By early 2026, investors have had nearly four years to live with policy rates that are not pinned near zero. The initial shock of the 2022–2023 hiking cycle has faded, but its consequences still ripple through every major asset class. What's happening is less a crisis and more a slow, grinding repricing of what risk, return, and "fair value" mean.
The most important change is psychological. For over a decade, markets assumed central banks would backstop severe drawdowns. That playbook produced elevated valuations in long‑duration assets, compressed credit spreads, and a search‑for‑yield dynamic. When policy rates jumped and stayed high, those foundations cracked.
Risk-free assets suddenly mattered again. When cash and short-term paper yield mid‑single digits, the opportunity cost of owning volatile assets rises. Portfolio construction discussions now revisit balance, income, and downside protection.
Equity markets have repriced. Early-stage growth, speculative tech, and profitless stocks were culled. Survivors have proven pathways to profitability or durable moats. At the index level, narrow leadership persists: mega‑caps tied to AI, infrastructure, and healthcare account for disproportionate gains.
Credit markets: the distinction between balance sheets matters again. Refinancing waves at higher coupons expose weak structures. Default rates have drifted upward. High-grade corporates, municipals, securitized products, and parts of EM debt look more appealing.
The macro environment remains characterized by cross‑currents: growth neither roaring nor collapsing, inflation off peaks but sticky, fiscal deficits large. Duration risk is delicate. Currency markets reflect divergent rate paths and growth trajectories.
Tail risks feel fatter. Geopolitical tensions, cyber risk, climate shocks, political instability—markets have not priced these as certainties, but there is less complacency.
Private markets: venture and growth equity valuations have come down. LPs are more selective. In private equity, leveraged buyout arithmetic is tougher. Core real estate faces reckoning.
For individuals: positive real yields in safer assets are a relief, but comfortable narratives—central banks will always rescue, "buy the dip"—look less certain.
The "great repricing" is about the system adjusting to the idea that the post‑crisis decade was abnormal. Capital has a cost again. Cash flows matter. Dispersion is higher, and careful analysis can add more value.