Stagflation expectations rise amid fears that 'inflation is permanent,' BofA survey finds

Consumer inflation jumped to nearly 8% in February — the sharpest spike in 40 years — and with volatile oil prices, the concept of stagflation could be back on the mind of investors.

The so-called buzzword "stagflation" refers to an economy with little-to-no growth and higher than normal inflation.

And according to the latest Bank of America Fund Manager Survey, investors are worried the current conditions could amount to a perfect storm — a dynamic that made the economy of the 1970s miserable for many Americans.

In March, 62% of respondents said they expect the U.S. economy to see stagflation, a number that has more than doubled from February’s reading of 30%.

Some investors are reacting to the major economic tailwinds by shifting to cash and moving their portfolios to the highest allocation ever for commodities at 33%.

And it's not just the U.S: Expectations for global growth also tumbled to the lowest level — causing 60% of respondents to see the current market as “late cycle,” which is common around the time of recessions.

Respondents also saw Russia's invasion of Ukraine as the biggest “tail risk,” with 44% of those surveyed listing the ongoing war as the biggest threat causing an outsized impact. A global recession was cited by 21% while inflation followed at 18%.

On inflation, 51% of respondents thought inflation would be permanent while 42% thought it would be transitory.

And while the Federal Reserve is expected to raise interest rates by a quarter of a percentage point this week, investors are expecting a 4.4% rate hike this year, which is up from 4.0 in February.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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