9 April 2025 | 12:14PM EDT US Daily: 5 Questions on the Near-Term Outlook for Trade and Fiscal Policy (Phillips) Jan Hatzius +1(212)902-0394 | jan.hatzius@gs.com Goldman Sachs & Co. LLC Alec Phillips +1(202)637-3746 | alec.phillips@gs.com Goldman Sachs & Co. LLC David Mericle +1(212)357-2619 | david.mericle@gs.com Goldman Sachs & Co. LLC Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Manuel Abecasis +1(212)902-8357 | manuel.abecasis@gs.com Goldman Sachs & Co. LLC Elsie Peng +1( ...

Investment Rating - The report indicates a downward revision of real GDP growth forecasts for China to 4.0% for 2025 and 3.5% for 2026, reflecting the impact of increased tariffs and a slowing global economy [1][10][11] Core Insights - The US has raised tariffs on Chinese imports to 125%, significantly affecting the Chinese economy and labor market, with expectations of further policy easing from the Chinese government [1][2][11] - The report anticipates a substantial reduction in Chinese real GDP, estimating a 2.6 percentage point decrease due to the increased US tariffs, with a projected impact of 2.2 percentage points in 2025 [4][9] - The Chinese government is expected to implement expanded monetary and fiscal easing measures, including a total of 60 basis points in policy rate cuts and an increase in the augmented fiscal deficit to 14.5% of GDP [10][18] Summary by Sections Tariff Impact - The effective US tariff rate on Chinese goods has escalated from 11% to 125%, which is expected to exert significant pressure on the Chinese economy [4][13] - The rapid escalation of tariffs has led to a reassessment of growth forecasts, with the report highlighting the challenges in achieving the previously projected 4.5% GDP growth for this year [3][11] Policy Easing Measures - The report outlines a series of forecast revisions, including an increase in policy easing assumptions and a rise in the augmented fiscal deficit estimate [10][18] - Expectations for faster credit growth and relaxed property policies are also noted as part of the government's strategy to mitigate the tariff impact [10][18] Growth Forecasts - The revised growth forecasts indicate a significant slowdown, with 2025 and 2026 real GDP growth now projected at 4.0% and 3.5%, respectively, down from previous estimates [10][21] - The report suggests that achieving the official target of "around 5%" real GDP growth for this year may be challenging, with alternative measures potentially falling below this level [11][21]

Investment Rating - The report reverts to a non-recession baseline forecast with GDP growth projected at 0.5% and a 45% probability of recession [4]. Core Insights - President Trump announced a 90-day pause on additional country-specific tariffs, maintaining prior tariffs and a minimum 10% reciprocal tariff, with expectations of further sector-specific tariffs [4]. - The total effective tariff rate is expected to increase by approximately 15 percentage points due to these tariffs [4]. - The previous shift to a recession baseline was reversed following the announcement, leading to a forecast of a peak core PCE inflation rate of 3.5% and three consecutive 25 basis point "insurance" cuts by the Fed in mid-2025 [4]. Summary by Sections - **Tariff Announcement**: President Trump authorized a 90-day pause on additional tariffs for countries that have not retaliated, while the tariff rate on imports from China will rise to 125% [4]. - **Tariff Impact**: The report anticipates a total effective tariff rate increase of about 15 percentage points, combining existing tariffs and new sector-specific tariffs at a 25% rate [4]. - **Economic Forecast**: The report projects a GDP growth of 0.5% for Q4 2025, a peak core PCE inflation rate of 3.5%, and a 45% probability of recession, along with expected Fed rate cuts [4].

8 April 2025 | 10:35PM HKT China Consumer Pulse check: Signs of bottoming out in 4Q24 but outlook still prudent; policy/tariff to be watched While we are yet to see meaningful rebound and volatility remains in the recovery path, there has been signs of bottoming out since 4Q24 with sequential growth improvement (average 14% vs. 7% in 3Q24 for reported sales, with easier base) and post CNY holiday consumption pull back has been better than feared. Post intensified price competition in past two years, from 2H ...

8 April 2025 | 2:22AM BST Global Markets Daily: Tariffs and the Dollar: Why We Flipped Our View Tariffs and the Dollar: Why We Flipped Our View We have made a major shift in our Dollar view after seeing the developments of the last few weeks and rethinking the likely implications of these policy changes. We now expect recent Dollar weakness to persist, particularly in DXY terms. This change reflects a number of related factors, but the common thread is that the exceptional positioning that has supported the ...

Investment Rating - The report indicates that most equities have entered or are on the cusp of a bear market, with a focus on the potential for further downside [4][5][22]. Core Insights - The report identifies three types of bear markets: Structural, Cyclical, and Event-driven, with the current market being classified as Event-driven due to tariff triggers, but with a risk of transitioning into a Cyclical bear market [4][12][21]. - Average declines in both Event-driven and Cyclical bear markets are around 30%, but they differ in duration, with Event-driven downturns being shorter and recovering faster [22][12]. - The report emphasizes the importance of valuation adjustments, extreme positioning, policy support, and signs of improving growth for a sustained market recovery [40][45][58]. Summary by Sections Bear Market Types - Structural bear markets are triggered by imbalances and bubbles, Cyclical bear markets by rising interest rates and recessions, and Event-driven bear markets by one-off shocks [13][19]. - Historical data shows that Structural bear markets have the most severe impacts, averaging declines of around 60% and taking a decade to recover [15][19]. Current Market Analysis - The current market is characterized as an Event-driven bear market, primarily influenced by tariff increases, with a noted probability of recession rising to 45% [21][22]. - The report highlights that the US equity market has seen significant de-rating, particularly in technology stocks, which has impacted overall market performance [5][22]. Recovery Conditions - For a sustained recovery, the report outlines that valuations need to adjust further, and the market must see a combination of cheap valuations, extreme negative positioning, policy intervention, and signs of improving growth [40][45][58]. - The report notes that while the US market remains expensive relative to historical standards, other markets are not particularly inexpensive either [41][44]. Market Sentiment and Positioning - The report discusses the recent significant drop in market sentiment, indicating a broad-based 'risk-off' approach among investors, which historically signals better opportunities for buying [60][62]. - The Risk Appetite Indicator has shown a considerable decline, suggesting that market positioning is adjusting to a more negative outlook [60][62].

7 April 2025 | 11:00PM EDT Oil Comment: How Low Could Oil Prices Go? Yulia Zhestkova Grigsby +1(646)446-3905 | yulia.grigsby@gs.com Goldman Sachs & Co. LLC Daan Struyven +1(212)357-4172 | daan.struyven@gs.com Goldman Sachs & Co. LLC Callum Bruce, CFA +1(212)902-3053 | callum.bruce@gs.com Goldman Sachs & Co. LLC Ephraim Sutherland +1(972)368-0395 | ephraim.sutherland@gs.com Goldman Sachs & Co. LLC Investors should consider this report as only a single factor in making their investment decision. For Reg AC ce ...

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The potential implementation of an additional 50% tariff by the US on Chinese goods could escalate trade tensions, with the total effective tariff rate on Chinese goods rising from approximately 60% to 110% if enacted [2] - The initial 50% tariff is projected to decrease Chinese GDP by 1.5 percentage points, while a subsequent 50% tariff would have a smaller incremental impact, reducing GDP by an additional 0.9 percentage points [9] - The analysis indicates that a significant portion of US imports from China (36%) relies on China for over 70% of its supply, suggesting limited alternatives for US importers even with high tariffs [4] Summary by Sections Section 1: Tariff Implications - Following China's retaliatory tariffs of 34% on US goods, President Trump threatened an additional 50% tariff if China does not withdraw its tariffs, indicating a potential escalation in trade tensions [2][3] - The Chinese government has signaled a readiness to take countermeasures if further US tariffs are implemented, as evidenced by the People's Bank of China's actions regarding the CNY fixing [3] Section 2: Economic Impact Analysis - The report analyzes detailed trade data, estimating that a 60% US tariff on China could decrease Chinese real GDP by approximately 2 percentage points, with the initial 50% tariff causing a 1.5 percentage point reduction and a subsequent 50% tariff causing a 0.9 percentage point reduction [9][4] - The report highlights that US-bound exports contribute an estimated 3 percentage points to China's total GDP, emphasizing the significant economic interdependence between the two countries [9] Section 3: Trade Reliance - The distribution of US imports from China shows a high reliance on Chinese goods, with 36% of imports depending on China for over 70% of supply, while only 10% of Chinese imports from the US have a similar reliance [4][14]

Investment Rating - The report suggests a high chance of moving towards a recession baseline forecast, indicating a bearish outlook for the market [2][16][35] Core Insights - The market has experienced a significant downgrade in growth views following recent tariff announcements, with the downgrade being historically large, equivalent to a roughly 130 basis points drop in the 1-year ahead GDP growth view for the US [5][16] - The current market pricing does not fully reflect the potential for a recession, as historical comparisons indicate that typical recessions are associated with larger equity drawdowns and more substantial declines in the Fed funds rate than currently priced [16][27] - A policy shift, particularly in trade policy, is viewed as the most direct route to market recovery, with the potential for a significant reversal in intended tariff policy being crucial for stabilization [36][37] Summary by Sections Market Reaction to Tariffs - The market price action has been dramatic, with a broad-based decline across global equities and commodities following the tariff announcements [3][4] - Financial conditions have tightened sharply, and the initial focus on US assets has shifted to a more global perspective [3][4] Growth Downgrade and Policy Reaction - The report indicates a large growth downgrade alongside a hawkish policy reaction, with the market pricing reflecting a more constrained Fed response than usual [4][9] - The implied market growth decline for April 3 and 4 represents the largest 2-day move outside significant historical events such as Black Monday and the COVID lockdown [5][9] Recession Pricing and Market Conditions - Current market conditions suggest that a full recession is not yet fully priced, with only the VIX indicating levels associated with past recession peaks, while other common recession gauges remain below those levels [28][34] - The report highlights that the risks still skew to the downside unless there is a shift in the policy path, with a high chance of further weakness in equity markets and wider credit spreads if recession pricing continues to develop [35][36]

Investment Rating - The report maintains a Neutral rating across equity regions to maximize diversification, with a shift to a more defensive asset allocation [4]. Core Insights - The market experienced a significant sell-off following the announcement of a reciprocal tariff policy by the US, leading to an 11% drop in the S&P 500, marking one of the largest two-day declines since the Great Depression [2][9]. - The Risk Appetite Indicator (RAI) saw one of its largest two-day drops since 1991, indicating a broad 'risk-off' sentiment across assets, with the RAI closing at approximately -1.4 [3][4]. - Historically, RAI levels near or below -2 have indicated better opportunities to 'buy the dip', with a hit ratio of over 90% for positive S&P 500 returns in the subsequent 12 months from such levels [3][4]. Summary by Sections Market Reaction - The S&P 500's drop of 11% since the tariff announcement is the fifth largest two-day drop since the Great Depression, with US equities leading the sell-off across assets [2][9]. - Non-US equities initially reacted less sharply but saw accelerated declines later, while credit spreads widened, indicating increased credit beta to the equity sell-off [2]. Risk Appetite Indicator - The RAI dropped to around -1.4, with a tendency to bottom lower during previous market sell-offs, suggesting potential buying opportunities when it reaches levels near or below -2 [3][10]. - The credit component of the RAI fell rapidly, closing the gap with the equity component, although credit is still pricing a low probability of recession [3][4]. Asset Allocation - The report indicates a shift to a more defensive asset allocation, moving from Overweight (OW) equities to Neutral (N), while maintaining OW in bonds and underweight (UW) in credit [4][19]. - The probability of a sell-off for equities is now above 40%, driven by worsening market sentiment [4].