Welcome to our exchanges, the Goldman Sachs Markets Update for Friday December eleven. Each week we check a little leader across the firm to get a quick take on what they're watching in markets Today we take a look back at the roller coaster. Ride of twenty twenty in some of the key. Investing themes that came out of it objects go ahead of corporate communications here. The firm and I'm joined by Drew Pavlovitch of the market's coverage group in our consumer and wealth division drew the brother. Thank you. Thank you Everywhere. So

Let's talk a little bit about two thousand and twenty in terms of investors, emotions and expectations- if you can just take us back to January straight through to December, give us a quick rundown on different stages of sentiment that we've seen this year, yeah absolutely so, as you alluded to which I think is very appropriately put two thousand and twenty was the very least a roller coaster, and it was one that saw multiple ups and downs for a variety of different reasons and one that I think any of that are market participants will say it is one that we will never truly forget so the year really singly started off with a tone of really cautious optimism. Almost a sort of place and Caesar relates to find sentiment. You had what most viewed as stable to strong corporate earnings, the? U S and world steady Kind study, a single digit growth trajectory from Jimmy he's the and and the only real foreseeable kind of market destabilizing event was really the. U S election here in ever potential

destabilizing about, I should say, and there, I'm kind of fast forward toward the end of January, beginning of February with reports The coronavirus, starting to become more of a reality for our investor base and a more freely Topic of conversation, cases here in here in the United States reported been reported by the Jay, and that of accelerates into February and by March stay the sea and said concern about what might actually become a full blown global pandemic. Now as a kind of relates to quiet portfolios. I think one of the key realization events for lack of a better term was when Apple formally announced it would no longer be able to meet its revenue guidance for that upcoming March quarter. Due to the impact of costs, nineteen combined with kind of additionally, swift and emergent rate cuts from the said send a signal that really kind of further trigger client reactions

in kind of started to set in what we would identify as a little bit of a set of panic from there we started to kind of see increased concern permit through client sentiment with a variety of interactions. Some it's kind sitting on their hands paralyzed with uncertainty, son taking the opportunity to increase risk amid what they viewed as a more attractive valuations across asked glasses and then, as I alluded to some genuine panic amongst some of the private client base here from wait March through the early summer, despite things dramatically deteriorating on the public health side. Saw a kind of one of the ops groups in this roller coaster. We start to see renewed optimism in financial markets our opinion- that was clearly due to the unprecedented fiscal and monetary stimulus that you really from global central banks across the globe and central bank, governments and what they really did is that right,

confidence constitutes global financial markets from both a price and liquidity standpoint. But that enough. Kind of renewed confidence in individual consumer balance sheets. Just given some of the stimulus programs that were put in place so that from mid to late summer and further into early choose three bells really highlighted by renewed optimism from economic standpoint as locked out listed and in local economies were able to marginally reopen kind of saw this restart the economy trend in not only agree markets, browser fixed income markets and people start to take some risk in some of the areas of the economy that had been complete lockdown for the previous it six months. That optimism, I would say so somewhat of a slight blip as clients, The focus on the impending election heard you ass well

the possibility of a blue way can gave concern as to the impact of what that might have on financial markets and kind of coming up on her answer. Following the election we would say hope, is political certainty. Despite some of the impending Senate runoff in Georgia, we seen a renewed interest and risk assets and that is really only been further fuelled by a lot of the positive vaccine moves around the world and further stimulus measures that seem to be closer on the horizon So there's a lot of swift shift in sentiment, big sell off big rallies, a lot of what counts rises year. Those speed talk a little bit better volatility and saw the whiplash between he's really dramatic ball at their markets that we saw this year. Absolutely so you, I think you probably start that volatility and whiplash conversation with the initial sell off and what I call mid to late February to MID March, where you saw the victim.

From from teams to to the eighty s level and p, essentially selling off called thirty three to thirty four percent. From that bit said to the laws in March as you can imagine, it does quite frightening divides now within our client base. I would say, as that volatility settle into what I would call more of a normalized elevated, so do I will, as opposed to pure panic. You really kind of a large portion of our planet's whatsoever I and take advantage of that variety of different trade instruments, the Miller which is probably selling, puts the monetize that ball and putting on short dated risk reversals further to them Thirdly, in the quick cell ass, I would say that each subsequent so of post the initial FED to march for lack of a better term. Each one has been quicker was violence and war

shallow, which I think is largely attributable to the easy financial conditions are put in place by global central banks and yet in, I think, that's kind of a different way of saying that you ve had to be very quick. You had been nimble, but it has shade to by the deaths in equity markets, here near twilight so yeah. You talked about the unprecedented monitored fiscal stimulus this year, I hadn't that help clay get comfortable with risk again, were they just hearkening back, oh nine, or what is it that made them feel like it that helped call the bottom. No, absolutely the amount of parallels drawn between people that were around nine and currently in twenty twenty was dramatic. You had people that and seen the actions the fat took in two thousand and nine. You saw similar programs put in place in twenty twenty

The kind of at a high level, this monetary and fiscal action taken was different in the sense that it was extreme. It was, for the most part go from a congressional who is in the first from a congressional and from a regulatory standpoint, just given the unprecedented nature of this global pandemic, but very much. A positive signal, a mechanism to the financial markets in general, so the they can. And basically said that they were willing to back, stop any and all credit markets, and I that really give people a lot of comfort a lot of confidence that the said was willing to do whatever it takes in order to help both to consume financial markets stay open. I think the other aspect of this was you saw true global coordination across global central banks. Global governance because of your call we're almost together. There wasn't one country that necessarily was in a worse

He was seen as the cause for this virus, so you saw a coordination that I think give people comforts well and I waited if I kind of bring us back to our client base, I think, area the markets where our clients were initially the most aggressive as as relates to trying to put on risk was really in the credit markets, and that was because of the said that I mentioned earlier, where the FED said we not only are willing to backstop in whether it asset about markets. Corporal get your municipal credit markets, but prosecuted setting streams. As far as buying exchange shredded funds that have. His assets as there are deploying assets so you with big big, big cuts, central banks around the world, little hard find yield your client as the client base in position themselves, do gets a meal in this environment. So

for your conversation is one that is extremely challenging extremely frequent within our fireplace and continues to be. A frustrating exercise, I think, will continue to be a frustrating exercise, its twenty twenty one, but with cash yielding essentially zero there being somewhere in the ballpark of eighteen trillion dollars a beggar yielded deck globally. Credit spreads near all time. Tights we had to see climate really allocate their cash or bonds to risk your assets and go for there are the rest term to find that yield than I think, probably them. Prevalent way. The most dramatic if that were seen as is finds taking their cash allocations allegations and really looking at things like hiding than paying stocks. Here, the United States can be seen as kind of a more stable defensive equity allocation, really pick up that might be more attractive. The other aspect is just same clients as I you going further out

standing durations. I should say in their fixed income portfolios, which Getting some people are especially just given, where the potential inflation market given. You haven't really seen that seeing here materialise here states, I think, inflation has really become a large sum of one of our clients, just given as we move to an unprecedented fiscal and monetary stimulus, saying so, with any sort of economic stabilization that gives people consternation that in the next two three four or five years, you could see a matic, dramatic inflation, so One thing that I think puzzles people who are in the financial markets is just the amount of optimism at this time. There is a pandemic still raging, people still getting sick people so buying, but the sentiment has got much more optimistic, particularly clarity around the US election, and now the vaccine coming closer and closer help. Us quite

if I put some numbers on the optimism in terms of what you've seen in the market just in the last couple of months since the election absolutely- and I think you've got a lot of people kind of scratching their head around how aggressive people have been was the election in allocating the risk assets, encourage pudding, actual numbers on it. Looking kind of girl. It's called the November to current timeframe, be solved since the Us Pre trade up just north of twelve percent insult best one month before me since nineteen eighty seven November, and that was also November in history for this five hundred further to my previous about the reopening of the economy and people looking at kind of laggards in the market, more of the value spaces in the market. The rest of two thousand was up almost twenty four percent. From member November to December period. You saw tat

in the form of NASDAQ, which had had arguably one of its best six months stretches it in recent history up an additional twelve percent from November to December. Looking on global basis, emerging markets up about thirteen per and then they will to December period and then an even broader had a global index. The embassy I'll world was close to sixteen percent. In that same time, frame so, as you had into the end of the year with all that said, our investor playing more often in December. They starting to wait for January and see what the world looks like after the holidays. You know it's kind of mixed bag and say there's the healthy combination of those. We ve got him investors that are continuing to look to allocate a cap over risk assets, the appropriate situations- and you ve got the family office, clientele that is sitting on large balance sheets with relatively decent allocations to risk, as it's happy to sit and wait given kind of the patient nature of the

capital and wait for a better time to allocate additional funds to risk assets. Then you also got people that have had a great twenty. Why? Just given what funds once done? Special equity markets and they're fine pairing risk in the for a variety of different reasons, both from taking a look at them relations, but then also for tax reasons as well. Just given what most likely will be a higher tax regime had its twenty twenty one. I don't think many would argue that there is definitely a heightened potential for attending go back, as it relates to equity markets here, in the U S and across the globe, just given where we are continuing to make all time highs. But in summary, from a longer term perspective, I think most are very short in his earliest equity markets into twenty one and was gas its general just now. Vaccines are distributed worldwide in from their respective corporate profits remain healthy, And we started truly put. This were looking behind us. Well, the other side.

An optimistic note to end. Let's hope we put on twenty twenty behind us soon enough, thanks for joining us today, drew my pleasure jack. That's all for this weeks markets update on exchanged Goldman Sachs in case you missed it check out podcast earlier this week with Gregg Lamb, CO code of our investment banking division, Greg did a little exit interview on his reflections of twenty eight years of Goldman and how the industry's change changed for hope. Everyone has a great weekend. This podcast record good on Thursday afternoon, Semitenth near two thousand year. Twenty. Thank you very much for this all price references and market forecasts correspond to the date of this recording. This podcast should not be copied distributed, published or reproduced in whole or in part. The information contained in this package does not constitute research or recommendation from any Goldman Sachs

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