22 August 2025 | 1:40PM EDT US Weekly Kickstart Hedge funds and mutual funds both navigating beta and alpha headwinds David J. Kostin +1(212)902-6781 | david.kostin@gs.com Goldman Sachs & Co. LLC Ben Snider +1(212)357-1744 | ben.snider@gs.com Goldman Sachs & Co. LLC Ryan Hammond +1(212)902-5625 | ryan.hammond@gs.com Goldman Sachs & Co. LLC Jenny Ma +1(212)357-5775 | jenny.ma@gs.com Goldman Sachs & Co. LLC Daniel Chavez +1(212)357-7657 | daniel.chavez@gs.com Goldman Sachs & Co. LLC Kartik Jayachandran +1(212 ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the US Equity Strategy, particularly the S&P 500 index and its performance outlook for 2025, highlighting macroeconomic factors and sector-specific dynamics. Core Insights and Arguments - **Market Outlook**: The initial outlook for 2025 anticipated a flat first half followed by improvement in the second half, influenced by political policies. The S&P 500 year-end target is set at 6600, with a mid-2026 target of 6900, reflecting a return to earlier levels. The full-year index earnings estimate has been raised to $272 from $261, surpassing the current consensus of $267 [4][7][10]. - **Bull and Bear Scenarios**: - **Bull Case**: A target of 7200, driven by a tech/AI-led surge and favorable macro conditions. - **Bear Case**: A target of 5600, reflecting severe tariff impacts and mild recession risks [5][10]. - **Sector Recommendations**: - **Overweight**: Utilities, Information Technology, Communication Services, Financials. - **Underweight**: Consumer Discretionary, Energy, Consumer Staples, Materials [11]. - **Earnings Growth**: The "Mag 7" (major tech companies) continues to be pivotal for returns, with a projected EPS growth of 20% for 2025, while the broader index is expected to grow at 9% [12][44]. Additional Important Content - **Valuation Metrics**: Current P/E ratios for the S&P 500 are noted, with a base case P/E of 21.4x and a bull case of 22.8x, indicating a potential for growth in valuations as macro headwinds diminish [5][26]. - **Market Sentiment**: The Levkovich Index indicates a state of euphoria, historically correlating with negative forward returns, suggesting caution in the current market environment [67]. - **Buyback Activity**: Aggregate buybacks for the S&P 500 are projected at approximately $950 billion, reflecting a 14% year-on-year increase, as companies may prioritize share repurchases over capital expenditures due to tariff concerns [74]. - **Capex Trends**: Capital expenditures are expected to grow, with a notable increase in growth capex, particularly in the tech sector, indicating a shift towards investment in expansion rather than mere replacement [79]. - **Operational Efficiency**: Companies in the S&P 500 have managed to increase sales per employee while keeping labor costs stable, which is crucial for maintaining productivity and supporting equity market growth [82]. This summary encapsulates the essential insights and projections from the conference call, providing a comprehensive overview of the current state and future expectations for the US equity market and the S&P 500 index.

Financial Performance - NetEase's market capitalization was $854 billion as of August 13, 2025[9] - Net revenues for 2Q25 reached $39 billion[9] - Net income attributable to the company's shareholders for 2Q25 was $12 billion[9] - Basic net income per ADS (GAAP) for 2Q25 was $188[9] - Net cash as of June 30, 2025, amounted to $198 billion[9] Revenue Breakdown (2Q25) - Games and related value-added services generated $3184 million in net revenues[12] - Youdao's net revenues were $198 million[20] - NetEase Cloud Music's net revenues reached $275 million[23] - Innovative businesses and others contributed $237 million in net revenues[26] Games Performance - Online games accounted for 97% of games and related value-added services revenue in 2Q25[12] - Fantasy Westward Journey Online reached over 293 million peak concurrent players in August[18] ESG Ratings - NetEase received an AA rating from MSCI[9, 40] - NetEase's Sustainalytics rating indicates a low-risk company[40]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese equities market** and the flow of funds in **China/HK** equities, highlighting trends in both passive and active fund management strategies [1][10]. Core Insights and Arguments - **Equity Inflows**: Chinese equities experienced inflows of **US$2.7 billion** in July 2025, primarily driven by **US$3.9 billion** from passive funds, while active funds faced outflows of **US$1.2 billion** [1][10]. - **Southbound Flows**: Southbound stock connect inflows reached **US$17 billion** in July, totaling **US$110 billion** year-to-date (YTD), surpassing the full-year level of **US$103 billion** in 2024 [1][10]. - **Fund Underweights**: Global and Asia ex-Japan (AxJ) funds slightly reduced their underweights in China by **1.4 percentage points** and **0.3 percentage points**, respectively, while emerging market (EM) funds increased their underweight to **3.2 percentage points** [1][10]. - **Sector Performance**: Active fund managers increased their positions in **Media & Entertainment**, **Pharmaceuticals**, and **Insurance**, while reducing exposure in **Consumer Services** and **Consumer Durables & Apparel** [10]. - **Company-Specific Changes**: Notable increases in holdings were observed for **Tencent**, **Netease**, **Jiangsu Hengrui**, and **Wuxi AppTec**, while **Meituan** and **Xiaomi** saw reductions in their positions [10]. Additional Important Insights - **Domestic Fund Outflows**: Chinese domestic passive funds targeting A-shares recorded outflows of **US$6 billion** in July, up from **US$3 billion** in June [10]. - **Short Interest**: As of July 31, short positions in China/HK equities were predominantly added in **Consumer Staples**, **Financials**, and **Communication Services** [11]. - **Passive Fund Trends**: Cumulative foreign passive inflows reached **US$11 billion** YTD, exceeding the **US$7 billion** level in 2024, while cumulative foreign active outflows totaled **US$11 billion**, a decrease from **US$24 billion** in 2024 [10]. - **Fund Flow Dynamics**: The report indicates a significant correlation between foreign passive fund flows to the **CSI 300** and northbound net flows historically, suggesting a stable trend in foreign investment [12]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese equities market and fund flow dynamics.

Core Viewpoint - Verizon is facing threats of legal action and a potential smear campaign from Byron Allen, a media mogul, after the company reduced its advertising budget with his media group, Allen Media Group (AMG) [1][5][10]. Group 1: Legal Threats and Advertising Budget - Byron Allen has threatened to sue Verizon for alleged racial discrimination after the company backed out of a $15 million annual advertising deal with AMG [1][10]. - Verizon claims that the threats from Allen and AMG are baseless and represent an attempted shakedown [4][5]. - The company plans to reduce its advertising spending with AMG by 30% in 2025 and 2026, bringing the budget down to $5 million from $15 million [10][11]. Group 2: Historical Context and Partnerships - Verizon and AMG previously collaborated on a diversity, equity, and inclusion initiative aimed at increasing media spending in Black-owned media companies [12][13]. - Allen has a history of suing major media companies for racial discrimination, having recently settled a $10 billion lawsuit against McDonald's [16][18]. - The political climate has shifted, impacting DEI programs, as seen in Verizon's agreement to end its DEI initiatives during its merger with Frontier Communications [15].

Investment Rating - The report indicates a continued expectation of USD weakness, suggesting a favorable environment for US multinational companies, particularly large caps, due to their foreign revenue exposure [5][82]. Core Insights - The report posits that the USD's weakening trend is at an intermission, with a projected net decline of 20% expected [3][8]. - A weaker USD is viewed as a significant, underappreciated tailwind for US equity earnings, especially for large-cap companies that derive a substantial portion of their revenue from foreign markets [5][82]. - The report highlights that the USD remains at the upper end of historical ranges, and pro-cyclicality from hedging and index rebalancing are important amplifying factors [5][7]. Summary by Sections USD Weakness and Economic Implications - The report forecasts that USD weakness will persist, driven by a convergence in US rates to global peers and increased risk premiums from FX hedging [5][6]. - Limited economic impact from recent USD weakness is noted, but further depreciation could push headline CPI and GDP, with an estimated increase of 5 basis points to CPI and GDP for every 1% depreciation [5][63]. FX Hedging and Corporate Exposure - FX hedges significantly impact a company's ultimate USD exposure, but limited disclosures complicate forecasting [5][96]. - The report emphasizes the importance of subjective data from earnings calls to understand corporate currency policies and hedging strategies [44][96]. Sector and Industry Analysis - The report identifies sectors with high foreign revenue exposure, including Tech, Materials, and Industrials, as key beneficiaries of dollar weakness [88][89]. - It highlights that larger companies, such as those in the S&P 500, earn approximately 40% of their revenue abroad, positioning them to benefit more from a weaker dollar [84][82]. Trade Ideas - Specific trade ideas are provided, including maintaining long positions in EUR/USD and short positions in USD/JPY and USD/TRY, reflecting the anticipated continued weakness of the USD [7].

Investment Rating - The report provides a base case target for the S&P 500 at 6300 by year-end 2025, with a bull case target of 7000 and a bear case target of 5200 [5][14]. Core Insights - The report anticipates a volatile bull market in 2025, with a flattish first half followed by a stronger second half as macroeconomic factors stabilize [5][7]. - Earnings growth is expected to converge, benefiting small and mid-cap stocks as well as value sectors, while mega-cap growth continues to drive S&P 500 returns [9][50]. - The Federal Reserve's new normal of higher interest rates is not expected to be detrimental to US equities, suggesting a shift in market dynamics [10][11]. - The focus on productivity and leverage is critical for earnings growth, with an emphasis on operational efficiency [11][12]. Summary by Sections Market Outlook - The initial outlook for 2025 was for a flat first half, but tariff risks have led to a downgrade in earnings expectations, with a revised full-year index earnings estimate of $261 [5][6]. - The report highlights a potential recovery in earnings as tariff impacts diminish, leading to a modestly higher terminal multiple [5][17]. Sector Recommendations - Overweight sectors include Information Technology, Health Care, Communication Services, and Financials, while underweight sectors include Consumer Discretionary, Utilities, and Industrials [18]. - Industry group recommendations favor Software & Services, Media & Entertainment, and Semiconductors, while underperforming groups include Food Beverage & Tobacco and Consumer Services [18]. Earnings Growth and Valuation - The report indicates that the Magnificent 7 stocks returned nearly 48% in 2024, significantly contributing to the S&P 500's overall gains [20][22]. - Earnings growth for the S&P 500 is projected at 7.5% for 2025, with sector-specific growth rates varying widely [54][61]. - The report emphasizes the importance of comparing market cap weights to earnings weights to understand valuation implications [62]. Sentiment and Fund Flows - The Levkovich Index indicates a normalization of sentiment, moving from euphoria to neutral territory, which historically aligns with average forward returns [71]. - Equity mutual funds and ETFs experienced significant outflows in 2022-2023, but the trend turned positive in early 2024, although recent changes suggest a potential deceleration [74]. Buyback Activity - Aggregate buybacks for the S&P 500 are projected at approximately $950 billion, reflecting a 21% year-on-year increase, driven by corporate strategies to manage capital expenditures amid tariff concerns [78].

Investment Rating - The report does not explicitly state an investment rating for the industry but provides insights into market conditions and forecasts for the S&P 500 [2][4]. Core Insights - The S&P 500 is forecasted to reach 6,500 by 2026, with adjusted EPS expected to be $280 [7]. - The report highlights a projected 12-month total return of 9% for the S&P 500, compared to a historical median of 13% [11]. - Economic growth forecasts indicate a rise in the US effective tariff rate by 13 percentage points, impacting market dynamics [30]. - The report notes that the US real GDP growth is expected to be 2.4% in 2024 and 2.2% in 2025 [34]. - The equity market is currently positioned lightly at -1.3 standard deviations, indicating potential for upward movement [20]. Summary by Sections Economy and Earnings - The report discusses the correlation between macroeconomic factors and individual stock returns, with macro factors explaining 42% of median S&P 500 stock returns [13]. - It also mentions that actual 1Q EPS growth was 12%, significantly above the consensus of 6% [45]. Valuation - Investors are currently assigning a valuation premium for quality factors, with various metrics indicating a preference for companies with strong fundamentals [17]. Money Flow and Demand for Stocks - The report indicates that market breadth has narrowed, which could signal momentum risk for the S&P 500 [23][27]. Corporate Uses of Cash - Companies are increasingly focused on passing through increased input costs to maintain profit margins, with a significant percentage indicating plans to adjust prices accordingly [61]. AI Adoption - The report does not provide specific insights on AI adoption within the industry but emphasizes the importance of companies with pricing power in the current economic environment [65].

Core Viewpoint - The article emphasizes the importance of confirming the sustainability of stock trends for successful short-term investing, highlighting the use of a specific screening strategy to identify stocks with strong fundamentals and positive price momentum [1][2]. Group 1: Stock Performance - Liberty Media Corporation's Formula One Series A (FWONA) has shown a solid price increase of 2.2% over the past 12 weeks, indicating investor confidence in its potential upside [4]. - The stock has experienced a significant price increase of 16.8% over the last four weeks, suggesting that the upward trend is still intact [5]. - FWONA is currently trading at 81.3% of its 52-week high-low range, indicating a potential breakout opportunity [5]. Group 2: Fundamental Strength - FWONA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, which are critical for near-term price movements [6]. - The stock has an Average Broker Recommendation of 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. Group 3: Investment Strategy - The "Recent Price Strength" screen is a useful tool for identifying stocks with sufficient fundamental strength to maintain their recent uptrends, including FWONA [3][8]. - The article suggests that there are several other stocks that meet the criteria of the "Recent Price Strength" screen, encouraging investors to explore these options [8].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Chinese equities experienced a significant outflow of US$5.3 billion from foreign long-only funds in April, reversing a two-month inflow trend since February [11] - The outflow was primarily driven by passive funds, which saw outflows of US$3.7 billion, and active funds, which had outflows of US$1.6 billion [11] - Cumulative foreign passive inflows since October 2022 have reverted to levels similar to late February 2025, with April outflows reversing approximately 50% of the inflows from March 2025 [11] - Active fund managers increased their underweight positions in China, with global funds down 1.3 percentage points, AxJ funds down 2.0 percentage points, and EM funds down 3.2 percentage points [11] - Domestic passive funds targeting China A-shares recorded a massive inflow of US$27 billion in April, marking the highest monthly inflow since 2024 [11] - The Southbound Stock Connect program maintained strong momentum with US$21 billion in April, bringing the net inflow for the first four months of 2025 to US$77 billion [11] Fund Flows - In April, foreign domiciled funds saw a total outflow of US$5.3 billion, with passive funds contributing US$3.7 billion and active funds contributing US$1.6 billion [11] - The report indicates that the northbound net flow data was terminated as of August 19, 2024, and suggests using foreign passive funds flow to CSI 300 as a proxy for historical northbound net flow [13] - As of April 30, 2025, US$0.4 billion in short interest was added in China offshore/HK equities, primarily in the Energy and Industrials sectors [13] Sector and Company Positioning - Active fund managers increased their positions in Household & Personal Products while reducing their holdings in Media & Entertainment and Insurance [11] - The most added companies by active fund managers included Alibaba, BYD, Trip.com, and China Construction Bank, while Tencent and Xiaomi were the most trimmed [11] - The report highlights that the top holdings among long-only EM and China active managers include Tencent Holdings, Alibaba Group, and Meituan, with notable changes in their active weights [42]