AXIOMA ROOF™ SCORE HIGHLIGHTS

• US: FOMC minutes, Services PMI and trade balance data.
• Europe: ECB policy meeting accounts. Germany industrial production and trade data.
• APAC: Japan consumer spending, machine tool orders, producer prices, and the current account data. China inflation data.
• Global: The slow normalization of traffic through Hormuz remain the focus for now.

Investor sentiment was little changed last week, but the broader trend remains lower than a month ago. The sharpest move came from US investors, where sentiment fell from bullish to negative. Global Developed ex-US sentiment also declined, moving from bullish to neutral and confirming a wider downswing across developed markets. Across the ten markets we follow, sentiment now enters the summer months on the backfoot, with investors less confident, more reactive, and more exposed to emotion-driven swings. Elevated retail participation in leveraged ETFs and other directional instruments only amplifies that risk.

The old saying that markets climb a wall of worry is simply the Stoic injunction to wear the world like a loose garment, translated into the language of finance. The lesson is to acknowledge uncertainty without becoming captive to it—to let risks inform your decisions rather than dictate them.

That discipline, however, is hardest to maintain during the summer. With many institutional investors on annual leave, trading volumes thin and a smaller cast of characters is left to set prices. In quieter markets, emotions become a more powerful force. Investors become quicker to chase narratives, slower to weigh fundamentals, and more inclined to lurch from one story to the next.

The business of investing was built on the premise that prices ultimately reflect fundamentals. Yet, on a quiet summer day, what often matters more is which story investors have decided deserves their attention. They are a demanding audience: fickle enough to cheer bad news and boo good news, quick to abandon yesterday’s plotline, and always waiting for the next twist. During the summer, investors put down their econometrics manuals and pick up the TV Guide instead. So, what’s on this summer?

Iran War Season 2 wrapped up last month. The finale left enough unresolved plotlines to hint at a Season 3, but until the network announces a renewal, investors will mostly be watching reruns rather than new episodes. Reruns can still fill airtime, but they rarely hold the audience for long; each viewing tends to lose some of its impact.

AI Fears returns for Season 4 with a larger production budget and a less forgiving audience. “Show, Don’t Tell” looks like the title of the new season: with valuations still lofty, bearish investors will need to be shown what bullish investors only need to be told. If the evidence disappoints, AI could move quickly from background anxiety to market catalyst.

With the Iran blockbuster on hiatus and USMCA renewed for just a single season, the rest of the summer schedule is familiar: The Fed, whose latest season has just premiered, and Putin’s War, now in Season 5. Like many series that have outlived their initial buzz, Putin’s War no longer commands the audience it once did. Investors tune in only for major plot twists—perhaps a surprise cancellation announcement?
Summer programming is now set. The challenge, as always, is to remember that successful investors watch the audience as closely as they watch the show.

Bullish and bearish regimes are extreme sentiment states when investors are more likely to react emotionally to news. The next signal is whether weakness spreads from China and Emerging Markets into APAC ex-Japan and the US, the two markets closest to the bearish threshold. With Q2 earnings not starting until mid-July, there is little company-specific news to anchor sentiment this week, or for another ten days. Meanwhile, heavy retail participation in directional leveraged ETFs — the Rosetta Stone of hubris — can become a trigger for market volatility, especially when AI fears, lofty valuations, and low volume turn small disappointments into larger sentiment-driven moves.