It’s as simple as this: as long-term interest rates continue moving higher, virtually every important piece of financial math gets worse, all at the same time.
The discount rate used to value stocks rises, which makes future earnings worth less today. Mortgages get more expensive. Corporate borrowing gets more expensive. Private equity deals and private credit…much of which is already FUBAR but not showing it yet…become harder to finance. Leveraged companies have to refinance debt at higher rates. Consumers pay more to borrow and the federal government pays more to service its enormous pile of debt.
Yikes.
