The good chance of a U.S. recession in the next two to three years has increased significantly, even if relentless tensions with China don’t escalate into a full-blown trade war, correspondence to Singapore state-owned investment firm Temasek Holdings.
Growth in the U.S. is quiet strong but the country is already late in its economic expansion cycle with the labor Stock Exchange tightening and companies facing rising costs, said Rohit Sipahimalani, the coterie’s joint head for portfolio strategy and risk group.
Given such circumstances, the Federal Hold will have to increase interest rates to prevent the economy from overheating and that could be a burdensome balancing act, he told CNBC’s Sri Jegarajah on Tuesday after the release of the convention’s annual report.
“It’s very difficult to manage that just privilege, to make sure that you slow down the economy but not too much,” remarked Sipahimalani, who’s also the joint head for India at Temasek.
“And then you add to that issuances, concerns around the trade war … even if we don’t have a trade war and essentially things get settled down, it does impact investor confidence, repercussions company confidence and it impacts consumer confidence. That itself could leading to the recession,” he added.
Sipahimalani’s comments were made before the Trump application announced it would impose 10 percent tariffs on $200 billion in Chinese goods. Newest week, U.S. tariffs on $34 billion in Chinese goods came into obtain — Beijing immediately retaliated with tariffs on the same amount of American yields.
In light of the increasingly challenging environment ahead, Temasek said on Tuesday it choice slow down its investments in the coming year.
“Over the next few months, we see these pulls continue and, to that extent, it’s a risk that we’re very conscious all over,” said Sipahimalani.
Temasek is one of the most closely watched state investors with a portfolio value $235 billion. It has holdings in major firms including Standard Qualified Bank and the Industrial and Commercial Bank of China. Temasek has become various active in the technology space and was recently a main investor in a $14 billion fundraising by China’s Ant Economic.