Inflation—Not Covid-19—Is Now The Biggest Risk To Markets, Bank Of America Survey Shows

Plus: Biden Gears Up For New Tax Hikes To Pay For More Stimulus—Here’s What We Know

TOPLINE

For the first time in more than a year, global investment managers are more worried about the risk of inflation on markets than they are about the risk of Covid-19, a Bank of America survey released Tuesday found, as Wall Street looks beyond the coronavirus crisis to the risks that accompany the massive fiscal spending measures that were required to manage it.

KEY FACTS

Of the 220 fund managers surveyed (who manage $630 billion collectively) 37% percent named inflation as the number one “tail risk” for investors. 

Taper tantrums—the surge in U.S. Treasury bond yields caused by investor panic about the Federal Reserve tightening policy—were a close second, with 35% of fund managers naming them as the biggest risk.

Taper tantrums—the surge in U.S. Treasury bond yields caused by investor panic about the Federal Reserve tightening policy—were a close second, with 35% of fund managers naming them as the biggest risk.

Those inflation fears have led to the biggest drop in exposure to risky tech stocks in 15 years, the survey found, while allocation to commodities has risen to an all-time high. 

But despite the risks, investor sentiment overall is still “unambiguously bullish,” the survey found, with 91% of fund managers expecting a stronger economy in the future and nearly half of fund managers are now expecting a v-shaped recovery in global markets. 

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