AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: PPI (March), several Federal Reserve officials’ speeches. Earnings from Goldman Sachs, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Morgan Stanley, and BlackRock.
• Europe: Final inflation readings for March in the Eurozone. ECB minutes. Uk retail sales.
• APAC: China Q1 GDP, trade surplus, industrial production, unemployment rate, and retail sales. Japan machinery orders.
• Global: Is there a face-saving de‑escalation play that reopens Hormuz before markets price-in a long blockade as the base case? Will the ceasefire hold now?

Most people spend all their time worrying about the future or chasing the past. Investors, spend all of their time chasing the future or worrying about the past. Was our initial forecasts correct? Have circumstances changed? Should we rebalance? Could the future be different than what we thought it would be?

For investors, the past is a funny thing. It has such power over future performance. Such sway. It’s shifty too. It morphs and changes with every news headline, even though in theory it should be set in stone. In investments, the past is all perspective. 

Investing follows a simple process. First investors forecast where returns will come from as best they can. They then construct a portfolio loading on these expected sources of return as much as possible given the constraints in their mandate. Then they wait, hoping for the past to passively turn into the future and turn those expected returns into realized returns. Seems simple enough, almost foolproof. The problem is the present, when news comes out that invalidates the past and now makes the expected future unlikely. Last week, after the announcement of a ceasefire fire and an upcoming peace negotiation, investors rebalanced their portfolios based on a new forecast for a peace dividend return. On Sunday, they got the news: No deal. No peace. And just like that, the expected future investors had forecasted in the past, and built their portfolios around, turned into dust.

Investors initially celebrated the news of a two-week ceasefire by loading up on risk assets, causing volatility to fall as rapidly as the tide recedes from the shore before a tsunami thunders in. By Friday, however, they had turned suspicious about the durability of this truce: a lot of status, not enough quo. There had been plenty of noise around the announcement, with both sides presenting it as a win, but the Strait of Hormuz remained effectively closed and the global economy still saddled with the costs. Washington went into the talks demanding the complete, unconditional reopening of Hormuz; with diplomacy now dead, it has delivered the opposite: a freedom-of-navigation wish turned into a complete denial-of-transit deed. The consequences of Operation Epic Fury now appear to be running ahead of the administration’s capacity to contain them. From a market perspective, the headline changed, but the economic reality hasn’t; dire straits indeed.

Now that the future the past had priced in has been denied by the present - no deal, no peace - investors have to rebalance for a different tomorrow: a doubly sealed Hormuz. In ROOF terms, last week’s “peace dividend” lifted risk tolerance at the margin and took some pressure off risk aversion,  but it never earned the kind of broad, confident buy-in we saw after the pause in Liberation Day tariffs in April 2025. Sentiment stopped getting worse and even recovered slightly, yet it remained bearish in eight of ten markets: a rally led by the most risk-tolerant speculators and contrarians, while everyone else stayed defensive in a trust-but-verify posture. With diplomacy now dead, that marginal bid is likely to fade. Risk tolerance may not need to fall much further, and risk aversion may not need to rise much further, for the imbalance to reassert itself - more investors looking to shed risk than to add it. In that kind of market, tail risk has a habit of refusing to stay in the tail.