Andrew Mann from JM Finn reflects on the current state of the economy, from the Bank of England to the growth of the stock market.

Interest rates remained on hold last week but there was a noticeable change of tone at the Bank of England – this was the first meeting since September 2021 when nobody on the Monetary Policy Committee voted for a rate rise.

With inflation falling, and a signal that we should still expect more than one interest rate cut this year, Andrew Bailey’s comment that it’s still ‘not yet’ time to cut is likely to disappoint those in need of some relief from the currently high levels of borrowing costs.

As frustrating as it may be, I do have some sympathy with the Bank, who will be wary that moving too early could well lead to a resurgence of inflation.

There are a growing number of warnings, though, that the Bank’s overly cautious approach risks prolonging the country’s current economic struggles.

East Anglian Daily Times: Andrew Mann from JM FinnAndrew Mann from JM Finn (Image: JM Finn)

On balance, however, the stock market took the change in tone as good news, with the FTSE100 back trading close to its all-time high and growth stocks, which often perform better in a lower rate environment, generally receiving a welcome boost.

Elsewhere, my eye has been caught by US hedge fund Elliott Associates building a 5% stake in Scottish Mortgage, the largest investment trust listed on the UK market.

The share price has been trading far below the high seen in late 2021 and remains at a significant discount to the value of its net assets, so while the presence of an activist investor might create a headache for the company’s board, it can also be a good thing for shareholders with pressure exerted to improve returns.

So far, the company has announced the launch of a £1bn share buyback over the next two years and we are already starting to see the discount narrow.

Whether this is sufficient for Elliott Associates will be interesting to watch.