Higher for Longer and the Cost of Capital Reset

Global financial markets have entered a regime characterised by persistently higher interest rates and a broad reset in the cost of capital, marking a clear departure from the post-Global Financial Crisis period of near-zero rates and abundant liquidity. This shift reflects a combination of structural forces, including persistent inflation pressures, constrained labour supply, chronic underinvestment in housing and infrastructure, elevated public debt burdens, and increasing geopolitical fragmentation. Central banks have responded by maintaining restrictive policy stances, signalling that interest rates may remain elevated for longer than previously anticipated. The resulting increase in discount rates has important implications for valuation, capital allocation, and risk pricing, mechanically reducing the present value of future cash flows and placing particular pressure on long-duration assets and capital-intensive business models. As capital becomes more expensive, balance sheet resilience, cash flow durability, and disciplined reinvestment are increasingly central to investment outcomes across both public and private markets.