AXIOMA ROOF™ SCORE HIGHLIGHTS
WEEK OF FEBRUARY 23, 2026
Potential triggers for sentiment-driven market moves this week
- US: Fed Governor speeches and PPI data. Earnings from Nvidia, Berkshire Hathaway, Salesforce, HP, Snowflake, and Baidu.
- Europe: Eurozone inflation data, business and consumer surveys.
- APAC: Japan industrial production, retail sales, and Tokyo inflation data. Australia inflation data.
- Global: US-Iran negotiations, AI valuation (Nvidia earnings), Private Credit cracks (Blue Owl).
Insights from last week's changes in investor sentiment:
Investor sentiment weakened further last week. Bearish positioning persisted across six of the ten markets we track, deepened in two additional markets (Global Developed ex‑US, UK), and remained neutral / wait‑and‑see in the US. China was offline due to Lunar New Year holidays. Globally, investors are digesting softer US macro data, the SCOTUS ruling on Liberation Day tariffs, and rising geopolitical risk around Iran, as negotiations continue to stall without clear convergence. Absent further military escalation in Iran, attention now turns to Wednesday’s Nvidia earnings, which investors will look to for guidance and reassurance on the durability of AI‑driven valuations. Meanwhile, the ROOF Scores are flashing big warning signs in Global Emerging markets and Japan.
The real question for AI‑exposed investors - that’s everyone nowadays - is whether recent noise around Blue Owl mark a Bear Stearns‑style moment for private credit. The issue has entered the mainstream, with Mohamed El‑Erian raising it publicly on LinkedIn. When a leading voice on systemic fragility and tail risk starts asking uncomfortable questions, investors tend to listen. The ROOF Scores suggest they already are, with risk‑averse positioning building for a third consecutive week - even as the guns remain quiet in the Middle East, for now.
The illiquidity and opacity of private credit are pushing investors toward an uncomfortable conclusion: probability, as a clean measure of risk, might no longer work if this bubble bursts. So forecasts of what could happen have been quietly abandoned in favor of simulations of what might happen, with a focus on worst-case scenarios. These are then stitched together into a probability‑weighted Mr. Potato Head-beautiful forecast, where nothing fits right, but somehow achieves a certain logical harmony – a credibility greater than the sum of its parts.
As a businessman, your best ideas are the ones no one else has had yet. As an investor, your best ideas are the ones everyone else will eventually have. That includes knowing when to step off an over‑crowded ferry that’s about to sail into choppy seas with poor visibility. Taking a plane instead doesn’t mean you’ve changed your mind about the destination, only that you’ve lost faith in the vessel.
Which raises an obvious question: why is US investor sentiment - arguably the most exposed to the AI theme - only neutral, while everyone else appears busy buying plane tickets?
The answer isn’t calm or acceptance. US neutrality looks more like gridlock. A pile‑up of bullish AI narratives and bearish positioning occupying the same narrow deck. It’s not indecision so much as mutually assured hesitation - the market equivalent of a cold front slamming into a warm one, generating noise, turbulence, and very little forward motion.
The ROOF Scores make this hard to ignore. July 2025 was the last time US investors were meaningfully bullish. Since then, they haven’t been buying the dip so much as buying insurance, systematically rotating out of risk‑tolerant strategies and into risk‑averse ones, even as the story being told insists the ferry is sound, the seas are manageable, and anyone heading for the airport is overthinking it.
Are they?
Note: green background = bullish, red background = bearish
Changes to investor sentiment over the past 180 days for the ten 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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