As Russia’s war in Ukraine enters its third month, worries among big institutional investors about the outlook for global economic growth have risen to their highest level in more than 25 years.

According to a widely watched Bank of America survey with data going back to 1995, 71% of fund managers said in March they expected the global economy to weaken over the next 12 months.

“Investors are grappling with the prospect of a sharp slowdown in economic growth over the next six months. Still only a minority believe a recession is imminent, but that view is changing rapidly,” said Michael Hartnett, chief investment strategist at Bank of America. .

Bank of America consulted 292 investment professionals who collectively manage $833 billion in assets for pension plans, insurance companies, asset managers and hedge funds.

Stagflation — Below-trend economic growth and an unwelcome combination Above-trend inflation — Two-thirds of fund managers surveyed by Bank of America now expect it. It was the worst reading for the indicator since August 2008, a month before Lehman Brothers collapsed.

Growing concerns about the outlook for inflation outweighed investors’ concerns about the wider impact of the war in Ukraine, which has been tempered by the withdrawal of Russian troops from around Kyiv. Inflation data released on Tuesday showed that U.S. consumer prices up 8.5% in Marcha speed not seen since 1981.

Expectations for corporate profits have deteriorated sharply, and risks to financial market stability have returned to extreme levels seen at the start of the coronavirus pandemic in March 2020 and at the height of the global financial crisis in 2008, the survey showed.

Hartnett said there was a “stunning disconnect” between investors’ pessimistic expectations for economic growth and the equity allocations of global fund managers, who as a group still have a net overweight position in equities.

“Everyone is bearish on the outlook for growth, inflation, the Fed and U.S. interest rates, but asset allocators are still overweight equities,” Harnett said.

Cash was the largest “overweight” position held by global fund managers in March, followed by commodities, healthcare stocks and energy, while nearly 70% of asset allocators were “underweight” bonds.

“Investors don’t really like stocks at this stage of the cycle, but they really hate bonds,” Hartnett said.

He warned of growing recession warning signs in the U.S. housing market and small businesses, which account for nearly half of U.S. private-sector employment.

The number of small business owners who expect their companies to improve over the next six months fell in March to the lowest level in the entire 48-year history of the NFIB’s monthly survey, according to the National Federation of Independent Business. The monthly survey was released on Tuesday.

“Small business owners remain pessimistic about their future business conditions. Their expectations for both sales growth and business conditions are declining later in the year,” said Bill Dunkelberg, chief economist at NFIB. .