If investors expect worsening economic conditions, it is likely that the demand for loans will increase, leading to higher real interest rates.

When investors expect the economy to get worse, they often want to borrow more money to prepare for tough times. This increase in demand for loans means more people and businesses are looking for funds, which can make lenders more cautious. As lenders see more demand, they may raise interest rates to ensure they make enough profit from loans. For example, if a small business wants to borrow money to cover costs during a recession, they might find that interest rates have gone up because many others are also looking for loans. So, while demand increases, the cost of borrowing, or real interest rates, tends to rise as well.