Interim Management Statement Q2 2024

24 May 2024

HARGREAVE HALE AIM VCT PLC
(the “Company”)

Interim Management Statement

Q2 2024

Introduction

This interim management statement covers the second quarter of the 2023/24 financial year, 1 January 2024 to 31 March 2024. Investment performance measures contained in this report are calculated on a pence per share basis and include realised and unrealised gains and losses.

Overview

The inflation outlook continued to moderate in the UK, US and elsewhere in the quarter. In contrast to the prior quarter, when inflation fell more quickly than anticipated, inflation proved to be more sticky, particularly in the US where the steep declines of last year were replaced by a modest uptick in March 2024.

Whilst the situation is much improved, recent trends have not supported the market’s previous expectation of six rate cuts in the US this year. The current expectation is one to two. In response to consistently robust economic data, borrowing costs in the US, which fell so sharply in late 2023 and provided the impetus for a significant rally in equity markets, have reverted to levels that caused significant alarm in the autumn of 2023.

For now, equity and credit markets remain calm with current financial conditions in the US more accommodating than at any point since the Russian invasion of Ukraine. The foreign exchange markets have not been so relaxed with the dollar strengthening significantly against other major global currencies. The change in outlook for the US monetary policy will weigh heavily on other central banks as they contemplate the impact on their own monetary policy.

The situation is notably better in the UK where inflation (CPI) took longer to peak but has since fallen very rapidly, falling from 10.1% in March 2023 to 3.2% in March 2024 (Dec 23: 4.0%) and then, post period end, to 2.3% in April.

News that the UK had endured a short and very shallow recession in late 2024 briefly halted the recovery in UK consumer confidence that had been underway since late 2022. However, the UK economy has since returned to growth in the 3 months to March with improving conditions in the service, construction and manufacturing sectors. UK consumer confidence has reverted to its improving trend with employment markets remaining healthy and real wage growth strongly positive.