It took just three days after the Bank of England’s interest rate cut for my bank to let me know that the rate on my savings account would drop — so it can get its skates on when it puts its mind to it.

My guess is that I will have to wait a smidge longer for a similar drop in my mortgage, which is why it makes sense to hunt around for other ways to benefit from a rate cut.

Stock markets tend to be keen on lower rates. The last time the Bank of England cut rates was in March 2020 during the Covid pandemic. Over the next 12 months, the FTSE 100 rose about 30 per cent. This was not a one-off, or unique to the UK. Research from the asset manager Schroders shows that on those occasions when the US Federal Reserve has cut interest rates, the average returns from US stocks for the following 12 months have been 11 per cent ahead of inflation.

The circumstances of 2020 were unusual and it may be optimistic to expect something similar this time around. That said, lower rates oil the wheels of the economy, putting pounds in consumers’ pockets and encouraging companies to invest more, whether in people or production. This helps companies to increase their revenues and improve profitability and ultimately, should power stock markets forward.

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Rate cuts can also deliver a psychological boost. They often create a party atmosphere in markets that goes beyond their real-world impact. Scott McKenzie from the wealth manager Amati Global Investors said: “Even though it’s only 0.25 per cent, the cut represents a turning point. The consensus is that rates will go below 4 per cent by the end of 2025. No-one is expecting rates to go back to 1 per cent in a hurry, but the direction of travel is key.”

Maximilien Macmillan from the fund group Abrdn said lower returns on cash deposits creates more appetite for stock market investment. “Returns look more appealing than holding money in cash,” he said. “In theory this should be beneficial for stocks, especially as lower interest rates encourage greater consumer spending, which can benefit specific companies.”

However, there are nuances. The question of who benefits from rate cuts depends on why central banks are cutting those rates. Macmillan said that if policymakers are cutting because they fear recession, “then a sense of panic can ensue as expectations of prospective company earnings are lowered, outweighing the benefits of cheaper borrowing from lower interest rates”.

While there has been a touch of panic knocking around in markets over the past couple of weeks, I don’t believe that policymakers are fearing recession. Economic growth is still strong and investor confidence high.

That said, there will still be winners and losers within the stock market. Despite my earlier swipe at the banks, they don’t tend to do that well when rates are falling. Insurers may also struggle.

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Paul Flood from Newton Investment Management said that certain other sectors tend to do well out of falling rates. Consumer staples, for example, benefit because households have more disposable income, so companies such as Unilever, which makes Marmite and Persil, and Diageo, the drinks firm, could get a profit boost. Utilities, which tend to be highly indebted, benefit from lower borrowing costs. Housebuilders benefit as mortgages become more affordable and give a boost to home sales.

Equity income funds — those that focus on dividend-paying companies — may also have renewed interest from investors at a time of falling rates. There is a certain appeal in a fund that pays a 4 per cent yield, give or take, rising in line with inflation at a time when cash rates are falling and inflation remains a risk. While dividend-paying companies have been seen as pretty staid in comparison with the thrills and fat returns of the technology sector, there are signs that investors are tiring of the AI trend.

Smaller companies also tend to do well as interest rates fall. Ben Mackie from the investment management company Hawksmoor, said: “There is good empirical evidence that small companies outperform large firms after the first in a series of interest-rate cuts. There is so much value in smaller companies anyway. The gap with larger companies is abnormally wide. If there is a bit of a tailwind from interest rate cuts as well, even better.”

Beyond that, there is a messy smorgasbord of commercial property, infrastructure and private equity investments that were hit hard as rates started to rise and haven’t yet recovered. These are areas that thrived in the low interest rate environment that prevailed in the wake of the financial crisis, but are down 30, 40, even 50 per cent since 2022.

Here, investors need to be willing to get their hands dirty. It’s like rummaging around trying to find a bargain in a sales aisle where nothing looks very beautiful. And it will require a little patience. There has only been one Bank of England base rate cut so far, and while more are forecast, no one is suggesting a return to the world of sub-1 per cent rates that we enjoyed for more than a decade from 2009.

However, commercial property, infrastructure and private equity investments look cheap relative to their history.

Commercial property is an obvious starting point. Investors can pick up commercial property investment trusts on chunky discounts — 19 per cent for the Custodian Property Income Real Estate Investment Trust (Reit), or 25 per cent for the Schroder Reit. A safer option may be the TR Property fund whose manager considers which areas of the property market to target.

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The Hawksmoor team is looking again at infrastructure investment trusts. These were wildly popular through the 2010s as a source of inflation-linked income, but now trade at 20-30 per cent discounts to the value of their underlying assets. Mackie said trusts such as International Public Partnerships, HICL Infrastructure and BBGI Global Infrastructure own assets such as schools, prisons or hospitals. “That makes them pretty dull, with low economic sensitivity. The cash flows are backed by the UK government and are often index-linked.” They also have chunky yields of somewhere between 6.2 per cent and 6.6 per cent.

Flood also highlights real estate and renewable energy operators, such as Greencoat UK Wind and the Renewable Infrastructure Group. These have been a tricky investment over the past few years, speaking as an embattled holder of both trusts. I’ve been partially consoled by the warm and fuzzy feeling that I’m doing my bit for the UK’s energy transition, but this has occasionally been through gritted teeth.

Nevertheless, Flood thinks their time may be coming again. “The high dividends paid by these trusts became less attractive in a world of high bond yields. However, as interest rates and bond yields fall, it should provide an uplift to valuations,” he said.

Private equity, which focuses on companies not listed on public stock exchanges, remains a punchy option, but there are private equity investment trusts still trading on a 30-40 per cent discount to the value of their underlying assets. Some parts of the sector have uncomfortably high debt, but many don’t and the market hasn’t discriminated. Even very cautious trusts such as ICG Enterprise have been hit. These may start to turn as rates fall.

By their nature, low interest rates are designed to tempt us away from cash savings. After a brief period where keeping money in cash has been an OK-ish option, the opportunity cost is rising. Schroders research suggests that stocks generally beat cash by 9 per cent in the 12 months after rates start being cut. That’s a lot to leave on the table, even for risk-averse investors. I, for one, will be looking for more creative ways to deploy my savings.

Ian Cowie is away