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One of the top articles on Yahoo Finance recently was a post by Ray Dalio and other experts that due to rising interest rates, we risk facing a recession in the United States. The Federal Reserve, the central bank of the United States, has just raised interest rates. It is expected that we will see even more This, along with higher Treasury yields, is now raising concerns about an economic slowdown here in the United States. And the question arises: are we facing a recession? Now everyone has their own opinion, but instead of talking about emotions and assumptions, I want to turn to history. Because although history does not repeat itself exactly, it has its own patterns.
We have seen many different periods in our history when the Federal Reserve has raised rates, and we know exactly how that has affected the stock market and the economy. So in this video, I don't want to talk about emotions, but I'll just dig into the numbers to understand: during previous rate hike cycles, what happened to the stock market, what happened to the economy, and what could await us in 2026 and 2027? Because now the Federal Reserve is saying they are ready to fight inflation. In 2026, they have already raised interest rates once. There is a very high probability that they will raise interest rates again in October, this month, in 2026. There is also a chance that they will raise rates in December before the end of 2026. So, we are entering a
rate hike cycle. This means that borrowing money for a mortgage, car loan, credit card, or business loan will become more expensive, and therefore people and businesses will generally borrow less money because it is more expensive. So, what will be the impact of these higher rates on our economy and the stock market so you know how to act, how to become a smarter investor, and how to find investment opportunities. Let's just look at history. Prior to this rate hike in 2026, the last rate hike cycle we saw was between 2022 and 2023 after the pandemic. That rate hike cycle lasted 17 months. So, the Federal Reserve has been raising interest rates for 17 months, and it has been doing so quite aggressively. They raised rates from about 0.25%,
effectively zero, to about 5.5%. Between 2022 and 2023, we still saw an overall increase in the stock market, albeit a barely noticeable one. Over these 17 months, it has grown by about 5%. But during that same period, we also saw a stock market crash. In 2022, the stock market fell by about 20%. So, yes, the market did fall when rates started to rise, but it recovered in 2023. The economy did not collapse during that period. We did not see a recession. There were fears of a recession. In fact, the economy continued to grow, and there was no recession after interest rates were raised Although during that
rate hike cycle there were many concerns about a possible recession. So, between 2022 and 2023, the market fell, but recovered in 2023, and the economy did not slow down. The previous rate hike cycle lasted from 2015 to 2018. This rate hike cycle lasted about 3 years. This was after the Great Financial Crisis of 2008. During the 2008 crisis, the Federal Reserve also lowered rates to zero, and only in 2015 did they start raising them again During these 3 years, from 2015 to 2018, the Fed raised interest rates not too aggressively. They raised interest rates from near zero to around 2-2.5%. year period, we did not see a stock market crash. We saw the stock market rise about 21% over those 3 years, and
the economy was growing at that time. We didn't see a recession during or after that. But now it gets more interesting. Because before raising rates in 2015-2018, the Fed raised interest rates in 2004-2006. It was a very interesting time, because that was when housing prices were 2000s, mortgage rates were low. There were many It was possible to get a mortgage with a very low initial rate. You didn't even need income or proof of it. There were " ninja loans": no income, no job, no assets. Therefore, it was very easy to get a mortgage. Everyone bought houses or several houses at once, because you could buy a home, put it up for sale in 3 months, and make a profit. And so everyone felt like brilliant real estate investors. People
were buying up all these houses, so the Federal Reserve started raising rates to contain and cool the housing market. So between 2004 and 2006, in those two years, the Federal Reserve raised interest rates from about 1% to just over 5%. During those two years of rate hikes, the stock market rose 13%. But it was after that rate hike that we felt the pain. The rate increase occurred between 2004 and 2006. These higher rates also contributed to rising mortgage rates, because remember, these were . So people who had three- or five-year saw their payments go up because suddenly it turned out that the loan was unaffordable. Because you borrowed $300,000 at 3%, and now it's costing you 5%. And now that mortgage rates have gone up, people couldn't
make the monthly payments, so they decided, "I'll try refinancing." And when they tried to refinance, it turned out that the value of the house had not increased, but had fallen, and now people were in a debt hole, and we saw a wave of refinancings that set off a domino effect. And this is what led to the Great Recession and the economic collapse, which was also inextricably linked to the stock market crash. When most people think about how to improve their financial situation, they try to cut down on every expense possible, which is a good thing. But there is an alternative: how can you also earn a little more on the expenses you are forced to make. You have to spend money on fuel, you have to spend money on groceries. But what if you could get a little
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you rich, but if you can get some money back, then why not? To date, Upside has returned over a billion dollars in cashback to its users. Plus, when you use my promo code mindset, you'll also get an extra 25 cents off a gallon of fuel for your first fill-up, just by using my link and promo code. So, if you want to learn more, here's the QR code, or you can use my link in the description below. So, the stock market fell by more than 50%. The housing market has crashed across the country. This came after a cycle of interest rate hikes, and it was these hikes that actually caused the bubble to burst.
Let's look even further into the past. Before the rate hikes in 2004-2006, we saw a similar increase between 1999 and 2000. It was about a year of rising interest rates. What happened? Well, on the eve of 1999/2000, we saw a rapid increase in the valuations of Internet companies. If you went to a venture capital firm and said, "I have an idea for this company. We're going to sell really cool carpets, and I'm going to call it carpets.com." You could raise millions of dollars. You didn't need a business idea. All it took was just an idea. Company valuations skyrocketed based on ideas alone.
Businesses without income. That was the main thing. Companies with no revenue, just an idea, received multi-million dollar valuations and went public, raising a lot of money. Well, to curb what was happening, the Federal Reserve raised interest rates from about 4.75% to 6.5%. And during that rate hike cycle between 1999 and 2000, we saw the stock market rise 9%. We haven't seen a stock market crash. But he came later. So, during the rate hike cycle between 1999 and 2000, the economy grew and the stock market rose, but after 2000, the bubble burst. It was after the rate hike that we saw the stock market crash. After the rate hike, we saw how the economy was affected. The stock market, the overall stock market, fell about 46%.
Internet companies, i.e. the Nasdaq, fell about 78%, and we saw a recession in 2001. Before that, you see why history matters. Before that, the last rate hike cycle was the period of 1994-1995. This was about a year of rate hikes, when they went from about 3% to 6%. The stock market remained essentially stable. And the economy was growing. And after 1995, we didn't see a serious crash or recession until the dot-com bubble burst in 2000. What does this mean? So if we look at these 1, 2, 3, 4 , 5 interest rate hike cycles that we've seen over the last 30-plus years, we see that we've never actually seen a crash during a rate hike cycle. We have never seen a recession during a rate hike cycle. When we saw problems in the economy or the stock market
, it usually happened after. The exception is 2022. In 2022, during the rate hike, we saw the stock market crash right in the middle of this cycle. Of course, 2022 was a somewhat exceptional and strange period as we raised rates to combat inflation through money printing during the pandemic. Why am I telling you this? Because history is not repeated word for word, but it rhymes, and we can draw many conclusions. So let's talk about it. But I want to remind you that for those who want to stay up to date with events in the financial markets, my team prepares a free Market Briefs newsletter every morning, where we analyze what is happening in the economy, real estate, stocks, cryptocurrency, and global markets. This is an interesting and witty
newsletter. I think you'll like it. It is completely free. If you have n't subscribed yet, the link is in the description below. Why is this important? Because there is a lot of talk about higher interest rates right now, and there are many fears that they will contribute to a recession. And these fears are justified. And the reason they are justified is that higher interest rates are designed to slow down the economy. This is precisely their goal. Why? Because the Federal Reserve believes that if it can slow down the economy, it can also slow down inflation. This makes some sense. The reason is that if we slow down the economy, people will spend less money borrowed on credit. Why? Because if I borrow less money from the bank, I have to print
less money. After all, when you take money from a bank, a significant money issue occurs because your bank uses what is called fractional reserve banking: this means that the bank receives a deposit of $100 from you and then actually lends out $1,000. So, in order for this economic system to function, when people take money out of the bank, it is also a form of printing money. When borrowing occurs, there is an element of money printing, which helps stimulate spending. So when the Federal Reserve raises interest rates, the idea is to slow spending as a way to curb inflation. This is where people jump to the conclusion that we are immediately headed for a recession, but you have to remember how our economic system works to understand how
it all connects, because we jump to conclusions without understanding the mechanisms. Our economic system runs on costs. We live in a credit economy, which means our economy is not based on how much money you have, but on how much credit you have. After all, if you earn $100, you not only have $100 of purchasing power in cash, but you also have $100 of purchasing power on an Amex card in your pocket. And these $200 are people's real purchasing power. So now that interest rates are rising, that purchasing power drops from $200 to a smaller amount, because as rates rise, people's purchasing power decreases. After all, with higher interest rates, you can't borrow that much money. This is why higher interest rates contribute to a slowdown
in the economy, because people take out fewer loans when rates are higher. The question then becomes: how much further will interest rates rise and how long will they remain high? This ultimately determines the level of economic hardship, as the Federal Reserve System is balancing on a tightrope, where on one side we have the problem of inflation. Inflation is almost twice the Federal Reserve's target. There are fears that inflation will not decrease in the near future. How do we know this? The Federal Reserve itself says that we don't know when inflation will decline. We have these high oil prices coming from the Middle East. We have these concerns
about customs tariffs. Our national debt is still growing. All of these factors contribute to higher inflation. Well, to combat this inflation, the Federal Reserve raises interest rates. And this increase in interest rates goes against higher oil prices, goes against tariffs, goes against the national debt. So, we have certain things happening in the economy, and then we see what the Federal Reserve does to combat the inflation caused by what's happening in the economy. And if we see inflation slowing sooner rather than later, that would mean less economic hardship. But if the Federal Reserve has to keep raising interest rates, it will mean more economic hardship. The reason is that it means more businesses will be affected. Because
businesses not only have to pay more for new loans, but also now face costs on current debt. Because the business doesn't have a 30- year fixed-rate mortgage, they have variable-rate loans. This is how it works for commercial loans. And now that businesses' debts are being reviewed, their operating expenses are rising. Not because they have more debt, although that is probably the case, but because the cost of their debt is rising. So we have a situation where more and more businesses are facing higher costs. And you can look at certain industries because they are feeling this pain right now. Private equity, lending. These two industries are feeling the pressure from higher interest rates. And the reason I'm talking about the private equity
and private lending business is because let's talk about private equity. Private equity works like this: there are companies, these private equity firms, they go out and buy businesses. And they buy businesses based on their profit multiples. So, let's say I have a company that makes $1,000 in profit. How much is my company worth? You might say, " Well, it only costs $5,000, a five-fold return." Someone else might say it's worth 10 times the profit. Five years ago, this was what happened private equity firms would come in and say, "Hmm, you made $1,000 in profit. We will value you at 20 times profit." Which is twice as much as anyone else on the market could say. Because private equity firms were lending
money at effectively 0% interest. Because remember, five years ago, in 2021, interest rates were at their lowest level in history. So private equity firms took on huge amounts of debt, borrowed huge amounts of money, and then went out and bought companies left and right. And they were offering extremely high valuations because they were now competing with other private equity firms, and everyone wanted to put all that debt they had borrowed into action. So now, if you're competing with other private equity firms, you have to offer more money. It's like buying a house in 2021. Everyone had access to 3% mortgages, so when the house was put up for sale for $500,000, it received 34 offers in the first weekend. And that $500,000 house was now selling for
$615,000. The same thing happened in the world of private equity. Except that in the world of private equity, it's not a 30-year fixed-rate mortgage. This is a mortgage with a recalculated rate. Not to mention that private equity firms don't want to hold this asset. They want to resell it. So, private equity firms were buying up all of these companies at extremely high valuations in 2020, 2021, and early 2022. And then interest rates rose. And when the stakes rose, two things happened. The valuation of all these businesses that private equity firms acquired has declined. So the private equity firms bought the business at a multiple of 20, and
now it's only worth 10. The second thing that happened is today, in 2026, the private equity firms are seeing a recalculation of their debt. They are repaid at a higher interest rate. Why? Because today interest rates are much higher than 5 years ago, and often they took out loans for 5 years. So, today, in 2026, private equity firms are seeing their debt recalculated right now. They have to pay higher interest rates, but the business doesn't perform as they expected because the private equity firms actually want to take the business and resell it at a higher profit. And the way they do this is twofold.
First, private equity firms want to increase their company's profits. So they want to take my business, which had a thousand dollars in profit, to two thousand dollars in profit. The second thing they want to do is increase the multiplication factor. They bought my company at a multiple of 20, and they want to sell it at a multiple of 22, which means increasing my business's profit from $1,000 to $2,000. You double the value estimate. And then if you can increase the multiplier, well, you can potentially double the score again. This is how private equity firms made their money. So what happened and what is happening now: first, private equity firms are seeing the cost of
their debt increase, so they are under pressure and are forced to sell their businesses. The second problem is that many of these companies have not seen significant earnings growth in the last five years. Because, well, some businesses are feeling the pressure of inflation. Some companies simply aren't seeing the growth they were hoping for. And the third problem, and the biggest one, is that valuations have fallen sharply. They bought the company at 20 times earnings, and now it's only worth 10 times earnings. Therefore, private equity firms now have these assets, which are essentially loss-making. They paid twenty times the value for a company whose earnings may have increased slightly, but the valuation has become smaller, which means
they are in the red. And now that their debts are being reviewed, private equity firms are either having to pay out of pocket to stay afloat or are trying to figure out how to liquidate assets and get rid of these " bad" assets on their balance sheets. And that's what's causing concern in the private equity industry that we have bigger challenges ahead. And what does it look like? Well, it depends on how high Because private equity firms can only sustain losses for a certain amount of time. And in the coming months, we may start hearing about more and more changes. Smaller private equity firms may have to sell off their assets for next to nothing.
Private equity firms are now being absorbed by other companies because they can't keep paying these loans, or maybe we'll start seeing more bankruptcies in this area. This is what can be expected if interest rates remain high for longer. The same thing happens with private lending. Private equity buys businesses. A private loan lends money to a business. But private lending worked a little differently: special funds were created to issue loans to enterprises. But I say it's different because private lending funds raised money from ordinary people. From people like you, me, and other investors. In effect, they were saying, "Instead of keeping your money in a savings account at 1% per annum, lend it to a private lender, earn 8% per annum on your
savings, and it's almost guaranteed." " You can withdraw your money at any time, because it's like a regular savings account." This was the offer of private lending. Well, for a while it was great, because investors were getting 7, 8, 9% per annum, while savings accounts were only giving 1%. But then a few things happened. First, interest rates rose, which was good because private credit loans became more expensive, but the businesses that borrowed that money couldn't keep up with the payments because we saw changes in the economy. And now that companies have started having trouble repaying these loans, investors thought they would make more money because of rising rates. In reality, companies simply stopped repaying their loans. And when
businesses stopped making payments, that's when private lending institutions began to struggle. This concerned hedge funds that issued private loans. Now they began to feel the pinch. That's why in early 2026 we saw almost every major private lending firm on Wall Street freeze withdrawals. Investors were excited. People who borrowed money in private loans said, "Well, I see the problems happening in the economy." "I see problems arising with private lending." " Let me take my money," because private lending funds promised that we could withdraw funds at any time, just like at a bank. So investors started trying to withdraw their money. This
was coming from funds like BlackRock, Blackstone, and all the other big hedge funds. And the hedge funds said, "Uh, no, you can't do that." They froze their funds. They blocked investors from withdrawing money. Why? Because private credit funds started to decline, and they essentially said that if we let everyone take the money, we would go bankrupt. So, this was already starting to happen in 2026, and the hope of every private credit fund manager was that interest rates would soon fall and all these problems would disappear. Here we are at the end of 2026. It's hard to believe that it's almost 2027, but we're almost there, and interest rates are rising, not falling. So private credit fund managers are now feverishly wondering: How do we continue to
operate to weather this storm? The longer this goes on, the fewer people will be able to come out of it with a profit. And here we are. Now I'm not sure how much longer this will last. That's why experts say, "Well, these higher interest rates are going to hurt the economy." And yes, of course. This, in fact, is the purpose of raising interest rates. The purpose of higher interest rates is to slow down the economy. And this is where people start to panic, but I don't want you to panic. I want you to understand how this works. Then you can make smarter decisions about your money, because it's not really about the pain.
It's about possibilities. Every time something changes, interest rates go up, and someone is bound to get hurt. Interest rates are falling, and someone is bound to get hurt. How do people suffer when interest rates fall? Well, if you have cash, it loses value faster when rates fall. So, there is always a winner and a loser. Your job as an investor is not to complain or give in to emotions. Your job is to find opportunities in any cycle. We are now entering a rate hike cycle. How long will it last? We don't know, but it is known that in history they lasted 17 months, 3 years, 2 years, 1 year, and 1 year. These have been the last five cycles of
So, can it be shorter? Perhaps. Can it be longer? Perhaps. But in general they lasted from 1 to 3 years. And if history is any indicator of the future, that means this rate hike cycle could last anywhere from 1 to 3 years. How tall will they be? Well, it depends on how long inflation stays high. What is contributing to this high inflation? First, it is printing money. Our national debt was growing faster than our economy. That's why our Federal Reserve Bank printed money. This money printing devalues the dollar, causing the prices of goods to rise. They also rise because of things like tariffs. They are also rising
due to higher oil prices. So, we don't know how long these three factors will last. There is a chance, a very chance, that the war will end very soon. If this happens, oil prices could fall. I say " may" because there were periods when people thought the war was over, but oil prices didn't completely fall and gasoline prices remained high. But there is hope that the war will soon end and gasoline and oil prices will fall significantly, which could help ease inflation. Rates are subject to change. And the government can stop spending more than the economy allows. Again, I can't predict the future. All I can do is look at history and make smarter decisions with my money, but I now understand that higher interest rates
are bound to slow the economy. They need to slow down spending. This does not mean that the economy is headed for a recession. This doesn't mean we're going to see a stock market crash, but generally we've seen it cause a slowdown, because that's the goal. In 2022, this led to a 20% drop in the stock market, but did not cause a recession. From 2015 to 2018, we did not see a recession. We haven't seen a stock market crash. From 2004 to 2006, this led to the great financial crisis of 2008 and the stock market crash. After interest rates rose in 1999, it led to the collapse of the dot-com bubble. But in 1994 and 1995, it didn't hurt the economy or the stock market. So, if there is a bubble, then, as we have seen, higher interest rates tend to
inflate it. This inflated the 2022 money printing bubble. This inflated the real estate bubble during the 2008 financial crisis. This inflated the dot-com bubble of 2000. So, when you have a bubble, higher interest rates usually inflate it because it becomes harder to access money. And that's what you, as an investor, should pay attention to: not chasing the news, not giving in to emotions, but understanding how the system works so that you can find investment opportunities regardless of what's happening, because you know what? You will start to see more headlines in the coming weeks and months about recessions. The last few months have been headlines about the falling dollar, the dollar crisis, dollar this and that.
Now that will change to a recession. How do I know this? Because when you have periods of low interest rates and money printing, which we've been in for the last 2 years, there are concerns that the dollar is losing value. Now the Federal Reserve is committed to strengthening the dollar. So, concerns about the dollar have not gone away, but our Federal Reserve Bank is now committed to defending the dollar. They have committed to strengthening the dollar, they want to keep it strong by raising interest rates, so you will probably see fewer headlines and concerns about the dollar. Not because they disappeared, it's just how the media works.
They chase what's trendy. So, as we start to move into the Fed saying we're going to defend the dollar, that means we're going to see more headlines about problems in the economy and recession. So you'll see recession concerns increase due to higher interest rates. This is how the economy works, this is how the media works. The media is in the business of selling you clicks. I understand, YouTube works the same way. Welcome to the real world. Now that you understand how it works, what I'm going to say next is important. Don't give in to emotions. Emotions are the enemy of profits. When you make investment decisions based on headlines, based on emotions, you make everyone
else rich. Because you are selling good assets at a low price because you are panicking. And this is where I want you to take a deep breath and understand how our economy and wealth work, because I've been talking about this a lot lately because I think it's extremely important. There are three things you must understand. First: how to create wealth? I can't give anyone any advice, I'm not a financial advisor, just a random guy on YouTube, okay? The way to create wealth is ABB. Always Be Buying. You buy markets. Buy something like the S&P 500. Every week you just buy the S&P 500, whether it's up, down, or flat, and you do that until you retire. This is a proven strategy for wealth creation if
you stick to it long enough. If you do this for decades, you will definitely build capital. The problem is that this may not be enough, because the cost of living is also rising. And here are points two and three: how to accelerate the growth of your wealth? ABB is a way to create wealth. You want to speed up this process. The first thing you can do is take advantage of market crashes. Market crashes are the best opportunities for investors. I call it POOP. Panic leads to overselling, which leads to opportunities, which lead to profits.
Whenever you see a market crash, whether it was 2022 when the markets fell 20%, or 2020 when the stock market fell 34%, or 2008 with a 54% drop, or 2000 with a drop of over 50%. This created a great buying opportunity. It was POOP. Panic led to overselling, which led to opportunities that yielded profits. So, when you see a market crash, rest assured-it's an opportunity to accelerate your wealth growth. But we don't know when the next collapse will happen. We know it will happen. We know it is coming. We just don't know when. Therefore, the strategy of buying only during crashes is insufficient. You should always be prepared for a market crash. Always be prepared for a downturn. Because he is always ahead.
Use downturns to grow your capital. But remember: when it happens, just take advantage of the opportunity. Third, last, and most important-how you accelerate wealth growth-is what I call market shifts. Constant purchases on the market are a way to accumulate capital. Acceleration of wealth growth occurs through market crashes and changes. Market change can occur in any economy: when markets grow, fall, or stagnate. It doesn't matter what's happening, whether it's market peaks, or downturns, or anything else. This is the moment when you determine where the money goes. I call this research-based investing. You need to identify where investment opportunities are shifting. Not looking at the news, but looking at the money.
Watching how things change in the economy. It's like investing in AI a few years ago. Or invest in cooling systems for AI 2 years ago. Invest in data centers a year ago. That is, even before everything hits the headlines-those are the opportunities worth looking for, and this is where your research comes into play. This is what financially literate investors do. They don't chase trends when they're already in the news. They want to find opportunities in advance. Of course, this comes with more risks.
Investing is a risk. You never have guarantees of returns when investing. In fact, at some point you will lose money. So make sure you always do your own due diligence and never blindly trust random people on YouTube. The bottom line is that if you do your research, find theses and reasons, you will increase your chances. This is what the game is all about. It's just about working to improve your chances. The more research you do, the better your chances. So, we talked in this video about what a lot of investors are discussing right now: as interest rates rise, the likelihood of a recession increases. So we analyzed the five previous rate hike cycles, because history doesn't repeat itself word for word, but it rhymes, to see what happened before.
We saw that during the last rate hike cycle in 2022, the stock market fell 20%, but the economy did not collapse. During the 2015-2018 rate hike cycle, we did not see an economic downturn. We did not observe a stock market decline either. During the rate hike cycle from 2004 to 2006, we didn't see the economy or stock market crash directly during that cycle, but we did see a crash after it. During the rate hike cycle from 1999 to 2000, we didn't see a stock market or economy crash, but we did see a crash afterward. And during the rate hikes of 1994-1995, we did not see a stock market or economic downturn either during or after it. Why are we talking about this? Because we want to understand what happened in the past to better imagine what to expect in the
future. This is important to understand because we know we have entered a cycle of rising interest rates. The last five rate hike cycles have lasted from one to three years. So, if history is any indicator of the future, that's how long the next rate hike cycle could last. This rate hike is slowing spending. If there is a " bubble," they tend to burst it. The goal is not to try to guess the time or predict events. The goal is to accumulate assets and understand how to build wealth despite changes in the economy, because while most people are getting emotional and panicking, I want you to see the opportunities. If you found this video helpful, the best thank you is a
recommendation, so please share it with a friend, family member, colleague, or other investor so we can continue to spread this financial knowledge. Thank you. Our economy is growing at the fastest pace we've seen since 2021, right after the pandemic. At least that's what S&P Global claims, which just released a report on economic growth in the United States. They note that the United States is experiencing a boom and recovery in corporate profits.
