Anticipating global market trends is a guessing game. Moderator James J. Holman, a partner at Duane Morris, asked the panelists to offer insight on what we do know. “What everyone wants to know, what our clients have wanted to know in past seminars, is what is going to happen to interest rates?” he asked.

Peter Chadwick, managing director of Berkeley Research Group in Washington, D.C., outlined the issues. First, “the decline in value of the British pound after Brexit was massive, and it will not soon rebound,” he said. Next, Chadwick noted, “Our interest rates rose in 2016 and are expected to rise again soon. Then we have this constricting global economy, or at least a decelerating global economy. Nobody can know the true impact of the increased cost of capital.”

Middle-market companies have built alternative lending into their capital structure, and businesses are more levered now than they were before the 2008 financial crisis. “Some can’t afford to continue to pay higher interest rates,” said Chadwick. “What will be the tipping point?”

Panelist Steven J. McGehrin, executive vice president at PNC Bank, agreed. “As interest rates rise, small businesses will feel the heat first. Then we’ll start seeing that pressure in the lower middle-market side.”