As the Fed continued to hold interest rates the rhetoric appeared more dovish and markets briefly rallied on expectations of rate cuts earlier than had previously been expected. The Bank of England also held rates for the third month in a row but the associated commentary was more cautious than that in the US. This was despite the fact that having been perceived for many months as an outlier with respect to inflation, largely due to energy prices, it now looks as though the UK economy is reverting back to the pack with respect to inflation expectations. An increasing number of market commentators now expect a widespread easing of monetary policy in 2024, with the US leading the way and the UK to follow albeit there is still no consensus over the timing of UK rate cuts. In this context it is interesting to note the recent cut in UK mortgage rates by a good number of our domestic lenders. The stocks that we invest in are largely in good health as evidenced by the number of stocks buying shares back and balance sheet strength but the absence of an obvious catalyst to perform remains an issue. On a brighter note however once again our dividend expectations were exceeded in calendar year 2023, which against such a difficult macro background is testament to the resilience of the majority of the companies that we invest in.

At the stock level we added one new company to the portfolio, Hargreaves Services, a diversified business specialising in brownfield land regeneration and Environmental & Bulk Logistics services. The increasingly widespread belief that the interest rate rise has run its course has led to an uptick in corporate activity which we expect to continue through the first half of our new year. KKR made a recommended cash offer at a 40% increase over the prevailing market price for our holding in Smart Metering Systems, and we have subsequently sold part of our position. We have also sold out of Virgin Money after a change relating to our dividend expectations and have reduced one of our long standing investments, Wilmington on valuation grounds. We added to our investment in Paypoint. Ashmore and Paragon performed well in the month and Diversified Energy underperformed as it dual listed in the US as well as here. Whilst we await a shift in investor sentiment towards UK mid and small cap equities our investment process requires us to seek companies where the dividend yield is at least four percent. In the current environment we continue to see a wide range of attractive opportunities.