AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: FOMC meeting, PPI and industrial production data.
• Europe: ECB and BoE rate setting meetings. Germany’s economic sentiment index and PPI data. UK unemployment rate.
• APAC: BoJ and BoC rate setting meetings. China industrial production data. Meeting between Chinese Vice Premier He Lifeng and US Treasury Secretary Scott Bessent.
• Global: Potential regional expansion of the war in the Middle East and continued disruption of the oil supply chain.

After two weeks of trying to pick stocks through a thick fog of war — glued to news feeds, eating “al desko” (not a word, I’m aware), and attempting to work out what’s what — investors are finding themselves yearning less for the record‑setting markets that preceded Operation Epic Folly and more for calmer ones.

The rallies aren’t as high, but the drawdowns aren’t as low either. And with the war in Iran now entering its third week — and the uncertainty it casts over the global economy stretching further — many see that as a healthy trade‑off. They don’t really miss flying high. Being a bird isn’t all sunshine and pooping from high places.

Investor sentiment stayed bearish last week in eight of the ten markets we track, and UK investors, in particular, didn’t exactly keep calm and carry on. Even in the two markets least exposed to the oil shock — the US and China — sentiment remained negative. For a fourth consecutive week, the market for risk has been badly out of balance: risk‑averse investors continue to far outnumber risk‑tolerant ones, forcing sellers to offer steep discounts to coax buyers back to the table. In other words, equities are being priced less by competing investment theses and more by competing risk appetites. And for now, even risk‑tolerant investors aren’t willing to pay a premium to add risk assets.

What risk‑averse investors are saying: February 28’s bombing of Iran by Israel and the US was, for markets, the 2025 equivalent of Liberation Day. Investors were shocked that the administration was shocked that Iran would squeeze Hormuz — its very own rare‑earths‑style choke point on the global economy — much as they were last year when the administration failed to anticipate China’s squeeze on the rare‑earth choke point as trade tensions flared. In both episodes, this wasn’t just geopolitical theatre; it was a supply‑chain shock — predictable leverage, predictably deployed. The rare‑earth squeeze forced the Trump administration to back down; the Hormuz squeeze hasn’t yet.

What risk‑tolerant investors are saying: Savvy investors welcome volatility. To them, spikes in volatility are rarely noise — they’re clues, pointing to where risk is concentrating and where attention should be focused. Volatility is a contrarian investor’s best friend. Don’t fight it; follow it. Ask why it’s there in the first place.

Investors are likely to stay negative — if not outright bearish — until they know how (and when) this war ends. They’re not especially picky about who ‘wins’ and who ‘loses’; both sides have already penned that script. What they do want is simple: take the pressure off the Hormuz chokepoint. They also know that once a chokepoint has been weaponized, it can be weaponized again — they learned that lesson the hard way with rare earths last year — so they won’t be soothed by a breezy promise that a ‘coalition of the unwilling’ will handle it. And talk of the bombing continuing “just for fun” isn’t going to put a smile on anyone’s face.

Predicting investors’ mood is simple: sentiment equals reality minus expectations. That’s why even a reality that’s less adverse than expected — a ceasefire but not a peace deal — could be enough to spark a sharp relief rally.

Private credit cockroaches: Meanwhile, back at the ranch, CEOs of the biggest banks and insurers are eyeing their private credit exposure nervously — acutely aware that when the music stops, they may be the ones left holding the bag. And when the CEOs of the largest lenders start warning that there might be a problem, investors tend to listen — after all, bankers know where the bodies are buried, because they financed half the dig.

As Victor Hugo put it, “What makes night within us may leave stars.” When the fog of war eventually lifts, there will be plenty of stargazing to do. The key for investors is to identify the stars before the darkness clears — so when clear skies return, they already know where they are.