Economic Overview - The federal funds rate target range is maintained at 5.25% to 5.50%, reflecting a balance of risks to employment and inflation[3] - The unemployment rate was at a historically low level of 4.0% in May 2024, with significant employment gains across various sectors[43] - Real GDP growth moderated in the first quarter of 2024, primarily due to declines in net exports and inventory investment[58] Inflation Trends - The 12-month change in housing services prices decreased from over 8% in May 2023 to 5.5% in May 2024, indicating easing inflation[35] - Core goods prices saw a decline of 1.1% over the 12 months ending in May 2024, reflecting improvements in supply-demand imbalances[14] - The PCE price index for food prices slowed from a peak of 12.2% in August 2022 to just 1.2% in May 2024[13] Labor Market Dynamics - Payroll employment gains averaged 248,000 per month in the first five months of 2024, with over 60% of industries expanding their employment[68] - Nominal wage growth remains above levels consistent with 2% inflation, although it has slowed recently[56] - Employment disparities across demographic groups have narrowed, but significant gaps remain, particularly for prime-age women and minority groups[52] Financial Stability - The financial system is reported to be sound, with the credit-to-GDP ratio near a two-decade low, although vulnerabilities are emerging in asset markets and commercial real estate[58] - Delinquency rates for small business loans and credit cards have increased, indicating potential stress in the financial sector[58]

Economic Growth and Household Financial Assets - Household financial assets increased by 9.5% year-over-year (YoY) in Q1 2024, with a year-to-date (YTD) growth of 5.1%[11] - Disposable income per capita rose by 6.2% YoY in Q1 2024, recovering from the lowest level in 2022[11] - Household deposit growth moderated to approximately 11% in April and May 2024, down from 12% YoY in Q1 2024[6][11] Consumption Trends - Consumption payment growth for lower-ticket-size items has been significantly higher, with overall consumption payment growth remaining at 5-6% compound annual growth rate (CAGR) over the past three years[23] - Bank card consumption payment value increased by 7.6% YoY in Q4 2023, indicating stable consumption growth despite downgrades in first-tier cities[40] - A notable shift in job applications from internet and financial sectors to manufacturing and industrial sectors has been observed, reflecting changing employment trends[20] Financial Product Preferences - The proportion of insurance assets in household financial assets increased to 10% in Q1 2024, with insurance products growing by 9.7% YTD[12][42] - Wealth Management Products (WMP) assets under management (AUM) exceeded RMB 28 trillion in April 2024, indicating a recovery in this segment[44] Market Concerns - Structural changes in income allocation and increased competition among goods and service providers may negatively impact corporate margins[41] - The shift in consumption from goods to services could pose challenges for corporate profitability and producer price index (PPI) stability[41]

Group 1: Market Trends - Japan and India are expected to outperform, with Japan's ROE projected to reach 12% by 2025 due to sustained reflation and rising productivity[27] - The US net liquidity reversal in 2024 may lead to underperformance in US stocks, as 2023 was characterized by higher liquidity than anticipated[27] - The M&A and IPO market is showing signs of revival, with acquirer balance sheets flush with cash, indicating improved market sentiment[27] Group 2: Economic Challenges - Weather and conflict bottlenecks are impacting trade, with 80% of trade flows by sea facing longer journeys, increasing freight rates by over 30%[27] - The renewable energy sector is experiencing a recovery, but sentiment remains low despite the potential for growth in solar and wind energy[27] - Carbon capture technologies are generating renewed investor interest, although previous projects faced delays and challenges[27] Group 3: Sector-Specific Insights - The automotive sector is facing challenges from battery oversupply, but Western OEMs are managing risks effectively[27] - Generative AI companies have outperformed the market by over 40%, with expectations for Edge AI to catch up in 2024[27] - Fintech consolidation is anticipated, driven by renewed interest in cryptocurrencies, which have seen over 50% returns year-to-date[27]

Sharon Bell +44(20)7552-1341 sharon.bell@gs.com Goldman Sachs International n We first published on women's contributions to the labour force, the opportunity for greater participation and the economic possibilities this provided 25 years ago in research led by our then head of Japan Portfolio Strategy, Kathy Matsui; Womenomics: Buy the Female Economy. Her research helped to shape the policy agenda, and we detail the policy progress in Japan in this report. n One of the areas of greatest progress is in the ...

Group 1: Macroeconomic Outlook - Major central bank rate cuts mark a turning point for investors, shifting focus towards supporting growth[24] - There is a 55% chance of a US economic soft landing and a 25% chance of a no-landing scenario in the next 12 months[24] - The Fed is expected to cut rates in H2 2024, influenced by slowing rents and softening labor markets[24] Group 2: Investment Strategy - Overweight equities over bonds and cash, favoring US and Indian equities[24] - Balanced foundation allocations comprising equities, bonds, and alternative assets are likely to outperform income-oriented strategies[24] - Gold and Emerging Market (EM) USD bonds are recommended as diversifiers[24] Group 3: Performance Review - The Balanced allocation has risen 6.7% year-to-date, outperforming income-oriented strategies[24] - The Multi-Asset Income (MAI) model allocation has delivered a 4.4% YTD return, benefiting from strong corporate earnings and a broadening equity rally[75] - Gold has risen 14.4% YTD, driven by a tight demand/supply balance rather than falling bond yields[49]

Can the Nikkei's record rally in Japanese stocks continue? After topping bubble-era highs, Goldman Sachs Research says Japanese stocks are poised to rise even higher. TOPIC: REGIONAL ANALYSIS Goldman Client Login https://www.goldmansachs.com/intelligence/pages/how-india-services-economy-became-a-world-leader.html 5/8 2024/7/8 14:42 How India's services economy became a world leader Goldman Sachs 01 FEB 2024 Japan's Prime Minister: How Japan is promoting a 'new form of capitalism' Japanese Prime Minister Kis ...

ARTICLES 2024/7/12 10:58 How India's services economy became a world leader How India's services economy became a world leader Topic: REGIONAL ANALYSIS India's services exports grew from $53 billion to $338 billion between 2005 and 2023 — almost double the rate of the rest of the world — and have come to form nearly a tenth of the national GDP. Its growth has outstripped that of India's exports of material goods. In their baseline forecast, our economists expect India's services exports to touch 11% of GDP ...

Economic Outlook - The US dollar has maintained a strong position in the first five months of 2024, supported by a robust US economy despite high interest rates[5] - Goldman Sachs forecasts that the dollar will remain at similar levels against currencies like the euro and British pound over the next 12 months[50] - The US economy is projected to continue solid growth, with a two-quarter annualized real GDP growth rate of around 5%[51] Market Dynamics - Limited prospects for global macroeconomic divergence are expected to support the dollar's strength[14] - The convergence of economic activity in the US, Europe, and China has kept major currencies, including the dollar, within a tight trading range[8] - The Federal Reserve's potential rate cuts in the next year are not expected to significantly diminish the yield on dollar bonds[5] Risk Factors - The upcoming US election poses a risk that could lead to increased fiscal spending or higher tariffs, potentially strengthening the dollar further[22] - Divergence in real interest rates, particularly between the US and Japan, may lead to continued weakness in the yen, impacting dollar dynamics[19] - A divided government may limit the ability to pass significant fiscal measures, affecting dollar strength and global economic stability[57]

Market Performance - Year-to-date, MSCI China, Hang Seng, and CSI300 have delivered returns of 11%, 12%, and 6% respectively, outperforming S&P (11%), Topix (18%), MSCI ACWI (10%), and MSCI EM (8%) [18] - The trajectory of Chinese equity indices has experienced significant volatility, with severe outflows and index drawdowns in January before a recovery starting in February [30] Market Outlook - The current index levels are believed to have priced in improvements in macro stabilization, flows, and government policy pivots, leading to expectations of a range-bound market in the coming months [2][6] - The bull/bear scenarios for June 2025 indicate a wide range of performance outcomes for MSCI China, with a bear case showing a potential decline of 31% and a bull case showing an increase of 21% [7][50] Sector Preferences - Selective overweight positions are maintained in Materials and Consumer sectors, while a less cautious stance is adopted for Banks due to government initiatives aimed at stabilizing macro and property risks [8][21] - An underweight position is retained in Real Estate due to weak fundamentals [21] Investment Strategy - A recommendation is made to overweight A-shares within China allocations, expecting their outperformance against offshore markets to resume [3][20] - Key trades for the second half of 2024 include increasing A-shares in portfolios and focusing on thematic investing, particularly in SOE Reform Beneficiaries and China Going Global [4][28] Earnings Growth Forecast - Earnings growth for 2024 has been revised upward, reflecting better-than-expected macro stabilization trends, but is expected to remain below historical levels due to persistent deflationary pressures [19][35] - The forecast for MSCI China's earnings growth is projected to recover to 13% by 2026, following a challenging macro environment [41][61]

Economic Indicators - HSBC Flash India Composite PMI Output Index rose to 61.7 in May from 61.5 in April, indicating strong growth[1] - HSBC Flash India Manufacturing PMI decreased slightly to 58.4 in May from 58.8 in April, reflecting a slowdown in manufacturing growth[1][11] Employment and Exports - Record rise in exports noted, with new export orders expanding at the fastest rate since September 2014[6][12] - Employment in the private sector increased sharply, marking the highest growth rate since September 2006[6][12] Sector Performance - Manufacturing sector growth remains stronger than services, despite a slowdown in new orders and production in May[12] - Services sector experienced the steepest increase in business activity in four months, contributing to overall economic expansion[11][12] Price Trends - Input prices rose at the fastest pace in nine months, driven by higher costs for chemicals, food, and electronic components[6][12] - Aggregate selling prices increased, although at a rate lower than input costs, indicating margin pressures for service providers[6][12] Future Outlook - Future Output Index improved significantly, reflecting the highest level of business confidence in over 11 years[6][12]