Interest Rate Cycle

Rate cycles are long and asymmetric: central banks typically raise rates gradually and cut them quickly, because the conditions requiring cuts arrive faster than those requiring hikes. The cycle drives asset prices through the discount rate, so falling rates lift both bonds and long-duration equities while rising rates compress both. Different sectors respond in opposite directions — banks generally benefit from rising rates through wider margins, while rate-sensitive borrowers such as real estate and infrastructure suffer. Positioning for a turn in the cycle requires being right about both direction and timing, and market pricing already contains the consensus view of both.