A recent Bank of America survey reveals that global fund managers have shifted their outlook towards a stagflationary environment as of March. The overall sentiment from the March Fund Manager Survey (FMS) has turned bearish, with geopolitical tensions involving Iran and risks in private credit dampening the previously optimistic "overheated bull market" atmosphere. Optimism regarding global growth plummeted from a net +39% to just +7%, while inflation expectations surged from +9% to +45%. Expectations for interest rate cuts have hit their lowest point since February 2023, and cash holdings among FMS participants jumped to 4.2%. However, markets are not pricing in a recession, with only a 5% probability assigned to a hard landing (compared to 44% for a soft landing and 46% for no landing). In March, capital notably rotated from "boom trades" such as bank stocks to "stagflation trades" like consumer staples. More broadly, investors remain significantly overweight commodities (the highest level since April 2022) and continue to be heavily overweight equities, particularly in emerging markets (the highest since February 2021), Japan (the highest since May 2024), banks, and industrials. In stark contrast, discretionary consumer stocks are substantially underweight (the deepest since December 2022). Additionally, the FMS indicates that currently underweight positions in the "Magnificent 7" U.S. stocks, consumer stocks, and Chinese equities are poised to outperform heavily held assets—such as emerging markets, Japan, semiconductors, banks, and industrials—in a potential rally following a de-escalation of U.S.-Iran tensions in the coming weeks. Regionally, European fund managers have also sharply downgraded their growth prospects for Europe, with "stagflation" becoming the dominant macro expectation for the coming months, alongside an increased preference for U.K. equities. Asian fund managers have similarly raised stagflation expectations for their local economies but remain most bullish on Japan, followed by Taiwan and South Korea (despite cooled expectations for an AI cycle recovery). For general investors, these insights not only reveal the asset allocation tendencies of professional fund managers but also provide market signals through capital flows and expectations, aiding in understanding trends and opportunities across different regions and sectors.