Temasek warns Trump victory could slow global growth despite market optimism

Singapore’s state-owned investment firm, Temasek, has raised concerns that a Trump victory in the upcoming United States presidential election may not benefit global growth or financial markets in the long term.

Temasek International’s Chief Investment Officer, Rohit Sipahimalani, warned that re-electing Trump could result in slower global economic growth, affecting not only emerging markets but also impacting US companies and their global operations.

Sipahimalani shared his perspective with Bloomberg on Tuesday (29 Oct), pointing out that while a Trump presidency may initially seem advantageous for markets due to anticipated tax cuts and regulatory rollbacks, the global economic outlook beyond 2025 becomes less certain under his policies.

“I know the conventional wisdom and consensus is that right now a Trump presidency is better for markets,” he said, highlighting expectations for policies that favour corporate profits and deregulation.

However, he cautioned that these perceived benefits could be offset by Trump’s trade policies, including tariffs and a strengthened US dollar, which could dampen investment and destabilise markets.

With the US presidential election just days away, global investors are closely monitoring the outcome, as market trends suggest a Trump victory would likely benefit holders of stocks and Bitcoin.

Vice President Kamala Harris holds a slight lead over former President Donald Trump in the five most recent national polls. However, most surveys indicate a virtually tied race for the White House, with close contests across all seven swing states, leaving the outcome highly unpredictable with only one week until Election Day.

According to Bloomberg’s Markets Live Pulse survey, a Trump administration could create more favourable conditions for cryptocurrency and stock markets than his Democratic opponent, Kamala Harris, might offer.

Nevertheless, while a Trump win might buoy stock and Bitcoin investors in the short term, Sipahimalani argues that global growth could face setbacks, particularly in emerging markets.

Explaining the potential implications of a stronger US dollar and higher interest rates under Trump, Sipahimalani pointed out that such conditions would add strain to emerging markets.

“A Trump win is probably going to mean a stronger dollar and higher rates than you would otherwise have in a Harris administration,” he noted, adding that tariffs would also fuel market uncertainty.

He warned that higher tariffs would likely affect global investment dynamics, slowing economic growth not only in emerging markets but worldwide.

As one of the world’s largest state-owned investment firms, Temasek manages a portfolio valued at S$389 billion (US$298 billion) as of 31 March 2024.

Recently, the firm has focused on deploying more capital in the US, where it plans to invest approximately US$30 billion over the next five years and has invested billions in US technology giants just before the sector experienced a notable downturn in July.

Despite this expanded US focus, Sipahimalani anticipates higher market volatility by 2025, signalling that global economic conditions may become less stable than they have been in recent years.

He further stated that current markets appear to be significantly underestimating “tail risks”—events that, while statistically unlikely, could have substantial impacts if realised.

For example, a global economic slowdown would likely influence US companies directly, as 25 per cent of S&P 500 firms’ revenues are generated internationally.

According to Sipahimalani, this interconnectedness makes the US economy especially vulnerable to global economic shifts, and any decline in growth overseas could diminish corporate earnings within the US.