Prime Minister of Institute (EMI), January 1, 2014 PEPP is expanded and
Communities (the Currency the forerunner
“Where are ECSC, the EEC, and Luxembourg, is given the Unit May 1, 2004 Latvia adopts the Euro extended several times
the European task of drawing up a report of the ECB. over next several
Euratom) are merged. (ECU; Cyprus, the Czech
currency and Three new institutions on how this goal might be pre- months.
the European Republic, Estonia, 2014
are formed: the reached by 1980; in October cursor to Hungary, Latvia, July 21, 2020
stamp that we European Commission 1970, the Werner report lays 1986 the Euro). Euroskepticism on the rise: EU leaders agree
need?” Lithuania, Malta,
(EC), the Council of out the blueprint for an EMU 10 become 12 Poland, Slovakia and Euroskeptic parties gain on COVID-19
Ministers and the comprising the six members Spain and Slovenia join the EU votes in European recovery plan in the
European Parliament. of the EEC. Portugal join form of the Next
Parliamentary elections.

the EEC. Generation EU
Aug 1971 1986 (NGEU) fund
…but EU integration still lags
EMU project is halted Single Aug 24, 2020

Collapse of Bretton European Act Feb 7, 1992 2008 EC proposes Support to
~2010-2012
Woods brings instability (SEA) Maastricht Treaty signed Cyprus and mitigate Unemployment
The Treaty establishes the EU Euro area
to FX markets. Sets forth an Malta adopt sovereign Risks in an Emergency
objective to and amends the Treaty the Euro (SURE) financial
Mar 1971 establishing the European crisis
establish a Greece, Ireland, package
EMU pursuit Community. It includes
single market. Portugal and The Council approves on
The EEC Six give their provisions on the introduction of Sept 25, and funds begin
approval in principle to the EMU and the establishment Cyprus
participate in to be disbursed in
the introduction of EMU of the ECB. Includes additional October.
in several stages. measures on intergovernmental bail-out
cooperation. programs.
1930
1950
1960
1970
1980
1990
2000
2010
2020
Mar 1972 1973

Snake in the tunnel 6 become 9 2002 Jul 1, 2013
Apr 18, 1951 An effort to revive Denmark, Ireland and Introduction of Croatia joins
progress toward EMU; a the UK join the EEC. Jun 1988 Euro banknotes the EU
European Coal mechanism for the
and Steel Hanover and coins in 12 EU
managed floating of European countries
Community currencies (“the snake”)
(ECSC) treaty Council 2009
with narrow margins The European Nov 1, 1993
Includes six around the dollar (“the Maastricht Slovakia
countries Council confirms adopts the
tunnel”); the plan loses the objective of Treaty
(Belgium, France, most of its members within enters into Euro
Italy, EMU. A committee Feb 11, 2021
two years. chaired by force 2011 The Council
Luxembourg, the Estonia
Netherlands and Jacques Delors, adopts EU
Mar 1979 President of the adopts the Recovery and
West Germany). Euro
Creation of the European EC, is tasked with Resilience Facility
Monetary System (EMS) examining ways of (RRF)
The governments and implementing Jan 1, 2007 (see pg. 19 for more
EMU. January 1, 2015 detail)
Mar 1957 central banks of the 9 EEC Bulgaria and
members create the EMS. Its Lithuania
Rome Treaties Romania join May 31, 2021
main feature is the exchange the EU adopts the Euro
Create the European rate mechanism (ERM), The Own
Atomic Energy which establishes fixed but Apr 1989 Resources
Community (Euratom) 2007 2015 Decision (ORD)
adjustable exchange rates Delors Report Slovenia
and the European between the currencies of Proposes a three-stage 1995 Migrant crisis is ratified by all
Economic Community Austria, adopts member states
the participating countries transition process to the Euro
(EEC). The objective (UK does not participate). accomplish EMU, Finland
of the member states stressing the need for and
is to remove trade better coordination on Sweden
and tariff barriers economic policies, rules join the
between them and EU 2019
covering national budget Euroskepticism in decline:
form a common deficits, and the
market. establishment of an European Parliamentary
independent institution elections kick off a new wave
that would be responsible of pro-European sentiment.
European Union (EU) and its precursors for the Union’s monetary
Economic and Monetary Union (EMU) policy: the European
Central Bank (ECB).
Special Issue
20
European Council, Europa, Goldman Sachs GIR.
Source: ECB, European Commission,936cca857399443f899022e0080611c1
2021: tackling the major crises of our time

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The post-pandemic future of work continues to evolve…

.
The share of remote work has plateaued ~40% Remote work is more common among the highly educated
Share of US paid full days worked from home, % Share of workers who worked remotely at all during pandemic, %
70 100
Actual share Employer planned
60
80
50
60
40
30 40
20
20
10
0
0 Less than High school 1-3yrs 4yr Grad
Pre-COVID Sep-20 Jan-21 May-21 Oct-21 high school degree college college degree
degree degree
Note: Pre-COVID estimate from 2017-18 American Time Use Survey; post- Note: Based on all survey waves since May 2020.
COVID estimate based on employers' expectations in Nov. survey wave. Source: Survey of Working Arrangements and Attitudes, Goldman Sachs GIR.
Source: Survey of Working Arrangements and Attitudes, BLS, Goldman Sachs GIR.
Most workers still prefer fully remote or fully in-office work While employers favor a return to office
Preferred employee WFH days after COVID (2022+), % Preferred employer WFH days after COVID (2022+), %
5 days per week No clear plan from employer
5 days per week

4 days per week
4 days per week
3 days per week
3 days per week
2 days per week
2 days per week
1 day per week
1 day per week
936cca857399443f899022e0080611c1
Rarely
Rarely
or never or never
0 10 20 30 40 0 10 20 30 40 50
Note: Based on all survey waves since May 2020, reflects all respondents. Note: Based on all survey waves since May 2020, excludes respondents with no employer.
Source: Survey of Working Arrangements and Attitudes, Goldman Sachs GIR. Source: Survey of Working Arrangements and Attitudes, Goldman Sachs GIR.
Workers continue to report being more productive from home And the perceived stigma around WFH has further improved
Workers’ self-stated productivity during WFH vs in office, % Change in perception of WFH among people you know, %
Higher reported 35 Reduced stigma around
45 productivity: ~62% work from home: ~65%
40 30
35
25
30
25 20
20 15
15
10
10
5 5
0
0
Down Down Down About Up Up Up 20+% Improved Improved Improved No Worsened Worsened Worsened
20+ % 10-20% 0-10% the same 0-10% 10-20% among among among change among among among
almost all most some some most almost all
Note: Based on all survey waves since July 2020.
Note: Based on all survey waves since July 2020.
Source: Survey of Working Arrangements and Attitudes, Goldman Sachs GIR.
Source: Survey of Working Arrangements and Attitudes, Goldman Sachs GIR.

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…and we still have a long way to go to solve climate change
A big gap exists between emissions goals vs current policy... …requiring large emissions reductions in most economies
IPCC emissions scenarios vs current policy/pledges, Gt CO2 Emissions baseline under BAU vs 2030 targets, Gt CO2
60 45 2030 emissions (baseline) 4.0
40 2030 emissions (NDC target) 3.5
50 35 3.0
30 Top emitters (lhs) Other major emitters (rhs)
40 BAU 2.5
25
2.0
Current 20
30 1.5 (1-1.8) 1.5
pledges 15
2 (1.3-2.4)
10 1.0
20 2.5 (2.1-3.5)
3.5 (2.8-4.6) 5 0.5
10 4.5 (3.3-5.7) 0 0.0
Canada
USA
Japan
S Korea
Indonesia
Germany
World
China
Russia
BAU="Business as Usual"
India
0
2015 2020 2025 2030
Note: Scenarios based on IPCC Shared Socio-economic pathways; temperature Note: Baseline reflects estimate of total CO2 emissions in BAU scenario,
ranges reflect long-term estimate based on emissions path; BAU refers to doesn't include all GHG emissions; NDC targets are the unconditional target or,
baseline without new mitigation policies; current pledges based on country-level where available, the average of the conditional and unconditional target; two
NDC commitments as of October 2021. listed countries' pledges (India and Russia) remain higher than BAU scenario.
Source: IPCC, IMF, Goldman Sachs GIR. Source: IPCC, IMF, Goldman Sachs GIR.
Low cost de-carbonization is concentrated in power today… …requiring steep CO2 cuts in power in <1.5 °C scenario
2021 carbon abatement cost curve, $/ton CO2 eq. CO2 emissions in GS 1.5 °C scenario by sector, GtCO2
1,100
Power generation (coal switch to gas & renewables) 15 Power generation
1,000 Transport (road, aviation, shipping)
Industry (iron & steel, cement, chemicals and other) Transport
Carbon abatement cost (US$/tnCO2eq)
900 Buildings (residential & commercial)

Agriculture, forestry & other land uses (AFOLU) Industry & other
800 Non-abatable at current conservation technologies
10 Buildings
700
AFOLU
600
500
400
5
300
936cca857399443f899022e0080611c1
200
100 0
0
-100
-200
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56
-5
GHG emissions abatement potential (Gt CO2eq) 2010 2020 2030 2040 2050
Source: Goldman Sachs GIR. Source: Goldman Sachs GIR.
~$56tn of investment needed for global Net Zero carbon Investment to reach >2% of GDP by 2032 in 1.5°C scenario
Cumulative infra. investment in GS 1.5 °C net zero model, $tn Ann. infra. investment for net zero by 2050, $tn; as % GDP (rhs)
60 56.0 DACCS Building upgrades/retrofits
0.8
Hydrogen 1.0
Hydrogen plants Industry (incl. CCUS)
Transportation 2.6
plants
Natural gas infra. 5.7 Natural Biorefineries EV and FCEV charging stations
50 power (EVs, FCEVs) Energy storage (batteries) Power networks
1.9 Building sinks
(incl. CCUS 2.1 upgrades Power generation as a % of global GDP - RHS
retrofit) Power 4.1
40 Other RES
networks 2.1 3,000 3%
(geothermal, 6.6
biomass)
1.8
30 1.0
1.1
3.3
Hydroelectric
2,000 2%
20 5.0
Offshore wind
8.5
10 Onshore wind
8.4
1,000 1%
Solar PV
0
Renewable Nuclear Energy Biofuels Industrial DACCS Cumulative
power power storage processes GS 1.5º
(batteries) incl. path
CCUS investments - 0%
to 2050 2021 2025 2029 2033 2037 2041 2045 2049
Note: Represents cumulative total figure for global investment by 2050. Note: This only reflects incremental investment; doesn’t include maint/capex.
Source: Goldman Sachs GIR. Source: Goldman Sachs GIR.

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The private sector is stepping up to tackle the climate problem…
ESG equity inflows have outpaced non-ESG inflows… …alongside investors' growing commitment to the PRI
Cumulative mon. global flows for ESG/non-ESG equity funds, $bn PRI signatory growth (rhs) and AUM (lhs, $tn)
650 All ESG Non-ESG 140 AUM ($tn) 4500
Number of signatories (RHS) 4000

120
450 3500
100
3000
250 80 2500
60 2000
50
1500
40
-150 1000
20
500
-350 0 0
2019 2020 2021 2006 2009 2012 2015 2018 2021*
Source: Morningstar, Goldman Sachs GIR. Note: The Principles of Responsible Investment (PRI) have required signatories
to incorporate ESG considerations into at least 50% of their AUM since 2020,
AUM as of March 30, 2021.
Source: PRI, Goldman Sachs GIR.
ESG integration and screening are the top fund strategies… ...but exclusionary strategies have seen larger inflows recently
Sustainable investing assets by strategy (2020), $tn Global ESG equity fund flows by category, $bn
Integration Sustainable Thematic Exclusionary
ESG integration
160
Negative/exclusionary screening 140
Corp. engagement & 120
shareholder action
100
Norms-based screening 80
Sustainability themed investing United States 60

Europe
40
Positive/best-in-class screening Japan
Canada/Aust/NZ 20
936cca857399443f899022e0080611c1
Impact/community investing Aust/NZ 0
-20
0 5 10 15 20 25
1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 3Q21
Source: GSIA, Goldman Sachs GIR. Note: Strategies are not mutually exclusive, see here for more on designations.
Source: Morningstar, Goldman Sachs GIR.
Companies with low E&S scores have underperformed The multiple spread between ESG leaders/laggards is growing
Cumulative performance by SUSTAIN E&S headline percentiles, % 12m fwd EV/EBITDA & relative premium (trimmed mean) (lhs), Q1
350 vs. Q5 SUSTAIN Operational E&S (rhs); E&S disclosure>50%
Top Quintile
2nd Quintile Premium (RHS)
15x 30%
3rd Quintile E&S Top Quintile
300 4th Quintile E&S Bottom Quintile
Bottom Quintile 14x 25%
250 13x
20%
200 12x
15%
11x
150 10%
10x
100 9x 5%
50 8x 0%
2011 2014 2017 2020 2017 2018 2019 2020 2021
Note: E&S refers to environment and sustainability. Note: Reflects 12m forward multiple of top quintile of companies in the GS
Source: Bloomberg, Refinitiv Eikon, FactSet, MSCI, Goldman Sachs GIR. SUSTAIN E&S headline rank vs that of the bottom quintile; Q5 is 5th quintile.
Source: FactSet, Goldman Sachs GIR.

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…but carbon prices are still the most efficient solution for solving climate change
936cca857399443f899022e0080611c1

Top of Mind archive – click to access

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Issue 104 Issue 88

Investing in climate change 2.0 Oil’s Seismic Shock
December 13, 2021 March 31, 2020
Issue 103 Issue 87

Inflation: here today, gone tomorrow? Roaring into Recession
November 17, 2021 March 24, 2020
Issue 102 Issue 86

Europe at a Crossroads 2020’s Black swan: COVID-19
October 18, 2021 February 28, 2020
Issue 101 Issue 85

Is China Investable? Investing in Climate Change
September 13, 2021 January 30, 2020
Issue 100 Special Issue

The Post-Pandemic Future of Work 2019 Update, and a Peek at 2020
July 29, 2021 December 17, 2019
Issue 99 Issue 84
Bidenomics: evolution or revolution? Fiscal Focus
June 29, 2021 November 26, 2019
Issue 98 Issue 83
Crypto: A New Asset Class? Growth and Geopolitical Risk
May 21, 2021 October 10, 2019
Issue 97 Issue 82
Reflation Risk Currency Wars
April 1, 2021 September 12, 2019
Issue 96 Issue 81
The Short and Long of Recent Volatility Central Bank Independence
February 25, 2021 August 8, 2019
Issue 95 Issue 80
The IPO SPAC-tacle Dissecting the Market Disconnect
January 28, 2021 July 11, 2019
936cca857399443f899022e0080611c1
Special Issue Issue 79
2020 Update, and a Peek at 2021 Trade Wars 3.0
December 17, 2020 June 6, 2019
Issue 94 Issue 78
What's In Store For the Dollar EU Elections: What’s at Stake?
October 29, 2020 May 9, 2019
Issue 93 Issue 77
Beyond 2020: Post-Election Policies Buyback Realities
October 1, 2020 April 11, 2019
Issue 92 Issue 76
COVID-19: Where We Go From Here The Fed’s Dovish Pivot
August 13, 2020 March 5, 2019
Issue 91 Issue 75
Investing in Racial Economic Equality Where Are We in the Market Cycle?
July 16, 2020 February 4, 2019
Issue 90 Issue 74
Daunting Debt Dynamics What’s Next for China?
May 28, 2020 December 7, 2018
Issue 89 Issue 73
Reopening the Economy Making Sense of Midterms
April 28, 2020 October 29, 2018
Source of photos: www.istockphoto.

GS GIR: Macro at a glance

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Watching
•Globally, we expect full-year growth of 6.0% in 2021 and 4.5% in 2022, more than 1pp above potential, thanks to continued medical improvements, a consumption boost from pent-up savings, and
inventory rebuilding, but the prospect of a winter COVID wave and a drag from the Omicron variant pose downside risk.
Top of Mind
•In the US, we expect full-year growth of 5.7% in 2021 and 3.9% in 2022. We expect a modest drag on growth from the Omicron variant in 1Q22 and see a gradual slowdown next year as the positive
impulses from continued reopening, pent-up saving and inventory restocking contend with a steady headwind from diminishing fiscal support. We expect core PCE inflation will continue to rise to 4.5% by
end-2021 before falling to 2.4% by end-2022. We expect the unemployment rate to fall to 4.1% and 3.5% by the end of 2021 and 2022, respectively.
•The Fed has announced that it will double the pace of the tapering of asset purchases to $30bn per month in January. We expect the first rate hike in March, followed by additional hikes in June and
September. We expect balance sheet runoff will begin in 4Q22. On the fiscal policy front, we expect the passage of additional spending of around $1.75-$2tn focused on infrastructure, social benefits,
and long-term investment, though we see growing downside risk to the final bill becoming law.
•In the Euro area, we expect full-year growth of 5.1% in 2021 and see risks skewed toward the downside amid the recent sharp rise in COVID case growth and the emergence of the Omicron variant. But
we remain constructive on the outlook for the latter part of next year and expect growth of 4.3% in 2022 given a likely easing of industrial bottlenecks, significant catch-up room for services spending, and
persistent fiscal support. We expect core inflation to fall sharply in January 2022 as base effects wash out, and reach 1.4% by December 2022.
•The ECB recently announced that it will end net PEPP purchases in March while providing an "APP bridge" to September 2021, though we expect it will maintain flexibility against downside risks via

PEPP through flexible reinvestments and the option to reactivate net purchases. We expect the first rate hike in 2024, but risks are skewed toward an earlier lift-off.
•In China, we expect below-consensus real GDP growth of 7.8% in 2021 and 4.8% in 2022. While recent dovish/pro-growth policy actions have reduced the left-tail risk to our 2022 growth forecast,
property market developments remain a key downside risk to watch in the coming months.
•WATCH CORONAVIRUS. The Omicron variant poses near-term risks to the global medical and economic outlook. Although the range of possible outcomes remains wide given remaining uncertainty
about the transmissibility, degree of protection from vaccines and prior infections, and disease severity of the new variant, medical evidence so far suggests that Omicron is transmitting more quickly than
Delta, but is evading immunity against hospitalizations only slightly more.
Goldman Sachs GIR.
Growth
Source: Haver Analytics and Goldman Sachs Global Investment Research.

Note: GS CAI is a measure of current growth. We have recently revised our methodology for calculating this measure. For more information on the methodology of the CAI please see “Lessons Learned: Re-engineering Our CAIs in Light of the Pandemic
Recession,” Global Economics Analyst, Sep. 29, 2020.
Forecasts
Summary of our key forecasts
Special Issue
26
Source: Bloomberg, Goldman Sachs Global Investment Research. For important disclosures, see the Disclosure Appendix or go to www.gs.com/research/hedge.html. Market pricing as of December 16, 2021.
936cca857399443f899022e0080611c1
Puzzle solutions
El
Crossword from pg. 2 of this report:

936cca857399443f899022e0080611c1
Puzzle made at www.puzzle-maker.com.

Glossary of GS proprietary indices

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Current Activity Indicator (CAI)

GS CAIs measure the growth signal in a broad range of weekly and monthly indicators, offering an alternative to Gross
Domestic Product (GDP). GDP is an imperfect guide to current activity: In most countries, it is only available quarterly and is
released with a substantial delay, and its initial estimates are often heavily revised. GDP also ignores important measures of real
activity, such as employment and the purchasing managers’ indexes (PMIs). All of these problems reduce the effectiveness of
GDP for investment and policy decisions. Our CAIs aim to address GDP’s shortcomings and provide a timelier read on the pace
of growth.
For more, see our CAI page and Global Economics Analyst: Trackin’ All Over the World – Our New Global CAI, 25 February
2017.
Dynamic Equilibrium Exchange Rates (DEER)

The GSDEER framework establishes an equilibrium (or “fair”) value of the real exchange rate based on relative productivity and
terms-of-trade differentials.
For more, see our GSDEER page, Global Economics Paper No. 227: Finding Fair Value in EM FX, 26 January 2016, and Global
Markets Analyst: A Look at Valuation Across G10 FX, 29 June 2017.
Financial Conditions Index (FCI)

GS FCIs gauge the “looseness” or “tightness” of financial conditions across the world’s major economies, incorporating
variables that directly affect spending on domestically produced goods and services. FCIs can provide valuable information
about the economic growth outlook and the direct and indirect effects of monetary policy on real economic activity.
FCIs for the G10 economies are calculated as a weighted average of a policy rate, a long-term risk-free bond yield, a corporate
credit spread, an equity price variable, and a trade-weighted exchange rate; the Euro area FCI also includes a sovereign credit
spread. The weights mirror the effects of the financial variables on real GDP growth in our models over a one-year horizon. FCIs
for emerging markets are calculated as a weighted average of a short-term interest rate, a long-term swap rate, a CDS spread,
an equity price variable, a trade-weighted exchange rate, and—in economies with large foreign-currency-denominated debt
stocks—a debt-weighted exchange rate index.
For more, see our FCI page, Global Economics Analyst: Our New G10 Financial Conditions Indices, 20 April 2017, and Global
Economics Analyst: Tracking EM Financial Conditions – Our New FCIs, 6 October 2017.
Goldman Sachs Analyst Index (GSAI)

The US GSAI is based on a monthly survey of GS equity analysts to obtain their assessments of business conditions in the
industries they follow. The results provide timely “bottom-up” information about US economic activity to supplement and cross-
check our analysis of “top-down” data. Based on analysts’ responses, we create a diffusion index for economic activity
936cca857399443f899022e0080611c1
comparable to the ISM’s indexes for activity in the manufacturing and nonmanufacturing sectors.
Macro-Data Assessment Platform (MAP)

GS MAP scores facilitate rapid interpretation of new data releases for economic indicators worldwide. MAP summarizes the
importance of a specific data release (i.e., its historical correlation with GDP) and the degree of surprise relative to the
consensus forecast. The sign on the degree of surprise characterizes underperformance with a negative number and
outperformance with a positive number. Each of these two components is ranked on a scale from 0 to 5, with the MAP score
being the product of the two, i.e., from -25 to +25. For example, a MAP score of +20 (5;+4) would indicate that the data has a
very high correlation to GDP (5) and that it came out well above consensus expectations (+4), for a total MAP value of +20.

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Disclosure Appendix
Reg AC
We, Allison Nathan, Jenny Grimberg and Gabe Lipton Galbraith, hereby certify that all of the views expressed in this report accurately reflect our
personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
Regulatory disclosures
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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
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GLOBAL MACRO RESEARCH Special Issue | December 17, 2021 | 3:35 PM EST

In this very special year-end edition of Top of Mind,

We begin with inﬂation surprises across the globe,

2021 also had US, EU and China policy shocks,

Allison Nathan Gabriel Lipton Galbraith Jenny Grimberg

Revisiting 2021 themes, crossword-style

Goldman Sachs Global Investment Research 2

In the words of our 2021 interviewees

20% of people don’t Galaxy Digital Holdings

Goldman Sachs Global Investment Research 3

2021: the year of inflation surprises

Goldman Sachs Global Investment Research 4

Goldman Sachs Global Investment Research 5

Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23

Source: Indeed, Goldman Sachs GIR.

Goldman Sachs Global Investment Research 6

10-year US Treasury yield

Goldman Sachs Global Investment Research

Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 123412341234123412341234123412341234

250 ($ raised in billions)

Goldman Sachs Global Investment Research 8

For those of us who still don’t know what a SPAC is…

Goldman Sachs Global Investment Research 9

Retail activity: Up, but still a modest share of the market

Goldman Sachs Global Investment Research 10

…and cryptocurrencies remained all the rage…

GSCI Ind Metals

Jan-21 Apr-21 Jul-21 Oct-21

S&P 500 0.6

Goldman Sachs Global Investment Research 11

Goldman Sachs Global Investment Research

the cryptocurrency under contracts. cryptocurrencies. will custody BTC. Salvador.

2021: positive, and negative, policy shocks

US: Biden's fiscal revolution faced reality in Congress…

White House proposals: Congressional bills:

Community college, Expanded Earned

American Families Plan Extend more

Close ACA funding gap $166bn

Goldman Sachs Global Investment Research 13

…where politics is quite polarized

100 Republicans 100 Republicans

Goldman Sachs Global Investment Research 14

...a trend which has continued and even grown today

Goldman Sachs Global Investment Research 15

130 January 22: SAMR June 21: PBOC

Goldman Sachs Global Investment Research

110 announces it will launch

…that caught China tech in the crosshairs

Cumulative Present Value for # of future years (end at year-30)

Goldman Sachs Global Investment Research 17

Sub-ministry level Industrial policy/

Goldman Sachs Global Investment Research

What is it? How are funds disbursed to member countries?

resilient, and better prepared for the green and digital

Funding mix How will this be paid for?

Goldman Sachs Global Investment Research 19

Goldman Sachs Global Investment Research

EMU project is halted Single Aug 24, 2020