Rising Rates Create Uneven Business Landscape, Favoring Large Firms While Squeezing Smaller Ones

Interest rates are much higher now compared to the near-zero rates during the pandemic, creating challenges especially for small companies.

Higher rates make borrowing more expensive, favoring large companies that have more reserves and protections.

Small companies tend to perform better when growth is strong, while large caps attract more investors late in cycles.

Mergers and acquisitions activity has already slowed with higher rates; it may pick up if good small businesses struggle and become targets.

If rates are cut by the expected 75 basis points this year, policy will still be restrictive, similar to the current M&A environment.