AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: Jobs report, manufacturing PMI, and factory orders data. SCOTUS decisions.
• Europe: ECB speeches and Eurozone inflation data.
• APAC: Japan Tankan index, industrial production, retail sales, and unemployment data. China PMI data.
• Global: Hormuz tanker traffic, and whether the ceasefire begins to look durable rather than merely paused.

Investor sentiment continued to drift lower across all markets we track after peaking in early June on the signing of an MOU between the US and Iran. Since then, three factors are weighing on sentiment: doubts over whether Iran’s concluding chapter is final or merely another draft in circulation, recurring AI worries, and the Fed’s hawkish turn. 

The war in Iran began in the air, moved to the sea, and has now entered the arithmetic of endurance. In a war between a superpower and almost anyone else, common wisdom says control belongs to the former. And it does — until the weaker side survives long enough that you are suddenly making concessions you never intended to put on the table, later reclassified as the cost of doing peace business. That’s when, as with most things in this world, it is no longer entirely in your hands.

Clarity comes from isolating the signal, not aggregating the noise. For investors, the signal is the number of tankers safely transiting through Hormuz; the noise is the finger-pointing. Two weeks into this ceasefire, that signal still looks more like Morse code than a trend line.

Last week, NASDAQ briefly felt like a downtown New York party where uptown people go and mix. In the AI era, old money hasn't stopped signing the checks—but it has stopped setting the terms. Uptown has gone from gatekeeper to gatecrasher. The FOMO buying following the SpaceX IPO (up 50% in the first two days) quickly gave way to a selling frenzy of semiconductor stocks, making the floor of the Exchange look like a speakeasy converting to a revival meeting moments before the cops rush in.

That AI is not going to ruin anyone's picnic seems to be the thinking of investors who believe AI is a pretty good thing and that more AI is better. “There won't be any need to do menial work,” they say with the ebullience of the better-living-through-insert-techno-pipe-dream-here romantic. But then, after trading hours on Monday, multiple outlets reported that Oracle’s latest annual filing disclosed a reduction of about 21,000 jobs, or roughly 13% of its workforce, and included the statement: “The adoption and deployment of AI technologies across our operations have resulted, and may continue to result, in reductions to our workforce.” 

The third worry is the Fed, or more precisely, the managed withdrawal of clarity. At last week’s FOMC press conference, Kevin Warsh’s first as Fed Chair, he declined to submit his own dot-plot forecast and made two things clear: the Fed would focus on inflation, not jobs, and it would offer less guidance, not more. That would be a cleaner position if the data were cleaner. They are not. The energy supply shock from the war in Iran will keep clouding the inflation numbers for months, making the Fed’s forecasting job harder and investors’ confidence in that forecast lower. 

The read-through is not evenly distributed. A more hawkish Fed, especially one investors think may need to raise rather than lower rates, lands hardest on emerging economies carrying USD-denominated debt. Global Emerging Markets, which had recovered to neutral two weeks ago after the war pushed sentiment into bearish territory, has therefore been the first to price the Fed U-turn. If investors were confident that the war’s supply-shock phase was over, sentiment would probably have stabilized at higher levels by now, rather than extending the reversal that began two weeks ago. The fact that it has not says enough. The concluding chapter remains unwritten, and recent experience has not made anyone more comfortable with the author.

This week, clarity remains the thing investors need and are least likely to get. Hormuz still needs a clearer signal, AI still has a jobs PR problem, and the Fed has helpfully announced that guidance will now be available in smaller portions. Add the July 4th weekend and the start of the holiday season, and the willingness to speculate should remain low — unless someone tempts the collapse of the space-time continuum by reading the Wall Street Journal on Wall Street. Until the signals improve, hesitation is not indecision. It is risk management with an out-of-office reply.