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Interest Rates Are Going Up. And That Can Also Impact Your Investments.

It’s Been Years Since Investors Faced a Rising Rate Environment. Here’s What to Expect.

Mar 31, 2022

In March 2022, the Federal Reserve issued its first rate hike in more than three years. This move increased U.S. interest rates by 0.25%, and reinforced the market expectation that more rate hikes are coming. So, what are interest rate hikes and why do they matter to investors?

Interest rates are a key monetary policy tool used for controlling the pace of the economy. Interest rate hikes are used to combat inflationary pressures like the rising cost of essential goods and services, while rate cuts are used to lower the cost of doing business and accelerate economic growth.

According to Securitize Capital’s Managing Director and Head of Portfolio Management, Adil Abdulali, “Rate hikes mean risk assets go down in value. Anything with a future cash flow is discounted at a higher rate. Assets held privately just take longer to adjust and sometimes insulate investors from the volatility of public markets."

For investors, rate hikes affect the amount of interest that businesses must pay to service loans. Businesses with large, outstanding loans tend to be devalued when there are rate hikes. However, businesses with solid balance sheets often outperform.1 Investors should pay attention to how businesses in their portfolio perform as rate hikes continue, and adjust accordingly.

“Most digital assets have yet to find product market fit and until they do, will follow other risk assets. The ones that have proven uses such as Bitcoin and Ethereum could eventually surprise over the longer term as inflation hedging and true utility subdue the effect of rate hikes," said Abdulali.

For digital asset security investors, keeping track of performance with Securitize Markets2 is easy and transparent. Because trading is fully digital, key performance metrics are updated in real-time and investors can engage with their portfolio from anywhere with an internet connection. So, when interest rates change, investors can take action without skipping a beat.

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Past performance is no guarantee of future results.

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Securitize Markets is an SEC-registered broker-dealer, FINRA member and operator of Securitize Markets ATS, and an SEC-regulated Alternative Trading System (ATS).

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