From cheap money to capital discipline
After a decade of near-zero interest rates, corporate America is adapting to a new reality. The cost of capital has normalized, exposing business models reliant on abundant liquidity. Sectors that thrived on leverage—private equity, real estate, and technology—now face compressed margins and slower growth.
Data table: Corporate borrowing and investment trends
| Metric | 2021 | 2023 | 2025 (Est.) |
|---|---|---|---|
| Average Corporate Bond Yield (%) | 2.3 | 5.0 | 5.4 |
| Investment-Grade Debt Issuance ($T) | 1.8 | 1.3 | 1.2 |
| CapEx Growth (%) | 8.5 | 3.0 | 2.1 |
| Nonfinancial Corporate Debt/GDP (%) | 49 | 47 | 46 |
Sources: Federal Reserve Financial Accounts, SIFMA, BEA.
M&A and private equity slowdown
Higher borrowing costs have cooled dealmaking. U.S. M&A volume fell 25% in 2024, while private equity deal activity dropped nearly 40%. Funds are holding more dry powder but deploying selectively into infrastructure and AI infrastructure plays.
The productivity pivot
Executives are shifting focus toward operational efficiency and margin resilience. Automation, AI-driven analytics, and energy efficiency upgrades are receiving more capital than traditional expansion projects. Balance sheet health now defines corporate resilience.
Strategic takeaway
Business leaders should assume a long-term interest-rate environment near 3–4%. Financial prudence and flexible capital allocation will be the differentiators in 2026 and beyond.