Over the past three months, manager sentiment gradually declined among listed companies in Germany, as shown by the SAFE Manager Sentiment Index. After starting in positive territory at 0.26 in May, the Index turned slightly negative at -0.08 in June and dropped further to -0.17 in July. This decline reflects growing uncertainty, driven by ongoing macroeconomic risks and geopolitical tensions. The Index remains close to zero, showing an overall neutral sentiment. While firms have become more cautious, positive financial results and digital transformation across several industries are helping to stabilize overall sentiment and prevent a steeper decline.
In this blog post, we document some of the key forces that shaped manager sentiment in the second quarter of 2025 by reviewing 139 earnings calls held from April to June. The main topics discussed by C-suite executives show how firms are pushing forward with digitalization and sustainability, yet remain acutely aware that unexpected external shocks could quickly reshape their path.
SAFE Sentiment Index in July of 2025
Geopolitical risk and tariffs unsettle managers
Geopolitical tensions and trade policy risks, already a major concern in the first quarter, continued to weigh heavily on managers’ confidence, shaping a defensive tone across earnings calls. Executives highlighted the destabilizing impact of ongoing conflicts in Ukraine and the Middle East, as well as the unpredictable nature of American trade policies and shifting alliances, which together have “disrupted supply chains and clouded planning horizons.” As one CEO put it, “In a world with all this geopolitical uncertainty, to have a strong balance sheet is exactly what our customers want to see,” underscoring that financial strength is precisely what customers demand and value most in such volatile times.
On the tariff front, managers described the challenges of navigating exemption rules and rapid policy shifts. As a strategic response, many companies have accelerated local production efforts, highlighting that “we produce locally for the local markets” to reduce vulnerability. Managers discussed these strategies already shortly after the US election, as shown in SAFE’s blog post “Trade Tensions and Tariff Tactics: Insights from Publicly Listed German Companies” from February.
Managers also pointed out new challenges. They noted that customers are adopting a clear “wait-and-see” approach, shortening order horizons from several months to just one or two weeks. As a result, executives were deliberately holding back on detailed forecasts before the end of the 90-day pause on new tariffs on 8 July, hoping that potential negotiations between Europe and the US would provide clarity.
Positive financial results despite the challenges
Across the second quarter earnings calls, managers from diverse industries frequently underscored that they had achieved their targets or even exceeded guidance. A manager of an insurance company provided a neutral outlook, yet confirmed the firm’s current high performance, saying, “I would not expect any big relief, but also not a burden going forward. But currently, we are really in good shape when it comes to achieving our target.” A CFO from the energy sector stated they “had another very strong quarter, exceeding basically all major KPIs compared with expectations.” Similarly, a manager from the technology industry remarked, “I'm happy to report that we achieved robust revenue growth, strong order entry, and stabilized EBITDA in the first six months.” Another manager from the healthcare industry stated: “We also exceeded our guidance based on previous accounting practice.” To conclude, statements from managers of companies operating in different industries signal robust performance despite uncertain conditions.
Economic momentum shifts from the US to Europe
Several executives pointed to a clear shift in momentum from the US to Europe, reflecting diverging economic conditions. While companies with a strong European focus stand to benefit directly, the effect is more neutral for multinationals operating in both regions. One manager remarked that “when it comes to the US, it remains depressed,” contrasting with “a continued strong order intake in Europe”.
This rotation toward Europe is driven by geopolitical uncertainty and a renewed search for stable and profitable assets. In the financial sector, executives observed a “repatriation of European savings back into Europe” for the first time in many years, underscoring growing confidence in the region’s economic outlook and highlighting Europe’s rising attractiveness as a strategic investment destination.
Sustainability goals progress, but firms meet structural challenges
Firms highlight both progress and structural challenges regarding Environmental, Social, and Governance (ESG). Industrial players showcased substantial contributions to decarbonization by introducing products with lower carbon footprints, such as sealants made from renewable raw materials and polymer binders supporting low-carbon construction. Managers emphasized a clear commitment to German and European climate goals. They also stressed the importance of cost efficiency and affordability, including measures like electricity tax reductions and tax incentives to support German plants and promote electrification of commercial car fleets.
Infrastructure gaps, particularly in charging networks, remain a bottleneck for scaling zero-emission mobility. As one manager said, “To meet the European CO2 [threshold] by 2030, about 35,000 public fast charging points need to be in place. To date, we have far less than 1,000. The infrastructure buildup, therefore, urgently needs to pick up pace. This is a collective challenge”.
In financial markets, sentiment about ESG was more mixed: some asset managers reported muted ESG inflows, with one commenting, “we do not see an increase in ESG demand.” At the same time, investors appear to be adjusting rather than abandoning sustainability criteria, with Article 8 funds increasingly re-admitting defense stocks, while stricter Article 9 mandates continue to uphold exclusion rules.
Digital transformation – progress and vulnerabilities
Digitalization has become a central strategic focus, with companies increasingly integrating AI and automation into all areas of their business. Consumer goods firms are deploying “a range of AI tools… generating pricing decisions based on current stock and historical behaviour,” while industrial players emphasize AI systems that “can handle nearly any supply chain challenge.” In healthcare, managers describe offering a seamless “digital patient journey,” enabling a “fully digital journey, not going to the doctor, not seeing a physical pharmacy.”
Companies report also on the downsides of digitalization: One company acknowledged that a recent cyber-attack “did block all systems… we could not ship,” highlighting vulnerability to security breaches, while another flagged exceptional costs associated with “the implementation of our new ERP system, which is still ongoing,” underscoring the risk of prolonged IT investments impacting margins.
Despite these challenges, the overall conviction remains strong: “It is crucial that we fully embrace new technologies as companies, but also as societies. It is a trigger for reinvention, fewer silos, less bureaucracy, and much higher speed when it comes to innovation and time to market.”
Cautious confidence amid uncertainty
This quarter’s earnings calls revealed a careful balance of confidence and caution, mirroring the nuanced but declining trend in the sentiment index. Several executives proudly presented strong results and gave a promising outlook despite the challenging environment. At the same time, almost all emphasized the need to “remain cautious with guidance for the rest of the year,” given ongoing macroeconomic uncertainties. Taken together, the message is clear: despite solid achievements, firms are approaching the rest of 2025 with cautious confidence and a vigilant focus on evolving risks.
Sara Fadavi is Financial Policy Analyst at the SAFE Policy Center.
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.
