AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: PCE inflation, personal consumption and spending, durable goods orders, and an updated Q2 GDP estimate. Speeches from several FOMC members.
• Europe: Eurozone PMI data.
• APAC: China’s industrial profits and BoC interest rate decision. Japan PMI and Tokyo CPI data. Australia’s PMI and CPI data.
• Global: Speeches at the United Nations General Assembly in NYC. Further escalation in Ukraine and Gaza.

Investor sentiment remained range-bound last week, fluctuating between mildly positive and mildly negative as investors struggled to make sense of conflicting economic signals. The ongoing gap between market performance and sentiment persisted in most regions, narrowing only in the US, UK, and other developed markets. A lack of transparency, consistency, and clarity about the fundamental economic outlook is translating into a lack of confidence, direction, and consensus among global investors. This uncertainty is likely to persist in the near term, especially as the leading effects of tariffs begin to show up in lagging economic data in Q4.

Markets and sentiment have been locked in a cat-and-mouse game for weeks, with no clear end in sight. As of last Friday, the cats appear to be regaining the upper hand in the US, UK, and Global Developed markets. Elsewhere, the game remains too close to call. This market dynamic mirrors similar games unfolding in the macroeconomic arena—between inflation and employment—as well as in geopolitics, where war and peace are in constant tension, and in global trade, where protectionism and free trade continue to spar. Just like in these broader battles, there’s no definitive winner yet. Investor sentiment seems to mirror this uncertainty, even as markets persist in assuming that, eventually, the cats will always win, appearances be damned.

Believing something intensely does not make it true. It makes it comfortable. That's not the same thing. A strong conviction, either bullish or bearish, makes believing news that confirms this belief that much more 'comfortable' and gives investors the confidence to act on it (buy or sell). A disconfirming news feels ‘uncomfortable’ - if we didn't see this coming, what else are we missing? This discomfort often leads to underreaction, as self-doubt creeps in, thereby avoiding the kinds of investment decisions that might spawn consequences.

Risk-tolerant investors are dreamers in a hurry, who want to turn a little money into a lot as fast as possible. Risk-averse investors are dreamers too - otherwise, they wouldn’t be in the market - but they feel no urgency about bringing their dreams to fruition. Time is the great divider here. Given the uncertainty created by conflicting signals from the economy, politics, and geopolitics, investors have adopted a two-pronged approach: short-term bets that don’t require news confirmation, and longer-term positions that do. The former tends to cluster around the AI theme, while the latter focuses on the direction of interest rates - the only two ‘known unknowns’ investors feel they can rely on. Betting on anything else, given all this uncertainty, only leads to regrets. Regrets lead to turnover, turnover to expenses, expenses to underperformance, underperformance to bad publicity, bad publicity to redemptions, and redemptions to the poorhouse.

Last week’s FOMC meeting delivered the expected 25bps rate cut, but the dysfunction evident in the dot plot did little to ease investors’ concerns about the Fed’s independence next year. For many, the Fed’s very nature is to be independent from politics. But they aren't so sure that Trump, a practical man, would concede that this was the Fed's intended nature to begin with; and if it was, it is probably the executive branch’s duty either to deny it or to whip it into shape, show it who’s boss.

Given how important the Fed’s independence is to both domestic and foreign investors, now is the time for the administration to clarify its stance. For some, last week’s FOMC meeting may have marked the moment when “now” quietly slipped into “then”.

Regime Distribution: Three horizontal stacked bars show how the ten markets are distributed across the five regimes — today, one week ago, and one month ago. Each bar is colored by regime: red (Bearish), yellow (Negative), grey (Neutral), blue (Positive), green (Bullish). The white vertical marker on each bar shows the aggregate ROOF score for that period. Tick marks below the bars align with the regime thresholds at ±0.20 and ±0.50. Reading it: a leftward shift over time indicates broadening deterioration; a rightward shift indicates broadening improvement. Widening tails signal rising dispersion.