In the first quarter of 2025, the SAFE Manager Sentiment Index painted a striking picture of renewed optimism and subsequent downturn. The Index rose from -0.01 to a notable peak of 1.09 in March, reverting to 0.61 in April. It captures the level of optimism or pessimism in C-suites of companies listed in Germany based on specific keywords used in quarterly and yearly financial reports and transcripts from earnings conference calls.
This blog post examines the key themes emerging from the earnings calls of 116 of these companies held between January and March 2025. The language corporate executives use shows how global trade tensions, domestic policy uncertainty, and industry-specific dynamics reshaped boardroom thinking.
SAFE Sentiment Index in the beginning of 2025
US tariffs caught between paralysis and preparedness
Across DAX-listed companies, the specter of escalating trade tensions with the United States dominated strategic discussions. Executives stressed that a global trade war is deeply unwelcome. As one manager noted: “Trade wars harm everyone... there are no winners.”
The main threat was not the tariffs themselves but their unpredictability: “Interpreting the tariffs is an ongoing exercise week after week... new scenarios coming out, new numbers being calculated.” While some companies enjoy a degree of insulation – “We produce local for local” – many acknowledge that indirect consequences across supply chains and global pricing are inevitable. Most firms have adopted a cautious wait and see approach, deliberately excluding tariff impacts from their 2025 guidance. As one CFO summed it up: “I remain humble... daily or weekly announcements being made that can change the picture completely.”
The infrastructure fund inspires cautious optimism after the German elections
While global tensions unsettled forecasts, domestic politics offered both promise and frustration. In the wake of the German elections in February, executives during the first quarter of 2025 expressed a clear desire for the swift formation of a new government. Political stability is essential to restore business confidence and support economic growth.
The incoming government’s infrastructure and defense spending commitments were largely welcomed, albeit with skepticism regarding implementation. “This unheard stimulus… will have an effect on the growth… but bad news for my grandchildren,” one executive quipped, underscoring fiscal concerns. Structural barriers remained front and center: “No one invests if you need five times longer to get an approval... if energy costs are up to four or five times higher.” The infrastructure fund, still embryonic, was viewed as a potential catalyst—but one that hinges on swift execution. “It needs to be implemented very quickly and forcefully... but the government still needs structural reforms.” Some executives urged a broader overhaul: “Review bureaucracy... review the social security system... that cannot be replaced by these special funds.”
Defense: booming demand, strategic realignment
The defense sector entered 2025 in full acceleration mode. “We want to grow the business significantly in the coming years,” said one defense CEO, driven by the exceptional financial performance achieved in 2024. Across Europe, demand is surging, and companies stand ready to deliver at scale. As one executive recalled from the Munich Security Conference: “[The Americans] said, you have to invest. The US will no longer protect you.”
In this climate of uncertainty, affordability is no longer the primary concern. Based on discussions with European defense ministers, one executive emphasized that quality is now the foremost criterion, followed by delivery timelines, while price ranks only third. Defense firms are also placing strong emphasis on digitalization as a strategic growth lever. At the same time, policymakers appear increasingly engaged: “We see a strong push of bringing academia and defense industry together, ... creating new startup funds and investment into R&D technologies.”
Technology: AI takes the wheel
The listed tech firms are fueled by relentless demand for AI and cloud services. “We had a record Q4 exceeding all our expectations,” one executive noted. Cloud revenues continue to grow at double-digit rates, while rapid AI integration is driving market momentum. In parallel, the automation of services is increasingly regarded as a key growth catalyst, further reinforcing the sector’s optimistic outlook. AI is also driving cross-sector adoption, from smart image tagging in consumer goods to AI-driven assistants in healthcare. “We’re working on AI initiatives to increase the efficiency of our operational processes,” said an executive from the transport sector. AI is no longer a buzzword; it is becoming embedded in business operations across the economy, creating a favorable environment for tech companies to scale and innovate. Legacy industries, however, faced more complicated terrain—caught between transformation and margin pressure.
Legacy sectors between change and constraint
For firms belonging to the automotive sector, 2024 marked a year of reckoning – an inflection point shaped by tepid European demand, a persistently “uncertain environment,” and “fierce price competition, especially in China.” Consumers shifted away from upper-segment vehicles toward more affordable models, driven by increased cost-sensitivity and inflation. For the upcoming financial years, electrification remains the strategic North Star – most firms expand electric vehicle offerings. At the same time, the industry is undergoing a quiet transformation, with software-defined vehicles and AI-powered manufacturing gaining traction.
In contrast, the housing market is beginning to stir, yet a full recovery remains out of reach. “We are in a slow recovery,” one executive noted, pointing to low unemployment and steady wage growth as supportive fundamentals. Easing inflation and successive interest rate cuts throughout 2024 have further lifted sentiment: “We saw the outlook improving with four interest rate cuts.” However, structural rigidities continue to hinder progress. “People don’t leave their apartments anymore... nothing comes to the market,” remarked one executive, highlighting a rental market gridlocked by regulation and scarcity. The stagnation not only impedes housing mobility but also stifles broader investment and development across the sector.
Pragmatic approach amid great uncertainty
At the beginning of 2025, companies still focus on identifying business opportunities despite geopolitical uncertainty: “Geopolitical items… support us. People want our advice.” Financial services and consulting firms are poised to capitalize on clients' desire for stability and foresight. Yet across many other industries, executives tread cautiously. “There are opportunities in 2025, but also very, very high risks.” Volatility in policy, inflation, and trade dynamics continue to cloud forecasts. As one executive bluntly put it: “Currently, we see no reason for euphoria.” The earnings calls show a pragmatic approach: mitigate risk, leverage uncertainty where possible, and avoid overextension in the absence of clear signals.
Alexander Hillert is Co-Director of the SAFE Department “Financial Intermediation” and Professor for Finance and Data Science.
Elena Munteanu is Student Assistant at the SAFE Data Center.
Blog entries represent the authors’ personal opinion and do not necessarily reflect the views of the Leibniz Institute for Financial Research SAFE or its staff.
