With Trump being elected as the 47th US President, the Investment Adviser expects the US to streamline permitting processes for energy infrastructure and there will be renewed efforts to deregulate energy production and to build a wide range of sources of electricity, including nuclear and hydropower. Research from the American Society of Civil Engineers also points to a $5.9 trillion overall requirement in infrastructure spending between 2020-2029 in the US, of which $2 trillion is currently unfunded.

During October 2024, the Bank of England held interest rates at 5.00%. On 7 November 2024, it reduced interest rates by 0.25% to 4.75%. The US Federal Reserve held interest rates at 5.00% during October 2024 and also reduced them by 0.25% to 4.75% on 7 November 2024. On 23 October 2024, the European Central Bank reduced rates by 0.25% to 3.25%.

The most recent data on CPI inflation in the UK shows that it declined from 2.2% during August 2024 to 1.7% during September 2024. The UK inflation rate has now slowed significantly from its peak, dropping below the Bank of England's 2% target for the first time in over three years in September. In the US, CPI inflation rose from 2.4% in September 2024 to 2.7% in October 2024. In the Eurozone, CPI inflation increased from 1.7% in September 2024 to 2.0% in October 2024.

As at 31 October 2024, 5-year gilt yields rose by 0.5% month-on-month after the Autumn Budget announcement, driven by new fiscal rules and plans for increased borrowing. The Investment Adviser noted a similar upward trend in the US of 0.4% in 5-year treasuries during the same period, influenced by election uncertainties and revised expectations for rate cuts. German 5-year government bond yields also increased by 0.3%, even with a 0.25% rate cut by the ECB. Credit spreads stayed broadly stable across sectors as base rates climbed.

The Investment Adviser has adjusted the valuation of SEQI's fixed rate instruments to reflect the movement in risk free rates. As such, the portfolio pull-to-par has increased marginally, from 3.4 pence to 3.5 pence month-on-month. Overall, asset valuations (net of FX movements) has increased by 0.28 pence per share, due to further write-ups in the carrying value of Bulb based on expected future receipts.

Once a downwards trend toward a lower interest rate environment unfolds, this will be supportive of fixed rate loans and bonds. Further, as short-term rates begin to fall, yield curves will become less inverted or turn positive again, supporting a bid for risk in the market.

As inflation abates in the long run, the likelihood of future interest rate cuts increases, which makes alternative investments such as infrastructure more attractive when compared to liquid debt. The markets have also priced in at least one further rate cut between now and the end of the year across all three regions. 

The Company received a £16 million paydown on its loan to Bulb Energy and has been able to further write up the carrying value of its loan based on expected future receipts. It is now likely that the Company will receive some or all of the interest that has accrued on the loan since it defaulted (in addition to the remaining principal amount of the loan).

After month end, the Company sold the entirety of its non-performing loan at a price consistent with its current mark. In addition to the cash consideration received, the Company may receive further sums based upon the performance of the project in the future.