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  Download Transcript Goldman Sachs’ Daan Struyven discusses how recent geopolitical events and evolving tariff policies are affecting the commodity and economic landscape.

Among major economies, India enjoys a unique demographic advantage. A large share of its population is poised to enter their working-age years, and India’s age-dependency ratio—the share of economically dependent people compared to the working-age population—will be one of the lowest among major economies. To further capitalize on this 20-year window of favorable demographics, India needs to boost its female labor force participation rate (LFPR), writes Chaitra Purushotham, Bengaluru head of Goldman Sachs Research. Just bringing the overall labor force participation rate to previous peak levels can add about 1 percentage point to India’s potential growth, all else being equal. We talked to Purushotham about why the female share of India’s workforce has remained low over the decades, why it has now started to rise, and what implications that holds for India’s economy. Could you describe the trends behind India’s broad, 20-year window of favorable demographics? India’s demographic transition is unfolding more gradually and over a longer period than we’ve seen in many other Asian countries. The main reason is that both birth and death rates are declining at a slower pace in India. As a result, over the next two decades, we believe India will have one of the lowest dependency ratios among major economies. That means there will be a relatively small proportion of people who are either under 15 years or over 65 years compared to the working-age population (15-65 years). We believe this will create a powerful window of opportunity for the country. At present, how does women’s participation in the Indian labor force compare to that of developed and emerging economies? Right now, women’s participation in India’s labor force is significantly lower than what we see in major developed and many emerging market economies. According to the International Labour Organization, only about 31% of working-age women in India are in the labor force, relative to 54% in other major economies. Official Indian labor statistics show a higher participation rate, possibly because they count unpaid women workers who assist in household and other non-farm activities. Declining fertility rates will eventually impact India’s labor force. How can the participation of women in the workforce offset that, and what kind of economic impact could we project by raising female participation? Well, as fertility rates decline, the pace of growth in India’s labor force will naturally moderate. However, one way to offset the economic impact of this demographic shift is to boost women’s participation in the labor force. We think creating more employment opportunities for women and encouraging their entry into jobs can potentially raise female labor force participation. Based on our prior estimates, just bringing the overall labor force participation rate to previous peak levels can add about 1 percentage point to India’s potential growth, all else being equal.    Could you help us understand the two or three major factors behind this low participation rate? There are a few major factors driving the low participation of women in the labor force in India. First, Indian women shoulder a disproportionate share of domestic and care-giving responsibilities. On average, women spend about 8x more time each day on these activities relative to men — which leaves them with much less time for employment. Second, deeply rooted social norms and gender roles often restrict women’s occupational choices and limit their access to the workforce. These norms reinforce the expectation that women should prioritize homemaking and caregiving over careers. Third, practical barriers such as concerns about safety—including crime—coupled with a lack of robust public transport connectivity make it even harder for women to work away from their residence. Lastly, there are noticeably fewer women role models in many sectors and communities. When women do not see other women succeeding in diverse careers or leadership positions, it can dampen their aspirations and reinforce the perception that certain opportunities are out of reach.   Despite the low female LFPR, the rate is rising, as you say in your report. Could you outline some of the trends behind this? On a positive note, the overall status of Indian women is improving largely owing to a focus on promoting education, well-being and providing access to basic amenities. It is encouraging to see an uptick in women’s participation in the labor force over the last few years. A big part of this rise is attributed to rural India, where an increasing share of women are engaging in self-employment, particularly in agriculture.   The rise of self-employed women is an important trend, largely driven by initiatives focused on financial inclusion, greater digitization, enhanced skill development, and improved infrastructure. When we look at corporate India, although women are still under-represented in Indian listed companies, the numbers are improving gradually. The Information Technology (IT) sector leads the way with a 34% share of women employees (in line with what is observed globally) and has added one million women employees in India over the past decade.   In a survey of women entrepreneurs, what did respondents cite as the biggest improvements aiding their entrepreneurship journey? And what are the key challenges that remain. A survey of women entrepreneurs from the Goldman Sachs 10,000 Women program helps us understand what is driving their entrepreneurial journeys, the progress they have seen in the entrepreneurial ecosystem, and the challenges they continue to face. About 65% of respondents identified training and mentorship as the key areas of improvements that have positively impacted their ventures—though it’s worth noting that their participation in the Goldman Sachs 10,000 Women program has likely helped in these areas.  When it comes to challenges, access to funding remains the biggest hurdle for women entrepreneurs. Research indicates a persistent gender gap in startup funding, largely driven by unconscious biases against women. For example, male entrepreneurs are around 60% more likely to secure funding than their female counterparts. While government initiatives have improved access to capital, a significant gap still exists that needs to be addressed. Interestingly, respondents also highlighted the availability of a skilled workforce as both a key area of improvement and a continuing challenge.

One of the most striking things about my conversations with CEOs at the beginning of the year was the deep pessimism about Europe. While it is important not to understate the challenges still facing the Continent, especially as conflict continues both on the Continent and in the Middle East, that negativity has undergone a remarkable reversal. As I convene our Board of Directors in Paris this week, it’s clear to us that this nascent optimism presents an opportunity. European nations are making meaningful strides towards a more cohesive defence policy, and the Continent would also benefit from making more cohesive economic and financial strides—especially by reducing cross-border frictions and harnessing the power of a more integrated capital market and banking union. I see reasons to be encouraged that Europe can make progress.  EU leaders clearly recognise that greater autonomy in the realm of defence and security is both a strategic and economic imperative. First, the agreement of a new spending target among NATO members, and the historic shift in Germany’s positioning earlier this year, is testament to a fundamental change in mindset. As defence expenditures accelerate, the Eurozone is forecast to grow at a faster rate than predicted just a few months ago, with this fiscal expansion as a tailwind. To be clear, prolonged war benefits no one. We are hopeful for swift and peaceful resolutions to the current conflicts.    Second, Europe retains important strengths. While international investors would like to see faster action, reforms in recent years by individual countries have improved tax regimes to attract talent and Europe remains one of the richest and largest economies in the world. Our experience is a case in point. Over the last few years, Goldman Sachs has significantly scaled up our operations across Europe—from Warsaw to Frankfurt, and Milan to The Hague. Here in Paris, we opened a new office to accommodate our growing footprint, with almost 500 positions now on the ground and all our business lines represented in the city. This would not have been possible without the positive reform agenda in France. Finally, Europe benefits from a rich talent pool. Its schools and universities, especially for business and engineering, are globally competitive. It does not lack for hungry and driven young professionals who are the foundation of firms like ours. ECB President Christine Lagarde and European Commission President Ursula von der Leyen have recently made the same point: Per million inhabitants, the EU produces almost as many science, technology, engineering, and mathematics graduates as the US. The open question is why these strengths have not translated to the same level of economic and entrepreneurial dynamism as in the United States. I believe Europe can achieve economic dynamism, but only if more decisive actions are taken to unlock the full potential of the European market. These actions will require popular and political will, but there is reason to expect Europe can surmount the obstacles. I offer five key suggestions as Europe seeks to reform its economy for a new era. First, Europe should be clear-eyed about the burdens its regulatory environment currently places on business. I see it at Goldman Sachs and hear it from the CEOs I speak to around the world: Europe remains an outlier in terms of the extensive—often overbearing, duplicative, and costly—obligations it places on firms. Mario Draghi put this in stark terms: Europe’s internal barriers and regulatory hurdles are equivalent to a tariff of 110% for services and 45% for manufacturing. I would encourage EU policymakers to look at the regulatory infrastructure that has mushroomed over the years in Brussels. Reducing or eliminating unwieldy and ineffective structures and processes will send a loud message that the EU is focused on efficiency, results, and economic growth.  As such, we warmly welcome the focus from the new European Commission, as well as leaders like President Macron and Chancellor Merz, on an ambitious programme of regulatory and administrative simplification. From our perspective, the scale of the challenge calls for a bold rethink, not tinkering around the edges. The aim of reducing reporting burdens on business by 25% is a helpful north star. But meeting it will require both a different and detailed approach. The industry is eager to have a dialogue about how to focus reporting on information that is genuinely useful to authorities.  Second, member states need to play their part in building the pools of long-term capital needed to channel financing more forcefully into both public and private markets—where much of the economic activity in Europe is now happening. Plugging gaps in auto-enrolment, consolidating pension schemes, and introducing compelling incentives for retail participation in capital markets are key steps to take without undue delay. A fundamental prerequisite of a Europe-wide ‘Savings & Investments Union’ is a strong capital market underpinned by robust engagement from institutional and retail investors. Europe is building on solid foundations in this respect, with an internationally regarded equity market structure that has seen it weather recent episodes of volatility effectively. Third, special attention must be paid to Europe’s venture and growth capital ecosystem. This means freeing up pension funds and insurers to engage more with early-stage investments while looking at the scope for public funding to “de-risk” potential projects. America’s enormous advantage in the availability of early-stage risk capital is among its most important distinguishing features. Europe must offer greater support for small businesses to engage investors and simplify the cross-border regulatory regime they face.  Fourth, it’s time for the EU to demonstrate a more serious commitment to its now decade-old pledge of creating a unified capital market. Any moves toward integration will allow more companies to diversity their funding, facilitate cross-border investment, and catalyse the risk-taking necessary for the innovation needed to better compete in the global economy. The final piece is naturally the most challenging: How does Europe work collectively to put its interests first when one or two countries veto reform in order to protect their narrow parochial interests? I know this question goes back to the beginning of

GS research reports have explored the ‘Womenomics’ theme across geographies over the past 26 years. Goldman Sachs Research analysts now assess the current employment status of women in India and explore opportunities that lie ahead. While India benefits from favorable demographics, it will not reap the full benefits unless women become a larger part of its labor force. The female labor force participation rate in India is significantly below the male participation rate and also below these rates in other major economies. One of the key reasons for women’s low participation in the labor force is that the women in India bear a disproportionate responsibility for domestic and care-giving activities. Indian women spend ~8x more time on a daily basis in domestic and care-giving services than men. However, an encouraging development over the past few years has been the rise of self-employed women in India. Women in corporate India are under-represented but gradually gaining ground. Going forward, our analysts find that building a robust ‘care economy’ (a network of child care centers and elder care ecosystem) would (a) free up women’s time for paid employment opportunities elsewhere, and (b) create greater employment opportunities for the ‘care work’ services sector.   India Womenomics A Step Forward in a Long Journey Ahead Read the Report

  Download Transcript Is the case against the US dollar overstated? Gurpreet Garewal of Goldman Sachs Asset Management separates the signal from the noise.

  Download Transcript Germany’s new government is pursuing a broad range of measures to bolster economic growth. At the same time, US tariffs could have a significant impact on the export-heavy German economy. How are Germany’s business leaders navigating this volatile environment? Wolfgang Fink, CEO of Goldman Sachs Bank Europe SE & Head of Goldman Sachs in Germany and Austria, discusses with Allison Nathan.

As the risk of sustained high tariffs on imports to the US receded in recent weeks, investors have turned their attention to another potential area of concern for the US stock market: rising interest rates. Several factors including a declining risk of recession, concerns about the path of US government debt, and higher borrowing costs around the world have contributed to an increase in US bond yields, according to Goldman Sachs Research. Rising interest rates have the potential to impact stocks in several ways, including limiting the scope of potential growth for stock valuations and reducing company earnings. The levels of bond yields themselves are not as important for stocks as the factors that are affecting interest rates, Goldman Sachs Research chief US equity strategist David Kostin writes in the team’s report. “Equities typically appreciate alongside rising bond yields when the market is raising its expectations for economic growth but struggle when yields rise due to other drivers, like fiscal concerns.” Why are US bond yields rising? The nominal yield on 10-year US Treasury bonds rose by 40 basis points in May, to 4.4%. That’s up from about 3.6% in mid-September. “The increase in bond yields was initially driven by cooling trade tensions and reduced recession risk. In recent weeks, spillovers from an increase in global bond yields, especially in Japan, and renewed concerns about the US fiscal outlook have also contributed to higher bond yields,” Kostin writes.   These factors have had a particularly pronounced effect on the term premium — the compensation that borrowers pay investors for holding long-term rather than short-term bonds. Estimates of the 10-year term premium have risen to the highest level since 2014. Based on a combination of slow (but not recessionary) economic growth and above-trend inflation, Goldman Sachs Research’s rates strategists expect bond yields will remain around current levels in 2025. They expect the Federal Reserve will conclude its interest rate-cutting cycle in June 2026, with its policy rate at 3.5-3.75%. The US fiscal outlook has been a focus for investors, and they’re scrutinizing how much the ratio of US debt to GDP, which is currently around 100%, may climb depending on budget policy. In the context of elevated inflation and low perceived risk of recession, our rates strategists note the risk that bond yields move even higher, similar to the August-October 2023 period when 10-year yields reached 5%. How will higher bond yields impact US stocks? The vulnerability of stocks to rising interest rates depends on the reason yields are rising. When higher bond yields are accompanied by a large improvement in economic growth expectations, stocks typically rise. In fact, an analysis of weekly returns during the last few years shows that the market’s pricing of economic growth has been around three times more important than term premium (the additional risk of holding an asset with a later maturity) when it comes to stock prices. “This relationship was demonstrated in April and early May as improving growth expectations lifted both stocks and yields,” Kostin writes in the report.    The speed of the move in bond yields also has an impact on stock prices. Stocks have historically struggled when yields rise by more than two standard deviations in a month. Today, a two-standard-deviation monthly move would be roughly 60 basis points, which would bring the nominal 10-year US Treasury yield to around 4.9% — similar to the levels in January this year. “Many investors point to 5% nominal yields as a key tipping point for stocks, but we are less convinced,” writes Kostin in the team’s report. An analysis of annual S&P500 returns since 1940 based on interest rates shows that there has been no clear relationship between the two. Goldman Sachs Research estimates that S&P 500 returns over the next 12 months will be more than 10%, bringing the index to 6500.   Even so, bond yields remaining at their current level could constrain the future valuations of stocks. Goldman Sachs Research’s macro model suggests that a 100-basis-point change in real Treasury yields is associated with a roughly 7% change in S&P 500 forward price-to-earnings (P/E) multiple. The team’s model indicates that the S&P 500 currently trades close to fair value due to strong corporate fundamentals, especially among the largest stocks, and their baseline forecast assumes the P/E multiple will be roughly unchanged in 12 months. Bond yields can also affect stock earnings, because higher interest rates mean that companies pay higher borrowing costs. But despite a significant rise in interest rates, effective borrowing costs for the S&P 500 have only modestly increased since the start of 2022, because 72% of S&P 500 debt carries a fixed rate lasting beyond 2028. Rising interest rates are also normally associated with higher earnings for financial stocks. As a result, the team’s S&P 500 earnings-per-share model shows that the net impact of a 100-basis point increase in bond yields on EPS is roughly neutral. However, elevated interest rates may pose a larger risk to the earnings of small-cap stocks, according to Goldman Sachs Research. These smaller firms also operate at lower margins than bigger companies, which means they have less of a financial cushion against higher interest payments.   “We expect continued economic growth and a Fed on hold will keep yields elevated, sustaining investor preference for companies with strong balance sheets that are insulated from the pressure of interest rates,” Kostin writes.

  Download Transcript A US trade court ruling has put the legal fate of President Trump’s tariffs in limbo. But will this actually change the course of US trade policy – and what could it mean for the economy and for investors? Alec Phillips, chief US political economist with Goldman Sachs Research, discusses with Allison Nathan.

The plunge in stocks after President Trump announced his full slate of tariffs in early April briefly met the definition of a bear market: The S&P 500 fell just under 20% from its high, and the Nasdaq dropped 23%. However, with the US and its trading partners stepping back from the tariff brink and the risk of recession easing, stocks may now be poised for further gains over the next 12 months, Goldman Sachs Research’s Chief Global Equity Strategist Peter Oppenheimer says. It remains to be seen whether global equities have genuinely escaped a bear market. Oppenheimer points out that it’s common for stocks to rally even during a prolonged downturn, and the reasons, or type, of bear market can give investors insight into the potential depth and duration of market declines. It’s still unclear whether the US and other economies will sidestep a contraction.   In the meantime, investors may benefit from greater portfolio diversification. While our analysts expect the S&P 500 index of US stocks to rally 10% in the next 12 months (as of May 30), there are signs that the dollar may weaken and there are indications of better opportunities in Europe and parts of Asia, Oppenheimer says. “We had this consistent rise in profit margins in the US in technology companies, but we think now you are beginning to see more mean reversion from high levels of profitability in some areas,” Oppenheimer says. We spoke with Oppenheimer about the different types of bear markets, where equities are trading in the economic cycle, and why portfolios may benefit from diversification in the coming months.  How do you look at the brief bear market earlier this year? People think of bear markets as binary — either you’re in one or you’re not. But actually, if you look at history, the data going back to the 1800s, you can differentiate between types of bear markets. They differ by depth and length, but also by the factors that trigger them. We’ve been able to identify three different types. The first type, which we call structural, is the worst type of bear market but fortunately also the rarest. They’re always preceded by asset bubbles of some form or another, usually backed by very high private sector debt. And when these bubbles burst, for whatever reason, it tends to trigger a deleveraging cycle and a very sharp fall in asset prices. And that usually feeds into some kind of problem in the banking sector or the real estate sector or both. The second type is cyclical, and these are the bear markets that oscillate around economic cycles. When investors anticipate a recession, stock prices fall to reflect the potential downturn in activity and profits. And ultimately, they recover as you get some kind of policy response that improves the prospect of an economic recovery. And the third type is event-driven. These are triggered by some kind of shock that derails an economic cycle, such as a war or a commodity crisis. The pandemic was an unusual event that derailed the economic cycle globally and triggered a bear market. To the extent that the recent downturn in equities has been triggered by tariffs, this is event-driven.   For an investor, why does it help to know the kind of bear market? Because it helps to set appropriate expectations. In a structural bear market, equities may fall by 50% or 60% over three or four years and take a long time, typically about a decade, to recover fully in nominal terms. Cyclical and event-driven bear markets don’t tend to vary that much in terms of the absolute price declines, typically around 25% to 30%, but the difference is the speed of this decline and the subsequent recovery — event-driven ones are just much quicker. The main difference is whether you get a recession. Sometimes shocks lead to recessions, and what starts out as a temporary drawdown can last a bit longer as that shock morphs into a recession. If this is an event-driven bear market, are we through it? One problem in trying to figure that out in real time is that bear markets of whatever description do incorporate strong rallies. It would be unusual for a bear market to fall in a straight line. We don’t know for sure whether the low in April marked the trough. At this stage we are not certain whether we are avoiding a recession. Our view is that recession risk has definitely moderated because tariffs have largely been wound back for large parts of the world and indeed, most recently, for China. Goldman Sachs economists had forecast the probability of recession at around 45% in the US over the next 12 months, and after the recent pause between China and the US, they reduced that probability to around 35%. That’s still above the usual background risk in any given year of about 15% probability of recession. Are you certain this isn’t a structural downturn? Structural downturns come about from the combination of asset bubbles with a lot of private sector leverage. I think we can put private sector leverage to one side right now. After the financial crisis, banks’ balance sheets strengthened a lot because of tighter regulation. Corporates broadly have very healthy balance sheets. And households still have pretty good balance sheets. On the valuation point, it’s true that the US equity market has a high valuation — well into the 90th percentile if we look at a historical distribution for price-to-earnings ratios. However, it is important that, at least up to now, the very high multiple has been reflective of very strong underlying fundamentals. Profits have been extremely strong in the US over the last decade or so, largely driven by the powerful rise in profitability of the largest tech companies. We don’t think that there is a speculative bubble. Is continued growth in earnings needed, though, to justify the valuations? The prospect of continued earnings growth is partly a function of what happens in the economy