

AXIOMA ROOF™ SCORE HIGHLIGHTS
WEEK OF MAY 12, 2025
Potential triggers for sentiment-driven market moves this week
- US: Core inflation rate, retail sales, producer prices, industrial production, consumer sentiment, export and import prices, as well as building permits and housing starts data. Speeches from Federal Reserve officials, notably Chair Powell. Earnings from Cisco, Tencent, Alibaba, SoftBank, and Target, Applied Materials, Cisco, Deere & Co., JD.com, and Walmart.
- Europe: UK unemployment rate, Q1 GDP growth rate, and inflation data.
- APAC: China industrial production and retail sales data. Japan GDP growth rate for Q1. Australia’s RBA interest rate decision.
- Global: US-China trade negotiations. Ongoing ceasefire negotiations between Ukraine and Russia, and India and Pakistan.
Insights from last week's changes in investor sentiment:
Investor sentiment saw a significant improvement across all markets last week. European investors, though initially lagging, are also showing signs of recovery. The whispers of peace deals in Ukraine, Gaza, and Iran, coupled with the prospect of trade negotiations between the US and China, have transformed the despair of a few weeks ago into renewed hopes for a return to normalcy. The supply-and-demand for risk has been restored to a neutral balance in all markets, with Europe still to come but already far less unbalanced than last week.
After a strong comeback, the US market is back to square for the year so far, and while volatility hasn’t necessarily been unkind to investors, it hasn’t gone out of its way to spare them either. April will have left a scar on most portfolios. Trump's governing style is a mix of random decisions and chaotic choices. To accommodate this in their investment strategies, investors will need to clear out areas in their forecasts where transparency and consistency once resided.
In a Trump world, time is bending. It’s slowing down one minute and speeding up the next, with no rhyme or reason. Investor sentiment took months to sour on Trump’s win, only to shift from bearish to hopeful in less than ten days, based solely on promises of geopolitical deals and a glaring lack of details. As an amuse-bouche, Trump has brokered a ceasefire between India and Pakistan. In Ukraine, Trump is simultaneously on the verge of walking out of negotiations and securing a lasting ceasefire. In Gaza, he is both close to letting Israel act freely and securing a deal for the release of more hostages and a ceasefire. In Iran, Trump is on the brink of either launching a military solution to end the regime's nuclear ambitions or securing a deal to bring sanction relief to the country. And then there's the big one: trade negotiations with China.
The US and China are finally talking, both claiming the other one called first, in an unconvincing tone that sounds like surrender and conquest simultaneously. Investors can't know for sure what was discussed this past weekend between them since they weren't in the room, but it was something, and whatever that something was, it was better than the nothing that’s been the default for the last year or so. Enough to lift investors’ hopes.
Not much is known yet (at the time of writing) about how the meeting went but based on the initial Bessent-Zelensky meeting on the minerals deal, we can picture the scene:
[Start scene] In the conference room of the residence of the Swiss ambassador to the United Nations in Geneva, Switzerland. Bessent and Greer are seated inside a boardroom, waiting for the Chinese delegation to arrive. Suddenly, they hear a knock on the door. Bessent gets up to answer it, opens the door, and sees He Lifeng and his team standing outside.
“You came!” Bessent says with delight.
He steps aside and waves them through with his arm, but He remains fixed where he is.
“I’m not sure about this”, He says.
Bessent turns to look at him, then gives him a quick nod. “Be sure”, he says. [End scene]
Yes, de-escalation had been contemplated for days prior to the attempt. Yes, Trump had floated the idea of reducing tariffs from 145% to 80%. Yes, Lutnick had hinted at a possible decline to as low as 34%, as per the April 2 ‘reciprocal’ level. Yes, there had been active discussions with Xi’s public-security minister on ways China could curb its role in fentanyl trafficking into the US in preparation for the meeting, and so on. He shoots, he scores.
This week should continue to see the triumph of hope over circumstances as investors return to the business of forecasting while they wait for confirmation of the happy ending the White House is painting for them on multiple fronts.

Note: green background = bullish, red background = bearish
Changes to investor sentiment over the past 180 days for the markets we follow:
How to Interpret These Charts:
Top Charts:
The top charts illustrate the ROOF ratio, which represents investor sentiment. This ratio is depicted in green on the left axis, while the cumulative returns of the underlying market are shown in black on the right axis. Key reference lines include:
- A horizontal red line at -0.5 (left axis), marking the threshold between negative sentiment (-0.2 to -0.5) and bearish sentiment (< -0.5).
- A horizontal blue line at +0.5 (left axis), indicating the boundary between positive sentiment (+0.2 to +0.5) and bullish sentiment (> +0.5).
- A horizontal grey line at 0.0 (left axis), around which sentiment is considered neutral (-0.2 to +0.2).
Bottom Charts:
The bottom charts display the levels of risk tolerance (green line) and risk aversion (red line) within the market, representing investors' demand and supply for risk, respectively. Key insights include:
- When risk tolerance (green line) exceeds risk aversion (red line), more investors are willing to buy risk assets than there are investors willing to sell them at the current price. This scenario forces risk-tolerant investors to offer a premium to entice more risk-averse investors to trade, thereby driving markets upward.
- Conversely, when risk aversion (red line) surpasses risk tolerance (green line), the market dynamics reverse.
The net balance between risk tolerance and risk aversion levels is used to compute the ROOF ratio shown in the top charts, reflecting the sentiment of the average investor in the market.
Blue Shaded Zone:
The blue shaded zone between levels 3 and 4 for both indicators signifies a reasonable balance between the supply and demand for risk in the market. When both lines remain within this blue zone, the market is considered ‘emotionally’ stable. However, when both lines move outside this zone, the significant imbalance in demand and supply for risk can lead to overreactions to unexpected news or risk events.




















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