Singapore’s state-owned investment firm Temasek on Tuesday cautioned that a potential re-election of former President Donald Trump could lead to a slowdown in global growth, impacting U.S. companies and financial markets.
What Happened: Rohit Sipahimalani, Chief Investment Officer at Temasek International, expressed concerns about the long-term impact of a Trump presidency on the global economy. Despite the current market optimism, Sipahimalani believes that a Trump win could lead to a stronger dollar, higher rates, and increased uncertainty due to tariffs, reported Bloomberg.
He also suggested that a Trump victory might not bode well for emerging markets, contrary to the general consensus.
"I know the conventional wisdom and consensus is that right now a Trump presidency is better for markets," Sipahimalani said.
"But as you look out to 2025, the picture is not that clear."
Temasek, with a net portfolio value of S$389 billion ($294 billion), has recently shifted its investment strategy towards the U.S., with plans to invest $30 billion over the next five years.
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Sipahimalani predicted that the markets would be more volatile in 2025 than in recent years, with potential “tail risks” being greatly underestimated. He also highlighted the potential impact of a global growth slowdown on U.S.-listed firms, given that 25% of S&P 500 companies’ revenues come from outside the country.
"The tariffs are going to create uncertainty, which is never good for investment and actually I think it'll be negative not just for emerging markets but across the world."
Why It Matters: Temasek’s warning comes amid a growing debate over the potential economic impact of a Trump re-election. A recent survey of economists suggested that Trump’s economic policies could drive inflation and deficits higher than those of his Democratic opponent, Kamala Harris, if he were to return to office.
Despite the potential economic risks, Steve Schwarzman, CEO of Blackstone Inc., has expressed confidence that the U.S. will avoid a recession, regardless of the election outcome. Schwarzman believes that both candidates have proposed policies that could bolster economic growth.
Meanwhile, Trump is pushing forward with his controversial tariff plan, despite growing backlash from voters. According to an NBC News poll, 44% of voters said they’d be less likely to back a candidate supporting universal tariffs, while only 35% were on board.
Price Action: With just about a week remaining until Election Day, the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500, has delivered returns of nearly 14% over the past six months. Meanwhile, the Invesco QQQ Trust, Series 1 QQQ, which follows the tech-heavy Nasdaq, has posted returns close to 15%.
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