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Capital Market Review

  • Capital Market Review
  • April 2023
  • Iron Capital Advisors

First Quarter 2023

How is your business?

I recently asked that question at three different locations for one of our clients and got three slightly different answers.

The first answer came from the CFO, who told me they would probably do fewer acquisitions this year because of higher interest rates. The second came from a field office who said that business was good; last year had been a record for them, and this year looks slightly better.

The third location rep said they were doing fine, but one of their clients was seeing a slowdown because part of their business had come from Russia.

These three stories are a great indicator of the actual impact the Fed has on the economy by raising interest rates: Actual daily life, including most business, does not rely upon borrowing, therefore is not impacted by interest rates rising.

Financing activities are directly impacted. They will not be shut down, but the higher cost of borrowing will mean that some deals are no longer profitable. This impacts Wall Street’s view.

Structural barriers, such as sanctions against Russia or other regulations, have a large impact. Supply, demand, interest rates – none of that matters if regulators shut the activity down.

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