The year has begun on a positive footing for the AIM market, and our portfolios have reflected that momentum. Several of the companies we hold have reported strong results and updates, contributing to an average portfolio gain of just under 5% in January. Don’t say it too loudly, but it appears the market may be waking up to what AIM has to offer. Meanwhile, yesterday’s Bank of England interest‑rate decision added an extra dose of optimism to the outlook for AIM. The Bank held the Bank Rate at 3.75% at its 5 February meeting, a move that was widely expected, but the vote was far tighter than many anticipated at 5–4, with four committee members favouring an immediate rate cut. This knife‑edge split has fuelled market expectations that rate cuts may now come sooner than previously thought. Economists who had previously viewed the first interest rate cuts of the year happening in June have now moved these expectations forward to April, with March also now being a realistic possibility. These positive sentiments come after the Bank of England announced it now expects inflation to fall back to its 2% target later this spring, quicker than earlier forecasts indicated. A faster‑than‑expected decline in inflation increases the probability of multiple interest‑rate cuts over the course of the year. WHY DOES ALL OF THIS MATTER FOR AIM?
Lower interest rates typically reduce borrowing costs, boost investor confidence, and increase the appetite for risk‑based assets. Historically, AIM has been one of the biggest beneficiaries of falling interest rates, as lower yields often push investors to seek higher‑growth opportunities within smaller, dynamic companies. Chris Boxall, portfolio manager at Fundamental Asset Management commented, “When looking for good companies, we have long said that our portfolio has never been better placed to take advantage of the opportunity that AIM now presents. The hope is the market is now waking up to this. There certainly appear to be grounds for cautious optimism”. If rate cuts do arrive earlier and potentially in greater number than initially signalled, this could provide a meaningful tailwind for AIM throughout 2026. Overall, it has been an encouraging start to the year for AIM, and the interest rate backdrop is beginning to align in a way that could sustain this positive momentum. If you have any questions or would like to speak about the portfolio performance, please contact us on 01923 713890 or email [email protected]. | 
