Bloomberg Surveillance · Wednesday, September 30, 2026
Higher interest rates present a headwind for small-cap companies, particularly those with high leverage and variable rate debt. While strong economic growth and labor markets can be beneficial, investors need to look beyond concentrated earnings in technology and energy. A broader earnings growth across manufacturing and other sectors is needed to ensure durable economic expansion.
“It's got to be a headwind. I think if you're thinking about small cap as a group, in general, higher interest rates are harder because most of them are borrowing at the banks, and so they're on variable rates. And a lot of them are highly levered.”
“But the reason why interest rates are going up is important too, right? If it's solely about inflation... that's not great. But if it's also about their strong economic growth and their strong labor markets, that tends to be actually better for small caps.”
“I think going forward, we want to continue seeing a broadening of the growth in earnings, right? The numbers have been pretty eye-popping, but the problem is that it's concentrated in technology with a huge chunk of it being the revaluations of these private. Companies, right?”