Significant rises in interest rates have resulted in Mega-Cap tech stocks recording record high returns on their cash reserves. However, what about the rest of the market?

Small cap companies are paying the highest interest expense ever recorded whilst their interest income is significantly lower than needed.

Unfortunately, I believe this may just be the beginning as many SMEs have locked in their interest when rates were low, and will face much higher rates when it comes to refinancing. This echoes many households who hold mortgages.

This is significant data. Why?

According to the U.S. Small Business Association (SBA), “small businesses of 500 employees or fewer make up 99.9% of all US businesses and 99.7% of firms with paid employees”.

Of newly created jobs between 1995 and 2020, “SMEs accounted for 62%—12.7 million compared to 7.9 million by large enterprises”. In addition, A 2019 SBA report found that “small businesses accounted for 44% of U.S Economic activity”