AXIOMA ROOF™ SCORE HIGHLIGHTS
WEEK OF JUNE 1, 2026
Potential triggers for sentiment-driven market moves this week
- US: PMI data and the Jobs report. Powell speech. Broadcom earnings.
- Europe: Eurozone inflation and retail sales data.
- APAC: China PMI data.
- Global: Ongoing efforts to reopen Hormuz.
Insights from last week's changes in investor sentiment:
A portfolio equals structure and activity. Structure is the framework: constraints, risk limits, sector allocations, and opportunity set. Activity is the continual revision of beliefs as new information arrives. Remove structure and you have speculation. Remove activity and you have a time capsule of yesterday’s convictions about a world the market has already left behind.
For investors, the war in Iran ended on March 31st; they rarely wait for diplomatic closure. The Trump administration has not just once said it is negotiating an end to the conflict—it has said so repeatedly, inconsistently, and often alongside threats of escalation, roughly 6–10 distinct times since March 24, turning it into the Boy who cried Peace. For investors trying to forecast inflation, monetary policy or, for extra credit, corporate earnings, each fresh mention of peace and a reopening of Hormuz brings a happily-ever-after ending for an entire afternoon. By now, however, these headlines add too little incremental guidance to justify activity and only prolong the boredom: investors have already moved on, while politicians are still negotiating the optics.
The recovering ROOF Scores told the same story. Sentiment appears to have reached peak bearishness in late March and has been recovering globally since, providing broader support for the April–May rally. That matters because an initial rebound can be led by contrarian, risk-tolerant investors buying the dip, but a lasting rally requires more risk-averse investors to become less reluctant to participate. Read that way, the ROOF Scores were signaling that what began as a speculative rebound in early April was evolving into a more durable rally in May as more hesitant investors began to follow. In other words, sentiment was not merely catching up with the move; it was validating continued participation in a market that had already moved on while politics was still rehearsing the ending.
With the exception of China, the April–May rally has largely repaired the March drawdown and restored the previous uptrend. But the recovery remains one-sided: risk aversion (red line in the bottom charts for each market) has fallen back to pre-war lows across markets, while risk tolerance (green line in the bottom charts for each market) has recovered in only three of the other nine—UK, US, and Global Developed ex-US.
This week is comparatively light in terms of economic data releases and, as long as the guns remain quiet in the Gulf, portfolio activity should again reflect the ordinary business of revising views on growth, inflation and earnings, rather than reacting to each new rumor of peace or escalation. Even so, the war has changed the baseline. Before it, investors expected two rate cuts this year in the US; after it, they are contemplating one hike, and perhaps more next year. Activity may return to fundamentals, but the fundamentals themselves are now being priced through a different monetary policy lens.
There are 60 seconds in a minute, 60 minutes in an hour, 24 hours in a day, 7 days in a week, and X weeks left in this market rally. Solve for X.
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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