AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: FOMC minutes, Q4 GDP. Personal income and spending data along with earnings from Walmart and DoorDash will inform investors on the financial health of consumers.
• Europe: UK retail sales, inflation, and labor market data. Eurozone PMIs.
• APAC: China FDI data. Japan Q4 GDP, trade balance, and inflation data.
• Global: Ongoing, going-nowhere peace talks on Ukraine and Iran. SCOTUS ruling on the one-size-fits-none Liberation Day tariffs.

Investor sentiment took a turn for the (much) worse last week across nearly every market we track, with the lone exception of China, where sentiment managed to climb back to neutral ahead of the week‑long Chinese New Year break - an upgrade from the previous week’s negativity. We now count six of the ten markets firmly in bearish territory, two more in the merely negative camp, and only two still clinging to neutrality.

In the US, the sentiment picture is its own curiosity – the kind investors stare at for a while before deciding they’d rather not know how it ends. Risk tolerance has been flatlining since December, while risk aversion, having bottomed out in early January, has been steadily grinding higher. Concerns over Fed independence, SCOTUS unpredictability, and a geopolitical backdrop that refuses to calm down are all piling onto the existing AI jitters, nudging investors toward increasingly risk‑averse strategies. 

Last week’s macroeconomic data confirmed that the US economy has settled into a tidy little K shape, neatly separating the haves from the have nots. Capitalism, it turns out, isn’t exactly overflowing with opportunities for people who don’t have any capital to begin with. Basically, they’re just left with the ism. And in this version of the economy, being driven by the top 10% is what passes for resilience.

Against this backdrop, investors kept drinking the AI Kool Aid, but just enough to be polite about it. It’s not that they’ve turned against AI or Big Tech; they’re just underwhelmed by the evidence so far. It remains a key part of their portfolios because by now AI feels engaging, attractive, familiar enough to sit next to without checking for exits. Will it be smooth sailing? Of course not. A few bumps, a few twists, maybe a cliff or two. Nothing major. Right.

For the rest of the week, sentiment slid from mostly neutral to openly grim, as investors braced for an even deeper transatlantic split between the US and Europe. The piece de resistance was, of course, the Munich Security Conference. After Donald Trump at Davos and JD Vance at last year’s Munich conference had already taken their swings, it was Marco Rubio’s turn to berate Europe, telling them they’d never done anything of real benefit to the world, or even to themselves. Where Donald Trump and JD Vance berated European leaders for building a faulty mousetrap, Rubio focused instead on the absence of mice – a different tone, but the same message: change or get left at the altar. How they’d been parked on third base for decades, never quite mustering the nerve to head for home. 

To their credit, European leaders didn’t look as hurt by this message as last year, just confused, like their nose was bleeding and they couldn’t remember getting hit. I won’t bore you with the particulars; I’m not writing a psychological drama here. But Rubio seemed to consider his European allies briefly, the way one might consider a bathroom stall with no door. Investors aren’t sure how this helps solidify the transatlantic alliance, but as a wise man once said, a man isn’t much good to anyone until he finds some relief. 

This week won’t offer much clarity. The FOMC minutes will give investors another chance to over interpret every comma, Q4 GDP will tell us whether the economy is actually as sturdy as everyone pretends, and the personal income and spending data will show whether the top 10% of consumers are still willing to play along. None of it is likely to calm nerves. If anything, it may just confirm what sentiment has already decided: the runway is getting shorter, and everyone’s still arguing about who’s supposed to be flying the plane – or worse, whether it’s already been handed over to AI.