“If you don’t have that and keep it going,” inflation could drop a little to rebound in 2024, reminiscent of what happened in the 1970s, Mr Sipahimalani said.
“So the best likely outcome is for the Fed to stay the course and really crush inflation. And if that leads to a recession, and we think it will, then so be it,” he said, adding “you bother, basically.”
With the large decline in earnings that would likely accompany a recession, “it’s not hard to imagine another 20% to 25% decline for global equity markets,” Gardner said.
Mr Sipahimalani said the case could be made for a milder recession, with strong consumer balance sheets, a general lack of excessive corporate leverage and well-capitalized banks potentially limiting further stock market declines by from current levels at 10% or 15%.
The broad themes that have guided Temasek’s investments over the past five years – digitalization, longer lifespans, sustainable living and the changing nature of consumption – remain “valid for the long term”, he said. declared.
Temasek will continue to invest there, “with some nuances”, he said.
The first is that everything must now be seen through a geopolitical lens, Mr Sipahimalani said. As an example, he noted that in previous years, Temasek could invest in a biotechnology company in China based on a huge opportunity in the domestic market, complemented by connections with multinationals to sell as well. in the USA. Today, amid US-China tensions, this foreign component cannot be counted on, he said.
That left Temasek to focus more on “large national markets or stand-alone businesses in a particular sphere of influence,” he said.
Returning to the issue of inflation, Mr Sipahimalani said that the fact that public markets, and private markets as well, have not yet started to price in the prospect of earnings downgrades “makes us more cautious, but once that starts to be priced in, I think we’ll be aggressive enough to keep investing” alongside those trends, he said.