BofA Survey: Fund Managers Brace for Stagflation Over Next 12 Months

Bank of America's latest Global Fund Manager Survey shows the smart money is still preparing for stagflation, even as risk appetite recovers. The stagflation call has been the dominant macro view among institutional investors for months, and it is reshaping how portfolios are positioned across equities, bonds and commodities.

What the survey actually says

According to BofA, stagflation remains the dominant description of the next 12 months, cited by 58% of respondents, though down from 69% in May, while the “boom” camp rose to 36% from 25%. The classic soft-landing view is nearly nonexistent, with Goldilocks remains almost absent at just 2%, and only 1% expect outright stagnation.

Translation: managers see growth holding up, but they are not buying the idea that inflation goes away quietly.

Why it matters for the tape

Fed expectations have flipped hawkish alongside the stagflation call. 40% now expect at least one rate hike over the next 12 months versus 16% in May, and 55% expect no change in the Fed funds rate but a hawkish tone, versus 33% expecting a dovish hold at the next FOMC.

That is a major rewrite of the “Fed cuts save equities” playbook that carried markets earlier in the year. If inflation stays sticky, bond yields become the pressure point for stocks.

Do you want to see how to make more plays? Do you want to find gains yourself?

Unusual Whales helps you find market opportunities through our market tide, historical options flow, GEX, and much, much more.

Create a free account here to start conquering the market with Unusual Whales.

Where managers are hiding

The positioning shift is telling. June's positioning changes show a clear shift from aggressive beta-chasing toward more selective risk-taking. Investors added to materials, banks, Japan, the U.S. dollar and several defensive sectors, while cutting technology, Eurozone equities, commodities, emerging markets and discretionary stocks.

The tail risks to watch

Risk perception has rotated from geopolitics back toward inflation and AI. “Second wave inflation” remains the top tail risk at 34%, followed by “AI bubble” at 28%, while geopolitical conflict has fallen sharply to 12% from 44% two months earlier.

The combo of sticky inflation and stretched AI valuations is what fund managers are most worried about breaking the tape. Follow additional coverage on market and macro news here.

Options market and stocks to watch

A stagflation-tilted portfolio has clear winners and losers. Watch these names as the setup plays out:

GLD: Watch for continued demand for gold as an inflation hedge if the stagflation narrative holds.

XLE: Energy is the classic stagflation trade. Watch for flow into the sector if oil stays bid.

XLK: Tech was trimmed by managers in June. Watch for whether that de-risking continues if yields grind higher.

XLP: Staples benefit from defensive rotation. Watch for relative strength if growth expectations soften.

TLT: Bonds are the pain trade if the Fed goes hawkish. Watch for yield-driven pressure on long-duration Treasuries.

Want more market intelligence? Create your free Unusual Whales account for options flow, market tide, GEX, and the full toolkit.