AXIOMA ROOF™ SCORE HIGHLIGHTS

It's the inflation, stupid. Three decades on, the slogan needed an updating: the University of Michigan reported American consumers in a deepening funk last week, with the sentiment index falling to 51 from 55.2, expectations for business conditions dropping double digits over both horizons, and only 8% of consumers now expecting their incomes to outrun inflation, down from 18% in December 2024. A household budget does not need a recession to become pessimistic; sometimes $4 gasoline is enough. And yet the same week, in the same country, presumably including many of the same people, the US equity market set another record high. Surveys measure stated concern; markets measure funded conviction.

Last week offered a powerful reminder that sentiment is an appetite, not an opinion. Markets have no mechanism for rewarding investors who want the sensible thing; they reward investors who want something strongly enough to own it. The AI theme continues to crowd every other narrative off the stage, and the bear case refuses to stay buried — job redundancies, the coming SaaS apocalypse, valuations priced for a future that has not yet filed its paperwork. Most will concede these concerns are rational. They keep buying technology stocks anyway. People can recognize that something is bad for them and continue consuming it with admirable consistency. There is a reason porn is a multibillion-dollar industry and documentaries are not.

ROOF scores track the other column of that ledger — what investors paid for, not what they told a pollster. In the US, that ledger is especially uncomfortable. Sentiment among US investors remained negative at -0.48 and weakened materially over the past month, while US equities continued to add records, taking the year's tally to 27. That is not a contradiction so much as a description of what the rally still depends on: prices can keep rising while investors remain uneasy, but an advance built on reluctant participation has less room for disappointment.

Across markets, the signal is no longer uniform deterioration. It is widening dispersion in sentiment changes. The weekly and monthly moves in ROOF scores are becoming less synchronized, with dispersion rising to the 66th percentile of its history from the 49th a week earlier. That matters because synchronized moves usually point to a common driver; wider dispersion suggests investors are reacting more idiosyncratically, market by market. That idiosyncrasy shows up first where the short-term and medium-term signals no longer point the same way. Investors in the UK and in developed markets outside the US show early signs of an upturn in sentiment: weekly changes have remained positive for two observations even though monthly changes are still negative. They are not forecasts. They are early directional evidence. Elsewhere, the message is cleaner: sentiment among European, emerging-market, Japanese and Asia-Pacific ex-Japan investors has moved in the same direction over both the week and month.

This leaves investors with an awkward combination for the week ahead. They will have plenty of information with which to justify whichever view they already hold: minutes of a divided Federal Reserve meeting with three dissents, ECB meeting accounts, US PMIs and industrial production, UK inflation and retail sales, Japanese GDP and inflation, and a full Chinese data slate. None of it guarantees clarity. The more useful question is whether the new information changes the balance of risk appetite, or merely gives existing convictions a more respectable footnote. Weak sentiment makes investors more sensitive to bad news and less responsive to good news; the opposite is true when confidence is strong. With US sentiment already close to the bearish threshold, another deterioration would matter more than another piece of evidence that the AI story remains intact. Investors can tolerate a great deal of cognitive dissonance when the thing they want keeps going up. They become less tolerant when it stops.

Aggregate ROOF Trend: The black line is the aggregate mean of ROOF scores across the ten markets; the shaded grey band shows the range from the most bearish to the most bullish market on each day, indicating the dispersion of sentiment across the universe. Reading it: a rising line indicates increasing risk tolerance; a declining line indicates increasing risk aversion. Bottom strip: cross-market dispersion percentile — the cross-sectional standard deviation of ROOF across the ten markets, percentile-ranked against its own full history. Shaded zones mark elevated (>80th percentile) and compressed (<20th) readings. Reading it: a spike into the top shaded zone is a material divergence episode (sentiment moving in different directions across markets), a slide into the bottom shaded zone is convergence on a common driver (sentiment moving in the same direction across markets).

Regime Distribution: Three horizontal stacked bars show how the ten markets are distributed across the five regimes — today, one week ago, and one month ago. Each bar is colored by regime: red (Bearish), yellow (Negative), grey (Neutral), blue (Positive), green (Bullish). The white vertical marker on each bar shows the aggregate ROOF score for that period. Tick marks below the bars align with the regime thresholds at ±0.20 and ±0.50. Reading it: a leftward shift over time indicates broadening deterioration; a rightward shift indicates broadening improvement. Widening tails signal rising dispersion.

Market Monitor: A table showing, for each market: current ROOF score, current regime, weekly and monthly changes, regime one month ago, and distance to the nearest extreme threshold. Color cues highlight regime deteriorations (red) and improvements (green). Reading it: scan the "1M Ago Regime" column for markets that have crossed regime bands over the past month; check the "Distance" column to find markets close to the ±0.50 extreme thresholds.

Correlation Matrix (Δ1M): A heatmap of correlations between monthly sentiment changes across all market pairs, over a rolling 60-day window. Green cells indicate that investor sentiment in the two markets changed in the same direction; red cells indicate opposite directions. The rightmost column shows each market's average correlation with the rest of the universe. Important: these are correlations of sentiment changes, not market returns or ROOF levels. High correlation means investor mood in the two markets moved in sync over the past 60 days.