The New Winners' Enclosure
So, if the high-growth, debt-addicted darlings of yesteryear are struggling, who is popping the champagne? The answer, rather predictably, lies with the businesses that never really got invited to that wild party in the first place. I’m talking about the steady, perhaps even slightly boring, companies that are built for this kind of weather.
Financial firms, for instance, are in a rather enviable position. When the cost of borrowing is high, the gap between what they pay you for your savings and what they charge someone else for a loan widens beautifully. This is their bread and butter, and right now, the loaf is thick and the butter is spread generously. Think of companies like Synchrony Financial, which specialises in consumer credit. Higher rates can mean healthier margins.
Then you have the insurers. Firms like Genworth Financial operate on a simple, brilliant model. They collect our premiums today and pay out claims tomorrow. In the meantime, they invest that great big pile of cash. In a high-rate world, the returns they can get on that pile are suddenly much more attractive, potentially giving their profits a healthy boost.
