Moreover, a more normal interest rate environment will ultimately benefit the economy and equity markets. While larger corporations have been able to access capital to support their growth, the low interest rate environment has not been as kind to smaller businesses. Because interest rates are lower, the margins that banks make on their loans to small businesses have been lower, too. This has contributed to banks’ reluctance to lend. If rates were higher, banks would be more likely to lend, provided that the economy was also growing. Small businesses are an important engine of job growth, so with more capital, they would be better able to hire more people, which would in turn support economic growth. Further, as illustrated in Figure 2, stocks have tended to perform well during the first year of an interest rate increase.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.
John P. Calamos Sr. is chairman, CEO and global co-CIO of Calamos Investments, a firm he founded in 1977. With origins as an institutional convertible bond manager, the firm has grown into a global asset management firm with major institutional and individual clients around the world. The firm is headquartered in the Chicago metropolitan area with additional offices in London and New York.