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Exhibit 3: Growth in US Real GDP Across Post- WWII Expansions In this recovery, GDP has grown at half the average pace of prior expansions. Cumulative Growth (%) 6005 -«=<=<=<- 021954 -———-03 1980 Q2 1958 04 1982 50 | 011961 ----- Q1 1991 04 1970 042001 Q1 1975 Q2 2009 ~ 30 5 20 + 0 4 8 12 16 20 24 28 32 36 40 Quarters After Trough Data as of 03 2016. Source: Investment Strategy Group, Datastream, National Bureau of Economic Research. Exhibit 4: Change in US Household Leverage Following Recessions A large reduction in household debt served as a drag on the pace of this recovery. Change in Debt-to-GDP (Percentage Points) 105 -j-——=—- Previous Post-WWII Recoveries (Median) Current Recovery poset | ‘ 5 4 LY 248 Cu KF MS ees cot 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 Quarters After Recession End Data through 03 2016. Source: Investment Strategy Group, National Bureau of Economic Research, Federal Reserve Economic Data. We believe that no one factor explains the difference in opinion. Instead, we rely on a comprehensive framework of investigation that blends all of these elements, combining rigorous fundamental, quantitative and technical analysis, as well as the insights of an extensive network of external experts. At the same time, we continually endeavor to overcome the behavioral biases Nobel Laureate Daniel Kahneman and his collaborator Amos Tverksy have shown to affect economic decision-making and tolerance for risk. These key characteristics of our investment process not only underpin our continued view of US preeminence, but also allow us to form a holistic view across global economies and asset classes. Of equal importance, our framework provides us with a consistent process by which to assess investment opportunities. While we believe our approach is robust, we acknowledge that nothing can ensure we will avoid the next downdraft. We begin our Outlook with a brief review of this recovery and place it in the context of past recoveries showing that the glass is indeed half-full. We address some of the key concerns regarding demographics and declining productivity growth. We show that US labor force demographics have deteriorated and will continue to do so, especially in the absence of policy changes. Nonetheless, we demonstrate why there is room for optimism about productivity growth. The analysis leads us to a view of slightly above-trend growth for 2017 with some upside potential from higher productivity and fiscal stimulus from a Trump administration. We then turn to our one- and five-year expected returns, which are driven by our view of a solid economic foundation, a well-balanced economy and a positive growth trajectory in the US. We conclude our introductory section with the risks to our view, both upside and downside, including a low probability of recession in 2017, high policy uncertainty under a Trump administration, possible global shocks from economic and currency policies in China, and the risks of geopolitical mishaps in Europe, the Middle East and the Far East. This Recovery in Context—An Update This recovery has been the slowest of the 10 recovery cycles since WWII, as shown in Exhibit 3. Since the trough, US GDP has grown at an annualized rate of 2.1% through the third quarter of 2016, which is half the pace of the median and average growth rates of all other recoveries. The slow GDP growth rate stands in stark contrast to the recovery in the labor market and, most recently, in wages and household income. Impressively, the decline in the unemployment rate has been the second-largest of all post-WWII recoveries. 8 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014541