Despite the knee-jerk panic that usually follows Federal Reserve rate hikes, historical data highlights that public equities often bounce back over a longer horizon. According to research cited by MarketWatch, stocks in the information technology and energy sectors post the best average returns one year after the central bank increases interest rates.
For tech founders and early-stage backers, this resilience is a vital counter-narrative to macro doom-mongering. While higher interest rates undeniably raise the cost of capital and elevate the hurdle rate for risk assets, public markets demonstrate that sector tailwinds and pricing power in technology can ultimately overcome tighter credit conditions.
In private markets, rate hikes typically compress entry valuations and force backers to demand higher risk premiums relative to risk-free yields. However, if public tech equities continue to advance a year post-hike, exit environments remain viable rather than slamming shut, protecting the downstream liquidity that early-stage investors rely on.
For angels and retail backers allocating from £500 up, the takeaway is clear: interest rate hikes change the price of capital, not the fundamental value of tech productivity. Waiting for monetary policy to loosen before deploying capital often means missing the early building phases of the next market cycle.