We continue to view the glass as half-full—if

2017 OUTLOOK Contents SECTION | 6 Half Full We continue to view the glass as half-full—if not full—when it comes to the US economy. 8 This Recovery in Context—An Update 9 10 12 14 18 19 20 20 One- and Five-Year Expected Total Returns 24 A Hangover from a Crisis Secular Stagnation: Unfavorable Demographics Secular Stagnation: Declining Productivity Growth Mismeasurement of GDP Statistics Poor Policies in Washington A Steady Onslaught of External Shocks In Summary Our Tactical Tilts 25 The Risks to Our Outlook 26 Pace of Federal Reserve Tightening 27 Low Expectations of a US Recession 28 29 30 30 31 33 Rising Influence of Populist Parties in the Eurozone Geopolitical Hot Spots Get Hotter Terrorism Escalates Cyberattacks Continue China Submerges Under Its Debt Burden and Capital Outflows US-China Relations Deteriorate Under the Trump Administration 35 Key Takeaways We expect a favorable global economic and policy backdrop in 2017, but there is no shortage of risks. We recommend clients stay invested in US equities with some tactical tilts to US high yield and European equities. 4 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014537