“The economy grew more strongly than expected in H1 2024, but exhibited much weaker growth in H2 2024¹.  In Q4, the Bank of England reduced interest rates by 0.25% points in November, citing the normalisation of inflationary persistence as service price inflation fell. Also, forward-looking Service and Manufacturing confidence surveys fell, suggesting a mix of domestic, Budget and global factors (weakening Germany and China)², while the labour markets began loosening at pace. However, 0% GDP growth in Q3 2024 was disappointing. Output fell also in October and November. The evidence suggests that this is due to weaker demand at the same time as weaker inflation³.

Impact of the Autumn Budget

“The Autumn Budget added new surprises as the economy slowed. The Bank of England has cited the uncertain effect on growth from the significant increase in National Insurance Contributions (NICs) and National Living Wage (NLW). This included the extent to which companies would, over time, react to the indirect spillovers to private demand from higher public spending. The Bank’s view was that the Budget would boost GDP by 0.75% points at peak versus previous predictions, and boost inflation by 0.5% points⁴. The NIC and NLW increases are a new shock. Businesses pass the entire cost into lower wages over time. Typically, in the short term, prices are increased, then in the medium term, there is a fall in employment and profit margins. The pass-on rate depends on demand dynamics for each sector and company. How quickly each element transmits its effect through the economy, as well as the order and magnitude, are not known. Overall, it will feed into consumer spending and business investment: key drivers of GDP growth. UK companies are navigating this new economic backdrop now. The budgetary effects are being quantified by companies in recently announced outlook statements as well as the planned mitigation strategies, including increasing prices, attempts to improve productivity and cost savings, including redundancies, to maintain margins and growth.

Future economic growth projections

“However, there are other responses. Despite the fiscal headwinds, the Bank of England can dampen the macroeconomic and Budget, plus other fiscal, effects, through an interest rate response. Currently, interest rates at 4.75% are restricting economic activity to control inflation. If post-energy spike inflation persists alongside Budget-induced inflation pressures, interest rates are still forecast to be cut, but only once or twice in 2025. If growth continues to stagnate as it did in H2 2024, and inflation continues its slow fall, then interest rates could be cut three or four times (and as high as six times). This is important. A falling interest rate cycle can create a positive environment for companies to grow. Further, the UK economy is forecast to grow at between 1.3%⁵ and 2%⁶ in 2025: A significant improvement on GDP growth of 0.8% in 2024. Despite the inevitable and occasional profit warning, the majority of our portfolio companies should be able to continue to grow in this improving environment. However, the portfolio is likely to remain undervalued until the Budget tax changes and market sentiment response dissipates.”

Puma AIM IHT Model Portfolio Performance

In Q4 2024, the Puma AIM IHT model portfolio decreased by -6.24%, underperforming both the FTSE AIM All-Share Index, which decreased by -2.81%, and the FTSE All-Share Index, which decreased by -0.96%. Since inception in July 2014, the cumulative performance of the model portfolio has increased by +84.36%, outperforming both the FTSE AIM All-Share Index (-8.37%) and the FTSE All-Share Index (+24.10%).⁷

Puma’s AIM IHT Service seeks to offer investors the potential growth opportunities of a carefully selected portfolio of AIM stocks, combined with the benefits of IHT mitigation. The portfolio has an AUM of £201.3m and 93% of companies in the portfolio have a market cap above £100m.⁸

Cumulative performance %

Discrete investment performance %

All figures correct as at 31 December 2024. Source: Puma Investments, Q4 2024 Report.

All performance data is quoted net of management and dealing fees and applies to actual initial investors’ portfolios that remain invested. Please note that performance data applies to the longest held, live portfolio which has been invested since inception, based on a portfolio managed directly by the Manager on its main trading platform. Performance data may vary for portfolios managed by the Manager on platform due to differing deal fees and other platform fees. Furthermore, small variations in performance may apply as each individual investor has their own discrete portfolio of assets. Discrete performance data is calculated as full-year periods from 1 January to 31 December of the year displayed.

Past performance is no guarantee of future results. 

Date of inception: 1 July 2014.

Sources

For all performance data: Puma Investments. Figures correct at 31 December 2024, unless otherwise stated, and may be subject to rounding errors.

¹ Bank of England Monetary Policy Committee: Reading between the lines – speech by Sarah Breeden, 9 January 2025

² Bank of England Monetary Policy Committee, 19 December 2024.

³ Bank of England Monetary Policy Committee: The last half mile – speech by Alan Taylor, 15 January 2025.

⁴ Bank of England Monetary Policy Committee, 19 December 2024.

⁵ Consensus estimate of economists surveyed by Bloomberg.

⁶ Forecasts for the UK economy: January 2025, Office for Budget Responsibility.

⁷ The indices shown are for illustrative purposes only and are not considered directly comparable to the performance of this Service. Source: Iress. Past performance is no indication of future results.

⁸ Puma Investments, Q4 2024 Report

⁹ Compound Annual Growth Rate