Shouldn’t it work in the reverse? If businesses are getting loans at higher interest rates shouldn’t they be doubling down on investments as a safety net?
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It won’t necessarily cause markets to crash. However, raising interest rates does a few things. It slows down the general economy because there’s fewer loans taking place, so there’s less demand for commodities. It also makes bonds a better investment, so investors will prefer to sell stocks and buy bonds instead. However, this only applies to bonds issued *after* the rate increase, bonds issued before the rate increase still have the older, lower interest rates so they’ll also get sold along with stocks as investors need access to more money to buy the newer, higher interest rate bonds. In addition, many companies borrow a lot of money and pay that debt by borrowing more money. This gets them more cash on hand to fund growth. Increasing interest rates will make it more expensive for those companies to do so, cutting into their ability to grow, which is one of the things that investors look for when they invest in a company. If growth slows, then investors are more likely to sell their stocks in that company to buy new bonds instead.
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