In the face of the GFC, global central banks needed to act swiftly and aggressively. Interest rates were slashed and balance sheets ballooned. Between 2009 and 2021, the U.S. Federal Reserve (Fed) held its policy rate below 1% for roughly 11 of 13 years, and during that time its balance sheet expanded from under US$1 trillion to nearly US$9 trillion following the pandemic¹. This helped stabilize a shaken banking system and support economic growth.

The persistence of these conditions, however, helped normalize historically low financing costs, even though such environments are highly unusual over longer economic cycles. As a result, they also reshaped investor behaviour. Psychologically, for investors, the cost of capital wasn't really a constraint anymore; it became more of a background assumption. Today, the era of "cheap money" stands out not as a new equilibrium, but as an outlier.

Today, many of the forces that supported ultra-low rates have reversed. Inflation has proven more persistent than many expected, governments are running larger fiscal deficits, and labour markets remain relatively tight. While the initial rise in interest rates occurred several years ago, the broader implications are still unfolding. At the same time, the global economy has entered a new phase of capital intensity. Significant investment is being directed toward infrastructure, artificial intelligence (AI), energy systems, and national security.

The rise of generative AI illustrates this shift. The world's largest technology companies, many of which built their business models around highly scalable and relatively capital-light software platforms, are now committing hundreds of billions of dollars toward data centres, computing infrastructure, semiconductors, and energy capacity. Some industry forecasts suggest that global AI infrastructure spending could surpass US$1 trillion annually before the end of the decade², underscoring the scale of capital required to support the next phase of technological development.

The defining investment paradox of this decade may be that capital is becoming more expensive just as the world's biggest growth opportunities are becoming more capital intensive. Capital is less abundant, and increasingly, it is needed in larger quantities than many investors became accustomed to during the post-GFC era.