Oil Investment’s ‘Age of Restraint’...National Small Business Week...EM Resiliency Amid Trade Tensions

Insights on markets, industries and the global economy [Goldman Sachs]( [BRIEFINGS] April 30, 2018 Oil Investment Cycle Enters 'Age of Restraint' The oil and natural gas investment cycle is entering an "age of restraint," according to a newly published report from Goldman Sachs Research. In the latest episode of our podcast, Exchanges at Goldman Sachs, we sat down with author Michele Della Vigna to understand what this means for the industry. "The period of restraint is a period where fear around long-term demand distraction from decarbonization and electric vehicles is forcing the industry to really rationalize its capital investment," Della Vigna said. Despite the decarbonization threat, Della Vigna noted that Big Oil is poised to prosper as a more consolidated industry helps increase returns. [Listen to podcast]( [Subscribe on iTunes]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Oil%20Investment%20Cycle%20Enters%20%27Age%20of%20Restraint%27&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2fpodcasts%2fepisodes%2f04-27-2018-michele-della-vigna.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Talks at GS: Pulitzer Prize Winner James Forman, Jr. on Rethinking Race and Criminal Justice Reform Above (L to R): Court Golumbic of Goldman Sachs and James Forman, Jr. of Yale Law School In a recent Talks at GS session, Yale Law professor James Forman, Jr., author of Locking Up Our Own: Crime and Punishment in Black America -- just awarded the Pulitzer Prize in General Nonfiction -- offered his perspective on the history and enforcement of criminal justice policy in the US. During a conversation moderated by Goldman Sachs' Court Golumbic, Forman highlighted the disproportionate impact that criminal justice policy has had -- and continues to have -- on people of color. Forman advocates for reform of the criminal justice system for both non-violent and violent offenders. "Behind every label there's a story," he said. "That's why I resist any kind of reform efforts that categorically applies a label to a group of people." [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%3a%20Pulitzer%20Prize%20Winner%20James%20Forman%2c%20Jr.%20on%20Rethinking%20Race%20and%20Criminal%20Justice%20Reform%20&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2ftalks-at-gs%2fjames-forman-jr.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) National Small Business Week: Characteristics of Successful Entrepreneurs and Growing Businesses Above: Small business owners who attended Goldman Sachs' 10,000 Small Businesses Summit: The Big Power of Small Business in Washington, DC, pose for a photo Small business owners and entrepreneurs play a vital role in creating jobs and growing the US economy. But what makes a small business successful? Access to capital, innovation, peer learning and the know-how to build and motivate a successful workforce are among the top characteristics most cited by successful entrepreneurs, according to a progress report on the 10,000 Small Businesses program by Babson College. The report was released in conjunction with Goldman Sachs' 10,000 Small Businesses Summit: The Big Power of Small Business in Washington, DC, earlier this year, where entrepreneurs including Warren Buffett, Richard Branson and Sara Blakely shared their advice to small business owners (watch on [YouTube](. [View Summit sessions]( [Read the Progress Report]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=National%20Small%20Business%20Week%3a%20Characteristics%20of%20Successful%20Entrepreneurs%20and%20Growing%20Businesses%20&body=https%3a%2f%2fwww.youtube.com%2fwatch%3fv%3dygM_40MRKL0%26list%3dPLIyiGQywEp64FJpn8QuI8FpCStZV_qPEr%26cid%3deml-np-briefings-briefings-textlink-201801--) Briefly...on EM Resiliency Amid Rising Trade Tensions Emerging market economies are powering ahead in 2018, despite higher rates, market volatility, and rising fears of protectionism. We spoke to Andrew Tilton and Kamakshya Trivedi, co-authors of GS Research's EM Macro Navigator report, to better understand the resiliency and why tariffs are unlikely to derail the growth story. Andrew, you've said that even as activity continues to pick up in EM economies, there is still "room to grow." What is contributing to this? Andrew Tilton: Robust global trade growth and above-trend growth in developed markets over the past couple of years has been a boon for emerging markets. Barring the recent market volatility, the global backdrop has facilitated EM expansion, and we believe there will be only a gradual fading of this external impulse. Output gaps remain in many EMs, and inflation pressure is generally modest so policy tightening can be gradual. Apart from this, the resilience in EM economies and asset markets also reflects favorable cyclical dynamics -- many are still early cycle relative to their developed peers. How should the various EM asset classes be looked at in this overall constructive stance? Kamakshya Trivedi: They're not as undervalued as they were in early 2016 or 2017, but prices are generally at undemanding levels and we expect them to move higher through the year on the back of favorable global and local macro dynamics. After a very strong start to the year, EM assets have come under pressure as US rates and the Dollar have moved higher and global equities have seen a drawdown. But overall they have traded resiliently--EM equities have so far weathered the recent spike in volatility, EM local rates have outperformed the move in Dollar rates and EM FX has traded in line with the rest of G10 FX. Credit has been the weakest link, but even the trajectory for that is still broadly in line with the spread widening seen in US corporate credit. We also feel that the ongoing volatility is re-creating pockets of value. More recently, trade tensions have rattled markets. What's your take on the impact of the proposals for EMs specifically? AT: We feel trade tensions pose more market than economic risk for now, and actual US trade sanctions in 2018 will be less dramatic than the rhetoric. While trade tensions between the US and China are unlikely to be fully resolved in the near-term, and further escalation remains a concern, we think any hit to East Asian growth will be small. We are also cautiously optimistic for a resolution on NAFTA before the Mexican election this summer. KT: Paradoxically, part of the solution to the trade tensions may involve moderately stronger rather than weaker currencies in EMs running large current account surpluses. So what could go wrong for EMs? AT: We're focused on risks in three areas. Political risks could escalate and threaten the relatively benign macro-markets picture. In addition to the current concerns over trade protectionism, there are important elections later this year in a number of EMs, and the outcomes may not necessarily be market friendly. Secondly, an acceleration in Fed rate hikes that pushes the Dollar meaningfully stronger would challenge the Goldilocks EM story of the past couple of years. A policy-driven slowdown in China would also clearly have material spillovers to EM Asia and beyond. But presently, none of these risks rise to the level of a red flag for the EM growth story. Goldman Sachs Media Highlights CNBC - April 30 [CEO Confidence is Relatively High, Says Goldman's Solomon]( (4:09) Bloomberg - April 26 [Goldman's Siegel Says Volatility Driving Push to Private Equity]( (2:42) eFinancialCareers - April 26 [Goldman Sachs' co-head of IBD on How to Get Ahead in Banking in 2018]( The Wall Street Journal - April 25 [Career Advice From Some of Wall Street's Top Women]( Bloomberg - April 24 [Goldman Sachs' Sheila Patel on the Impact of Geopolitics on Markets]( (3:19) [Subscribe]( The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. 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