Stifel has dropped its positive rating for Scottish Mortgage (SMT ) over concerns that the recent share price rally is unsustainable going into 2025.

The broker’s head investment companies analyst Iain Scouller noted that shares in Baillie Gifford’s £13.5bn global flagship had climbed 10% since Donald Trump was re-elected US president last month, bringing the discount back to 8% and making him cautious about its growth prospects next year.

‘We are taking a contrarian view and following this strong re-rating we are more cautious on the prospects for the investment style as we head into 2025, and wonder if many of these growth company stories are now starting to be priced for a perfect environment,’ Scouller said.

‘We may be too early to be cautious and often are, but we think it is wrong to go chasing share prices that have performed so strongly and hence we downgrade our recommendation to “neutral” from “positive”.’

The trust has been lifted by the US stock market surge since Trump’s won the US election in November, with growth companies including Nvidia and Tesla adding to their already astonishing returns year to date.

However, the performance of the private portfolio, which makes up just under a quarter of net assets, has weighed on the shares, with the recent interim report stating that the average unlisted company valuation fell 11.3% in the six months to 30 September.

The trust has received some good and bad news over two key holdings over the last few weeks. Fund managers Tom Slater and Lawrence Burns have written down their investment in private Swedish battery maker Northvolt after the company filed for bankruptcy, knocking 2.8% off net asset value.

However, press reports suggest that Elon Musk’s private space company SpaceX will hold a tender with an implied valuation of $350bn this month, well above the $250bn valuation reports suggested in mid-November and the $226bn at which Scottish Mortgage values the business.

Scouller highlighted that the board’s share buyback plan remained a key issue, given it spent the £1bn budget that was meant to last two years in six months as the discount swung back out to double-digits.

The speed reflects the board buying £313m of shares in one day from US activist Elliott’s stake, wider selling ahead of the increased capital gains tax reported ahead of the Labour autumns Budget and profit taking, with the shares up 26% in the year to the end of September.

‘The board said in the interims they have spoken to a number of shareholders on this and there are mixed views on the balance between buybacks, reducing debt and making new investments. Whilst the buyback will continue, no figure has been given,’ the analyst said in a note to investors.

Scouller suggested that the board increase the level of buybacks for the remainder of the two-year period, consider a tender offer and look to accelerate realisations of private companies, which account 26% of net assets when the trust’s 13% leverage is taken into account.

Scottish Mortgage shares closed at 982.4p on Wednesday on an 8% discount, which remains well below their November 2021 high of £15.29 as higher interest rates knocked sentiment towards its growth investment style and investors remained sceptical of private equity valuations.

Shareholder returns have staged a recovery and jumped 36% over the last 12 months, Deutsche Numis shows, which net asset value has risen 29%, while the FTSE All World index benchmark has gained 27%.

Despite the post-Covid falls, total five-year shareholder returns of 94% are ahead of the benchmark’s 83%.