Frothy bull market sentiment is waning as global investors adopt a bearish outlook, according to Bank of America’s latest fund manager survey. The report, released this week, reveals a sharp decline in optimism among institutional investors, with many citing economic uncertainty and geopolitical tensions as key concerns. This shift marks a significant departure from the past six months, during which relentless bullish bets fueled record-high stock valuations and aggressive M&A activity.

Global investors are now prioritizing risk mitigation over growth, with fund managers reporting increased allocations to defensive sectors like utilities and consumer staples. The survey highlights a 15% drop in equity exposure recommendations compared to Q1, signaling a potential slowdown in market rallies. Analysts note that this pivot could dampen deal values in leveraged buyouts and speculative investments, as companies face tighter lending conditions and reduced buyer enthusiasm.

The bearish trend carries broad implications for corporate strategy. Technology firms, which thrived on growth-oriented capital during the bull phase, may struggle to secure funding amid rising interest rates. Meanwhile, energy and materials sectors could see renewed interest as investors hedge against inflation. However, the report warns that prolonged pessimism might trigger volatility, particularly in emerging markets where liquidity is already strained.

Bank of America’s data underscores a critical inflection point: the market’s ability to sustain momentum hinges on central bank policies and corporate earnings resilience. While some sectors brace for contraction, others—like renewable energy—remain poised for growth. For now, the bank’s survey serves as a bellwether for a market grappling with balancing optimism and caution in an uncertain economic climate.