Market Overview

Dear Investor,

In a week that saw Donald Trump given the full royal treatment at Windsor, the Fed was also keeping him sweet by cutting rates for the first time this year. Jay Powell delivered a quarter point reduction and signalled more to come, with policymakers now openly prioritising a weakening labour market over the risk of tariff driven inflation. Markets barely blinked at the move, but the shift confirms what traders already suspected: the Fed has entered easing mode and the rate cycle has turned.

Back on the high street the tone was far less flattering. Retailer Next warned that the UK economy faces years of anaemic growth, weighed down by fewer jobs, heavier regulation and higher taxes. The cautious update knocked the shares by 6% and reminded investors that while listed retailers can execute well, the consumer backdrop remains fragile. For many, Lord Wolfson’s downbeat words carried more weight than all the fine speeches at Windsor and they paint a sobering picture for anyone banking on a quick recovery in household spending.

Tech meanwhile kept the future in sharp focus. Mark Zuckerberg unveiled Meta’s first smart glasses with a built-in display, pitching them as a step toward everyday superintelligence. The launch was not without glitches as Zuckerberg famously failed to answer a demo call on stage, but the message was clear: Meta is doubling down on AI hardware and willing to spend whatever it takes. Investors remain cautious given the scars of the metaverse misstep, but the push ensures AI remains front and centre in market narratives.

Pulling the threads together, it was a week that spanned pageantry and policy, retail warnings and tech ambition. The Fed’s dovish tilt should underpin global risk appetite, Trump’s visit offers at least the prospect of fresh US inflows, while Next’s warning keeps us grounded in the realities of UK growth. For UK investors the lesson is simple: stay alert to the contradictions. Markets can rally on the promise of cheap money and capital inflows, but the domestic backdrop is tougher, and only select sectors such as defence or AI are offering genuine growth stories.

Wishing you a fantastic weekend,

Tom

Market Movers

On the rise: Trustpilot (LSE:TRST) +18.3% on the week

Trustpilot delivered a strong set of half year results, with revenue climbing 23% to $122.8 million and bookings up 19% to $140 million compared with the same period last year. Growth was broad based, with the UK, Europe and North America all delivering double digit gains. Annual recurring revenue rose 29% to $273 million, while the number of active reviews on the platform increased by 22% to 330 million, underscoring the platform’s expanding global reach.

Operationally, Trustpilot reported margin improvement and strong free cash flow generation, driven in part by the use of AI to deliver efficiencies. Adjusted EBITDA margin strengthened enough for management to upgrade full year expectations, reflecting confidence in both the business model and trading momentum since the period end.

REGENCY VIEW:

Trustpilot is showing strong operational momentum with forecast EPS growth of over 50% and healthy returns on capital, highlighting the benefits of scaling its platform. The flip side is valuation which is sitting at eye-watering levels (forward PE north of 65!), meaning investors are paying a significant premium for that growth profile.

On the slide: SThree (LSE:STEM) -27.2% on the week

Shares in recruitment group SThree dropped sharply this week following the release of its Q3 trading update. The company reported that group net fees were down 12% year on year for the three months to the end of August, with contract revenue, which makes up 83% of fees, falling 13% and permanent revenue down 5%. While the US business returned to growth during the quarter and the Middle East and Asia region continued to perform strongly, these gains were offset by weakness in Germany and the Netherlands, which remain the group’s largest markets.

SThree also noted that its contractor order book stood at £156 million at the end of August, down 6% compared with the prior year but still equivalent to around five months of net fees, which the company said provides sector leading visibility. Within skill verticals, Engineering was the most resilient with just a 1% decline in net fees, while Life Sciences dropped 12% and Technology 22%. Looking to the year ahead, the board reiterated its cautious stance given continued macroeconomic uncertainty but confirmed plans to launch another share buyback programme in FY26 in line with its capital allocation policy.

REGENCY VIEW:

SThree screens well on value with a forward P/E of just 10.7, a dividend yield north of 10% and a price to book under 1, all underpinned by double-digit returns on capital and equity. The challenge lies in earnings pressure, with forecast EPS set to fall nearly 30%, but the balance sheet and cash flow profile suggest the business still has the financial strength to navigate a tougher cycle.

Sector Snapshot

Tech led the way this week, supported by gains in Real Estate, Industrials and Financials, suggesting a rotation back into growth and cyclicals after recent defensive leadership. Materials and Utilities also edged higher, giving the market a sense of balance despite the ongoing backdrop of rate and inflation uncertainty.

On the flip side, Healthcare extended its losing streak, finishing at the bottom once again alongside Consumer Staples and Consumer Discretionary. Energy and Telecom also slipped, reinforcing the shift away from defensives and rate-sensitive areas towards sectors with stronger earnings leverage.

UK Price Action

Having failed to retest its August highs, the FTSE has drifted lower this week and confirmed a new lower swing high. This shift is significant as it suggests the uptrend has now rolled into a consolidation phase rather than continuing in a straight line.

The most likely scenario from here is the development of a wedge consolidation pattern. This would gradually compress and funnel price action, creating the conditions for an eventual breakout with the direction of that move providing the next big clue for trend traders.