Global investors remain “uber-bullish” on markets but are increasingly signalling concerns that corporate overinvestment could start to weigh on returns, according to a Reuters poll of fund managers and analysts released on Tuesday.

Despite strong optimism in major equity markets, a growing share of investors said that heavy capital expenditures, especially in technology and industrial sectors, risk diluting shareholder value if earnings do not keep pace.

Market strategists noted that sentiment appears richly priced and could lead to rotation if profit growth slows.

Investors emphasised the importance of disciplined capital allocation and return on equity in this environment.

The shift in sentiment comes against a backdrop of robust equity valuations and persistent interest in growth sectors, particularly artificial intelligence, cloud computing and industrial automation.

While enthusiasm has supported broader market performance, concerns about overextension have led some investors to favour defensive sectors and value stocks.

Portfolio managers highlighted the need for balance in capital deployment as global growth narratives evolve.

Some analysts said investor caution is not yet signalling an imminent downturn, but rather a recalibration of expectations around future returns.

Corporate governance trends, including stricter capital discipline and shareholder-friendly policies, were cited by some investors as potential ways to manage overinvestment risks.

Financial markets remained sensitive to earnings updates that could validate or challenge bullish sentiment.

Regional market flows reflected this cautious optimism, with funds showing diversified exposures across equities, fixed income and alternative assets.

Emerging markets also attracted interest as investors seek growth beyond developed economies.

Currency markets were active, with the U.S. dollar and euro reacting to cross-asset shifts in investor positioning.

Looking ahead, investors said earnings narratives and capital spending trends will be key indicators for stock markets, particularly as policymakers weigh monetary and fiscal signals that could influence corporate investment decisions.

Source: Reuters.