In July, the SAFE Manager Sentiment Index fell to -0.17. In the second quarter, executives at listed companies in Germany used negative terms more frequently in their financial reports and at earnings calls, while positive expressions appeared less often. Despite DAX indices’ recent good performance, the decline in managers’ optimism points to a cloudier business outlook.
"Since March, we have been observing through the SAFE Index that the managers’ language is becoming more pessimistic. For listed companies in Germany, the situation is simply more uncertain than before - this uncertainty is here to stay," says SAFE Director Florian Heider.
Risks are usually quantifiable for companies, but the current economic environment is unpredictable and makes long-term forecasts considerably more difficult. Statements from managers show just how serious managers assess the situation. One example from an earnings call is: “Given the high volatility and uncertainty on the broader tariff environment and possible market tensions, we have not incorporated any effect thereof into these estimates.” Another company emphasized: “Given the ongoing uncertainty around tariffs, it's still too early to draw our final conclusions.”
Focus on indirect effects
Companies are increasingly concerned about the indirect consequences of possible tariffs. Alexander Hillert, Professor of Data Science and Finance at SAFE, explains: “Many companies are wondering how their customers will react to the changed situation and how trade tensions will affect the consumer climate.” One manager comments accordingly: “Macroeconomic uncertainties and a dampened consumer sentiment could still impact our business.” Another one points out: “We must also consider indirect impacts resulting from market uncertainty and changes in demand from our customers in industries such as automotive and consumer goods.”
A further text analysis by Alexander Hillert based on the earnings calls shows that the proportion of statements reflecting uncertainty continues to grow and reaches a new record high. Pairs of words such as “high volatility” or “market uncertainty” appear more often executives’ statements. “The phrases that signal uncertainty underline the downward trend in the sentiment of managers, as shown by the SAFE Index,” says Hillert.
The SAFE Manager Sentiment Index
The SAFE Manager Sentiment Index measures the optimism or pessimism expressed by executives of listed companies in Germany monthly. Developed by Alexander Hillert and his team at the Leibniz Institute for Financial Research SAFE, the Index is based on automated text analysis that evaluates positive and negative statements in financial reports and analyst conferences. The Index is based on a three-month rolling window of data.
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