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Exhibit 51: ISM Manufacturing Index and S&P 500 Returns Equity market performance is closely related to the business cycle. Index % YoY 65 4 60 55 50 45 40 4 35 ISM Manufacturing Index L .49 ee S&P 500 Return (Right) 30 -60 1995 2000 2005 2010 2015 Data through November 30, 2016. Source: Investment Strategy Group, Bloomberg. Exhibit 52: Estimated Incremental S&P 500 Earnings per Share by Tax Rate Proposals for lower corporate tax rates could lead to 04 higher earnings. 13 12 11 10 9 8 7 6 6 5 44 3 il 0 30 29 28 27 26 25 24 23 22 21 US Effective Tax Rate (%) neremental EPS ($} 6 Data as of December 31, 2016. Note: The current US effective tax rate for the S&P 500 companies is 33.3%. Source: Investment Strategy Group, Standard & Poor's. estimates its new long-run equilibrium level has fallen to 3%, a full 1.5 percentage points below the historical average.’°’ Of equal importance, the Federal Reserve is not expected to reach that 3% target for six years based on current market pricing in Eurodollar futures. A similar valuation tailwind emerges from the market’s current sector composition. The combined technology and health-care sectors constitute about 40% of S&P 500 earnings today, almost three times as high as their 15% share in the late 1980s. Because these faster-growing, higher-margin sectors are generally accorded premium valuations, their higher representation in the index today justifies a higher S&P 500 P/E multiple. Exhibit 50: ISG S&P 500 Forecast—Year-End 2017 2017 Year-End End 2017 S&P 500 Earnings Good Case (25%) Op. Earnings $140 Rep. Earnings $124 Trend Rep. Earnings $113 Although current valuations may be fundamentally justified, that does not mean they are impervious to downward pressure. Our central-case equity view for 2017 acknowledges this, calling for some contraction in P/E multiples given the uncertainty associated with a new administration and continued Federal Reserve interest rate hikes. Even so, that headwind will be more than offset by the 6-10% earnings growth we forecast, resulting in a 1-5% total return for US equities this year (see Exhibit 50). Investors might rightly ask whether it is worth bearing equity risk for such meager returns. Our read of the evidence suggests it is. The linchpin of this view is our expectation of a continued Central Case (60%) Op. Earnings $125-130 Rep. Earnings $113—-117 Trend Rep. Earnings $113 Bad Case (15%) Op. Earnings < $102 Rep. Earnings < $78 Trend Rep. Earnings < $113 rend and forward earnings estimate} Data as of December 31, 2016. S&P 500 Price-to-Trend Reported Earnings 21-23x 18—21x 15—-16x End 2017 S&P 500 Fundamental Valuation Range 2,375-2,600 2,040-2,375 1,700-1,810 End 2017 S&P 500 Price Target (based on a combination of 2,450 2.225-2,300 1,800 Note: Forecasts and any numbers shown for informational purposes only and are estimates. There can be no assurance the forecasts will be achieved and they are subject to change. Please see additional disclosures at the end of this Outiook. Source: Investment Strategy Group. 52 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014585