The world economy is tightening, and markets are starting to feel the pressure. Interest rates are higher than they’ve been in years, and that’s making borrowing more expensive and slowing down the flow of credit.
Central banks are keeping rates high. In the U.S., for example, the Federal Reserve is holding its key interest rate in the range of 4.25% to 4.5% as of mid-2025. This restricts easy borrowing, especially for companies and consumers. (Source: Federal Reserve Monetary Policy Report, June 2025)
Equities are under strain. Many growth and tech companies are seeing their earnings forecasts cut by around 3%–7%, as demand weakens and they tighten spending. Valuations are also elevated: the S&P 500’s forward 12-month P/E ratio recently reached 23.1×, which is above its five-year average of about 19.9× and its ten-year average of about 18.6×. (Source: FactSet analysis, November 2025)
Even among the largest tech companies — sometimes called the “Magnificent 7” — many are trading at very high P/E multiples, showing how much the market is expecting from AI and growth themes.
Crypto markets are cooling. Trading volumes on major exchanges have dropped compared to earlier in the year, and liquidity in altcoins has thinned out. Still, long-term institutions are continuing to buy core crypto assets like Bitcoin and Ethereum, which suggests long-term conviction even as short-term activity slows.
Bitcoin recently broke down through a support level around $88,000, falling closer to $82,000, which has created caution among more active traders. However, steady institutional flows point to underlying confidence.
Gold is holding up. In the first half of 2025, global gold ETFs saw strong inflows of roughly $38 billion, the highest in several years. (Source: World Gold Council) Central banks have also continued to buy gold, adding to demand. (Source: World Gold Council)
Gold prices climbed almost 26% in the first half of the year, supported by geopolitical uncertainty, safe-haven buying, and persistent demand from central banks. (Source: World Gold Council)
What This Means for Investors
In this environment, being selective matters. High valuations make it risky to chase momentum or hype. Companies with strong balance sheets, clear earnings visibility, and consistent cash flow are better placed to handle tighter financial conditions.
Diversification also becomes more important. A mix of equities, AI-related companies, crypto assets, and gold can help investors ride out volatility while keeping upside exposure.
Higher rates are unlikely to disappear quickly, so it makes sense to think long term and focus on investments that can grow sustainably without relying on cheap capital.
How Tech Spending Is Likely to Change
With the cost of money rising, tech companies are starting to prioritise profitability over rapid expansion. Many firms are now more careful about how they allocate resources, and they’re focusing on investments that can scale efficiently and generate real returns.
Instead of “growth at any cost,” the focus is shifting to:
- Strong cash flow
- Sustainable margins
- Smart capital allocation
- Scalable platforms
- Clear, measurable outcomes
