AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: CPI and retail sales data. Michigan consumer survey on consumer sentiment and inflation expectations. First week of the Q2 earnings reporting season, with JPMorgan, BlackRock, Bank of America, Goldman Sachs, Citi, Wells Fargo, Morgan Stanley, BNY Mellon, and American Express, Netflix, TSMC, J&J, ASML, J&J, PepsiCo and 3M reporting.
• Europe: UK inflation data and Eurozone industrial production and trade data.
• APAC: China trade data, GDP, industrial production, and retail sales. Japan trade data, inflation figures and core machinery orders. Australia consumer confidence and employment data.
• Global: Developments to US trade policy ahead of the August 1st deadline.

Investor sentiment ended the week on a bullish note in eight out of the ten markets we monitor. The two exceptions were Europe, where sentiment was positive but not quite bullish as investors await news of a trade deal with the US before the August 1st deadline, and Japan, where sentiment remains negative following two failed attempts at securing a trade deal with the Trump administration and in anticipation of a contested Upper House election on July 20th. In the other eight markets, investors seem confident that trade deals will be finalized over the summer, avoiding tariffs and allowing the Fed to resume interest rate cuts in the fall. This positive bias suggests that during this earnings reporting season, investors are likely to punish stocks whose CEO gives a bearish guidance, while rewarding only those of CEOs with an optimistic outlook that matches their own.

Let Trump be Trump: Investors have accepted that, given his slim majority in Congress and a strong majority in the Supreme Court, Trump will continue to use his preferred playbook, operating within the letter of the law while violating its spirit at every turn. For bullish investors, however, legality trumps ethics, and his once disturbing methods are now seen as just a novel management style. The volatility they caused in April is now deemed as the necessary price to pay for passage from shock to experience. 

As for geopolitics, the guns have gone quiet in Iran, are about to go quiet in Gaza, and Trump is now focused on quieting them in Ukraine using his peace-through-strength approach on Putin and his shadow allies. If his plan works, in the fall he will be delivering a peace dividend to markets in the form of cheaper energy prices, and possibly getting a Nobel prize for it in the process. Investors have concluded that he might be unstoppable and that the best place for their portfolios to be right now is on his coattails. 

As markets head into the thin and sometime treacherous summer holiday months, investors appear to be nodding along with Trump, much like you do when you want to show you understand and sympathize with someone's position, even if you don't fully agree. This is what happens when investors have been deprived of bullish endorphins for too long. For those in developed markets, the recent three-week stretch of fluctuating bullishness is the first time they've experienced this high in 2025. 

And so, filled with a resurging willingness to speculate, investors are more than willing to throw caution to the wind and keep dancing, believing the music will never stop. After all, there is no Commandment that reads, “Thou Shalt Not Participate in a Friendly Game of Chance”. 

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.