More than 70% of fund managers say inflation will be transitory despite 5% surge in prices in May, BofA survey shows

• 72% of fund managers think strong inflation will be transitory, a Bank of America survey showed.
• Investors have become less worried about inflation despite a 5% year-on-year jump in US prices in May.
• Investors snapped up tech stocks at a rapid pace in June, the BofA survey showed.

Just over 70% of global fund managers expect strong inflation to be transitory, despite US prices surging 5% year-on-year in May, according to Bank of America's latest survey.

The BofA survey also showed investors' inflation expectations have peaked. A net 64% of respondents expected higher inflation over the next 12 months, down 19 points compared to May's survey and 29 points from April.

The closely watched survey offered another sign that investors are overcoming their fears of inflation, which have periodically unnerved markets this year.

Prices across the US economy surged 5% year-on-year in May, data showed last week. Yet when looked at month-on-month, consumer price index inflation rose just 0.6% in May, slower than the 0.8% increase in April.

Bond yields - which tend to rise and fall along with inflation expectations - have dropped to around three-month lows in the US. Meanwhile the S&P 500 has risen to record highs and the Nasdaq has climbed solidly after falling in February.

The BofA survey showed investors bought back into tech stocks at a rapid rate in June, but cut their exposure to companies that tend to do better when growth and inflation are higher, such as utilities and banks. However, they were still keen on cyclical stocks and commodities overall.

"Several of the factors pushing up inflation recently are likely to fade in coming months, including energy prices," Mark Haefele, chief investment officer at UBS Wealth Management, said in a recent note.

"We agree with the [US Federal Reserve] that elevated inflation pressures will prove short-lived," he said. "We do not expect a more sustained disruption to equity markets."

Bank of America polled 224 managers with more than $660 billion under management for the survey.