Temasek, Singapore’s state-owned investment firm, issued a cautionary note on Tuesday regarding the potential impact of former President Donald Trump's possible re-election on the global economy. Temasek’s Chief Investment Officer, Rohit Sipahimalani, has raised concerns about the negative ramifications that a Trump presidency could have on growth rates worldwide, including effects on U.S. corporations and financial markets. Sipahimalani's remarks suggest that despite prevailing market optimism, a Trump victory could result in a stronger dollar, higher interest rates, and an increase in uncertainty due to trade tariffs.
Sipahimalani challenges the belief that a Trump presidency might be favorable for markets. However, he warns that the outlook beyond 2025 remains uncertain and cautions against overlooking possible future risks. Temasek, managing a portfolio valued at S$389 billion (approximately $294 billion), has shifted its investment focus towards the U.S., planning substantial investments totaling $30 billion over the next five years. He speculates that market volatility may increase in 2025 compared to recent years, emphasizing that underestimating 'tail risks' might undermine stability.
A slowdown in global growth could adversely affect U.S.-listed firms, notably since companies in the S&P 500 derive 25% of their revenues from international markets. The imposition of tariffs is seen as a driver of uncertainty, adversely affecting investments globally, not just in emerging economies. This warning coincides with a broader debate on the economic implications of a Trump re-election. Recent surveys among economists predict that Trump's policies might lead to higher inflation and budget deficits compared to those posited by his Democratic opponent, Kamala Harris.
Despite such risks, Blackstone Inc.'s CEO, Steve Schwarzman, has voiced confidence that the U.S. economy will avert a recession regardless of the election's outcome, suggesting that economic growth might be supported by policies proposed by both candidates. Nevertheless, Trump remains steadfast in advancing his contentious tariff agenda, amidst increasing disapproval from the electorate. An NBC News poll indicates that 44% of voters would likely not support a candidate advocating for universal tariffs, while only 35% are in favor.
With the election approaching, the SPDR S&P 500 ETF Trust, which tracks the S&P 500, has shown returns of nearly 14% over the past six months; similarly, the Invesco QQQ Trust, focused on the tech-oriented Nasdaq, has seen approximately 15% returns. This contextual analysis highlights the intricate dynamics at play leading up to the potential re-election and its implications on both domestic and international economic landscapes.
