Inflation Concerns Supersede Covid-19: 220 Investors Managing $650B Say Economy's Biggest Risk Is Inflation

As mainstream media pundits like the Bloomberg economics editor Peter Coy tell Americans to “tune out the hyperinflation hype,” fund managers from a recent Bank of America survey who collectively manage $630 billion, believe inflation is the biggest risk to markets right now. Instead of the former concern over Covid-19, the current number one risk to markets is inflation, as federal stimulus spending has invoked worry among investors.

While Inflation Concerns Grow, Mainstream Media Publications Tell Americans Not to Worry

Just recently, Jerome Powell, the Federal Reserve Chairman, showed little concern about rising inflation and never really said when the Fed’s monetary easing policies would end. After Powell did an interview at a Wall Street Journal Jobs Summit and showed no signs of worry, 10-year U.S. bond note markets saw a massive sell-off.

Following the market carnage on March 4, 2021, a number of mainstream media publications simply wrote off people who are concerned about inflation.

Specifically, that day, Bloomberg economics editor Peter Coy wrote an editorial called “Tune Out the Hyperinflation Hype. It’s Just Meme Economics.” The editorial passes off the concerns as “hype,” and coupled the proposition with the overused term “conspiracy theories.” Coy even noted that fear of inflation helps the leading crypto asset bitcoin (BTC).

“Conspiracy theories have an insidious way of seeping into the real world,” Coy’s editorial explains. “Fear of inflation—if not outright hyperinflation—helps explain the meteoric rise of Bitcoin,” the Bloomberg economics editor’s report adds.

Bank of America Survey’s 220 Investors Managing $630B AUM- Inflation Considered the Biggest ‘Tail Risk’ Over Covid-19 Concerns

Now, according to the latest survey from Bank of America (BoA), which surveyed 220 fund managers with assets over $630 billion assets under management (AUM), “higher than expected inflation” is a big risk to markets.

Participants in the BoA survey noted for the first time in over a year, inflation is more concerning than the coronavirus outbreak when it comes to the future of the economy. After the craziness in bond markets, 35% of the fund managers surveyed said U.S. Treasury bond yields were the second biggest risk.

37% of the 220 fund managers with $630 billion AUM said that inflation is the number one “tail risk” for investment markets right now. Additionally, some participants were concerned about a possible surprise monetary tightening policy from the U.S. central bank.

Despite the ‘meme economics’ commentary and so-called ‘conspiracy theories,’ 93% of BoA’s surveyed participants said they expect inflation to rise in 2021. Even though a drop in purchasing power is expected, close to half of the BoA surveyed fund managers are optimistic about the global economy seeing a “V-shaped recovery.”

This has caused investors to seek an allocation in commodities as opposed to certain tech stocks the BoA report notes. An executive at the foreign exchange company OANDA says that Jerome Powell and the Federal Reserve still have some time before the summer comes to deal with inflation concerns.

“Powell will likely replay his best hits when discussing inflation, noting that price increases later in the year won’t be large or persistent,” Edward Moya, senior market analyst at OANDA explained on March 15. “The summertime is when inflation could rear its ugly head, so Powell should be able to push back any concerns until then,” the analyst added.