October 23 2009 pe: Portfolio Strategy Exhibit 7: Division of the 1970s cycle into phases for the UK and US United Kingdom emulative Change espair----------> <---Hope----> <------------Grow th----------> <--Optimsm--> 120 80 Jan -73 an-76 Jan -77 Jan-78 Jan-79 Earnings Despair Growth Start date10/01/19731212/197430/01/197609031978 End date12/12/197430/01/1976o9/03/19780405/1979 Real Ret 122.8 25.7 P/E expansion 310.3 -31.1 Proportion of return (% .5 66.6 25.4 armings Growth Change in real interest rate(pp) 5.6 22.1 0.9 United States Cumulative change Grow theas ><Optimism Jan-74 Jan-75 Jan-76 Jan77 Jan-78 Jan-79 Jan-80 US Recessions etu 03/1019741507/197527/03198020/11/1980 Length(n m he Real Eamings Growth 15.6 9 48.8 Proportion of return ( %6 90.4 59.7 -36.6 60.3 7.1 56.9 7 -0.2 Source: Worldscope, Compustat, Haver Analytics, Datastream, Goldman Sachs Global ECS Research. oldman Sachs Global Economics, Commodities and strategy ResearchOctober 23, 2009 Europe: Portfolio Strategy Goldman Sachs Global Economics, Commodities and Strategy Research 9 Exhibit 7: Division of the 1970s cycle into phases for the UK and US United Kingdom 0 20 40 60 80 100 120 140 160 180 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 US Recessions Returns Earnings PE Cumulative Change <----------Despair----------> <-------------Grow th-----------> <----Hope----> <--Optimism--> Despair Hope Growth Optimism Start date 10/01/1973 12/12/1974 30/01/1976 09/03/1978 End date 12/12/1974 30/01/1976 09/03/1978 04/05/1979 Length (in months) 23.0 13.6 25.3 13.8 Real Return -76.0 122.8 -13.4 29.9 Real Earnings Growth 66.1 -45.7 25.7 -9.0 P/E expansion -85.6 310.3 -31.1 42.7 Proportion of return (%) 88.2 -9.6 21.5 Annualized Real Return -52.5 102.6 -6.6 25.4 Earnings Growth 30.2 -41.6 11.4 -7.8 Change in real interest rate (pp) 2.0 -5.6 -2.1 0.9 United States 20 40 60 80 100 120 140 160 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 US Recessions Returns Earnings PE Cumulative Change <-----Despair-----> <------------------------Grow th---------------------> <Hope> <Optimism> Despair Hope Growth Optimism Start date 11/01/1973 03/10/1974 15/07/1975 27/03/1980 End date 03/10/1974 15/07/1975 27/03/1980 20/11/1980 Length (in months) 20.7 9.4 56.4 7.8 Real Return -54.5 44.5 -29.4 34.2 Real Earnings Growth 21.4 -15.6 37.9 -8.1 P/E expansion -62.5 71.3 -48.8 46.0 Proportion of return (%) 90.4 -59.7 69.3 Annualized Real Return -36.6 60.3 -7.1 56.9 Earnings Growth 11.9 -19.5 7.1 -12.1 Change in real interest rate (pp) 0.7 -0.2 2.5 -0.9 Source: Worldscope, Compustat, Haver Analytics, Datastream, Goldman Sachs Global ECS Research