Credit drives all financial and real markets

Let's be clear. Credit or more precisely the cost of credit drives all markets, financial and real. If there is a repricing of credit, that is a rise in rates, it will affect all markets in a significant number of ways. This repricing occurs even if inflation is higher than nominal rates because inflation impact firms differently.  

• Increase in the risk-free rate of return will reverse the reach for yield when rates were close to zero.
• An increase in the discount rate will reduce the present value of all cash flows. Firms that expect more distant cash flows will be more affected.
• Rising rates will reduce cash available for investors and projects if rates go higher; more will go to debt holders.
• The cost of capital will increase, so investment projects will be rejected.
• Firms that made a low return on capital but above zero were able to continue operations. It will be the case as rates increase. Firms will go out of business. 

Financial markets begin and end with what is happening in credit markets, so repricing of credit will fundamentally change not just debt markets but the pricing of equities and the success of firms which spills into the real economy. A credit crisis will create an equity and real economy crisis.