Big money investors growing more optimistic inflation is 'transitory'

Sixty-one percent of survey respondents say inflation is temporary: Bank of America

Big money investors are growing less worried over inflation, according to a survey conducted by Bank of America.

Money managers are "convinced inflation [is] transitory," wrote Michael Hartnett, chief investment strategist at Bank of America. 

Sixty-one percent of respondents to Bank of America’s Fund Manager Survey in November said inflation was "transitory," representing a three percentage point increase from September. Thirty-five percent of those surveyed said inflation is "permanent."


This while a net 14% said inflation will fall to the lowest level since March 2020. 

The drop in inflation expectations comes as investors raise their expectations for Federal Reserve rate hikes next year. Thirty-nine percent of respondents expect two rate hikes in 2022, up from 24% in October. Seventy-six percent believe at least one rate hike will occur next year. 

As rate hike expectations increase and investors grow more optimistic that inflation is transitory, expectations for a steepening yield curve decline. A net 9% of investors said the yield curve will steepen, the lowest since February 2019.  

Fewer worries over inflation provoked investors to deploy cash sitting on the sidelines into U.S. stocks, which investors are now a net 29% overweight, the most since August 2013. Investors raised their allocations to consumer discretionary and technology while reducing holdings in inflation assets like energy and banks. 

Respondents were most bearish on bonds with a net overweight of -69%. 

Inflation (33%) and central bank rate hikes (22%) were seen as the biggest "tail risks." Long tech (37%) was considered the "most crowded trade," edging out long bitcoin (21%). Most investors expect bitcoin’s price to remain between $50,000 and $75,000 over the next 12 months.    


The Charlotte, North Carolina-based lender surveyed 345 participants with $1.2 trillion in assets under management between Nov. 5 and Nov. 11. The survey was conducted before the October consumer price index report showed annual inflation was 6.2%, the highest in 31 years.