Global investors were increasingly positioning for a stagflationary environment even before the latest report that showed inflation surging to a 40-year high.
Bank of America’s monthly global fund manager survey found investors bullish on cash, healthcare, commodities and energy, while short bonds, consumer discretionary, utilities and equities more broadly.
Bank of America said the survey of managers running $843 billion in assets was closed one day before the Labor Department reported U.S. consumer prices jumping 8.6% year-over-year in May.
Some 83% said they expected below-trend growth but above-trend inflation, up from 77% in May and the highest answering that way since June 2008.
The bleak backdrop found a net negative 73% expecting a stronger economy, the worst reading since 1994. And global profit expectations fell to a negative 72%, the weakest since Sept. 2008.
The two most crowded trades were long oil and commodities, and long the U.S. dollar.
The S&P 500 SPX, -3.88% entered a bear market on Monday, after losing nearly 10% in just four sessions on worries about an increasingly aggressive Federal Reserve.
The yield on the 10-year Treasury TMUBMUSD10Y, 3.311% was 3.30% early on Tuesday, up by about a quarter-point since inflation report.