World Cup Predictions...Jeremy Lin on Challenging Stereotypes...European Financial Integration

Insights on markets, industries and the global economy [Goldman Sachs]( [BRIEFINGS] June 11, 2018 GS Economists Train Their Machine-Learning Model on the 2018 World Cup What happens when economists apply their statistical techniques to the world's most popular sport? A mathematical model for predicting the winners in the 21st FIFA World Cup, of course. As they have done with the World Cup in years past, Goldman Sachs Research economists calculated the chances of victory for each of the 32 countries competing in the 2018 World Cup, which begins on June 14 in Russia. This year, for the first time, the team led by Chief Economist Jan Hatzius used player data and a machine-learning model. They ran one million simulations to find the most likely outcome for the tournament. Their prediction? Brazil has the best chance to take the cup, with an 18.5% probability, ahead of France with an 11.3% chance. [Watch video]( [Read report]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=GS%20Economists%20Train%20Their%20Machine-Learning%20Model%20on%20the%202018%20World%20Cup%20&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2fpages%2fworld-cup-2018%2findex.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Talks at GS: Jeremy Lin on his Brand and Basketball Career Above (L to R): Phil Han of Goldman Sachs and Jeremy Lin Five years from the peak of "Linsanity," basketball player Jeremy Lin, now with the Brooklyn Nets, feels like he's slipped under the radar of high expectations -- which is exactly how he likes it. "That's kind of the situation I've always thrived in, because...obviously, [when] you step on a basketball court, if you're Asian, you're immediately under the radar," Lin said at a recent Talks at GS session, where he spoke about the liberating effect of letting go of other people's expectations. "I enjoy the ability to be able to surprise people." As one of very few Asian-Americans in the National Basketball Association, Lin says he hopes his unconventional path from Harvard to the NBA will help challenge stereotypes. "That's really how you see racial breakthroughs in whatever industry it might be." [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%3a%20Jeremy%20Lin%20on%20his%20Brand%20and%20Basketball%20Career&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2ftalks-at-gs%2fjeremy-lin.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Corporate Pensions at Inflection Point Above (L to R): Jake Siewert and Michael Moran of Goldman Sachs While pension plans have been disappearing for years, there's finally good news for the workers that still rely on them -- but potentially unexpected outcomes for fixed income investors. For the first time since 2013, the funded status of corporate defined benefit plans has improved. But due to a confluence of factors -- the new tax law, regulatory changes, rising interest rates and structural changes in the retirement landscape -- these corporations are also poised to become big buyers in the bond markets, which could have significant repercussions for other institutional investors, says Goldman Sachs Asset Management pension strategist Michael Moran. As corporations look to lock in their gains, they're selling equities and increasing fixed income to ensure their plans' funded status stays steady. "When you look at the $3 trillion dollars of assets in the US corporate DB plan space today, about $600 billion could be moved into long-duration fixed income over the next couple of years," says Moran in the latest episode of our podcast, Exchanges at Goldman Sachs. [Listen to podcast]( [Subscribe]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Corporate%20Pensions%20at%20Inflection%20Point&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2fpodcasts%2fepisodes%2f06-11-2018-michael-moran.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Briefly...on European Banks, M&A and Politics Changing regulation, consolidation and European populism were talking points for over 800 investors, bank executives, regulators and policymakers who attended the 22nd Annual European Financials Conference, Goldman Sachs' longest-running event in Europe, last week in Frankfurt. Goldman Sachs Research's Jernej Omahen discusses the outlook for consolidation amid an increase in political uncertainty. Jernej, from your perspective covering European financial services for Goldman Sachs Research, what were the biggest topics among attendees? Jernej Omahen: In the banking sector, attendees were most focused on two themes -- completion of the European Bank Union, and further scope for consolidation. On the theme of European integration, specifically the ability for Europe to complete the two key projects -- a capital markets union, and the European banking union -- the overall message from policymakers was that completion of both is on the agenda, but the timing is still distant. M&A was also debated, with banks, investors and policymakers in agreement that the market needs to rationalize further. This said, whilst there is appetite to discuss consolidation within a single national banking market, the bank executives were skeptical that cross border consolidation can take place in the immediate term. How has the macroeconomic backdrop changed for financial institutions? JO: Last year, we hosted our conference at a time when Banco Popular, a large Spanish bank, was facing deep distress, and was sold for €1 to Santander on the opening day of our conference. This time around, the "crisis and distress" discussion gave way to more established topics -- ability of banks to pay higher dividends, to cut costs, compete with fin-tech companies, and areas of growth. This said, political risk remains elevated and has scope to cloud what is otherwise a better outlook. What other takeaways stood out from the event? JO: They fall into three categories. First, the operating environment remains tough. Rates are negative in Europe, which pressures margins; loan growth remains subdued, and there is upside pressure on costs, primarily due to high need for IT spend. Second, there is a recognition -- amongst bank executives, investors and regulators -- that the sector would benefit from a more rational market structure. Third, the key project for Eurozone banks -- the completion of the bank union -- is still only a long-term prospect. Goldman Sachs Media Highlights The Wall Street Journal - June 8 [Lloyd Blankfein: Same CEO, Different Goldman Sachs]( Bloomberg - June 8 [Goldman Sachs' Gnodde on Retail Banking, Consolidation, Brexit]( (10:19) Financial Times - June 6 [Goldman Sachs Enlists Staff for Cyber Security War Games]( Bloomberg - June 6 [Why Startups Keep Choosing Human Names]( CNBC - June 6 [US Growth is Now Probably 'As Good As It Gets,' Goldman's Chief Economist Says]( Bloomberg - June 5 [Goldman's Beinner Sees a Lot of Complacency in Markets]( (5:50) [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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