People invest more in companies when interest rates are low, because shoving it into lower risk vehicles becomes less profitable / likely to beat inflation. As interest rates rise, the value of safer places to put your money, such as bonds, increases.
- Higher int rates make it more expensive for companies to borrow, and to invest in additional production capacity. Depending on the company, this can cause their stock price to decline as lower investment usually signals lower revenue growth in the future.
- Higher int rates also encourage consumers to put money into savings accounts and bonds instead of stock markets, which lowers demand for stocks --> lower stock prices --> market indices fall as well (S&P500, Dow Jones Industrial Average). Movements in these indices are considered a barometer for the broader economy.
It means that there will be less investment cash pumping up the valuation of startups.
High rates means that there is less liquidity overall (people don't want to borrow money and invest it), and it means that there are decent alternatives to investigating in startups (if T bonds pay 10% guaranteed, why burn cash on a company that will probably fail?)
Stock price is calculated as a sum of future cash flows (dividends D, for example) discounted by time value of money (risk free rate r, for example): sum(P_n), where P_n = D / (1 + r) ^ n and n is a year. When rate r is up P automatically down.
it'd mean your savings account would beat the S&P500 (after it finds a bottom obviously; this year having cash in a 0% savings account has been amazing!).
This is the super simple version.