Just over a year since Covid-19 turned the world upside down, investors are starting to get over it.

For the first time since the pandemic, respondents to the Bank of America fund manager survey said the market was more concerned.

Inflation has now become the largest “tail risk” or outlier event that could cause the greatest damage, as the widespread perception of professional investors has shown.

A total of 37% of respondents in the March poll said this was the biggest challenge, followed by 35% for “taper tantrums” – sharp reactions in the bond market in the event the Federal Reserve unexpectedly withdrew its monthly asset purchases.

A total of 220 investors with assets under management of $ 630 billion took part in the bank’s survey, conducted March 5 through Thursday.

While coronavirus remains the third biggest threat – especially problems with the vaccine rollout – it was cited by less than 15% of respondents, roughly half the February level.

March marked the first time since February 2020 that concerns about Covid did not top the poll.

These three concerns easily outpaced a bubble on Wall Street, higher taxes, or stricter regulations under the Biden administration.

The shift in priorities comes as the US vaccinates more than 2 million people every day. Hospital stays and deaths have declined nationally, although the drop in cases per day has risen to a plateau. As most health professionals see a return to somewhat normal life by summer and into fall, investors are starting to shift their priorities.

Inflation has come into view this year as government bond yields rose to pre-pandemic levels. A market-based indicator, the “breakeven” rate between 5-year government bond and inflation-indexed bond yields, has risen to its highest level in nearly 13 years.

Respondents said a move to the 2% level in the 10-year Treasury note could result in a stock market correction or a decline of more than 10%. A jump to 2.5% would make bonds more attractive than stocks. The benchmark note traded 1.6% on Tuesday morning.

Although the markets were volatile during the rise in yields, key averages have scaled to near record levels. The Dow Jones Industrial Average is up 7.7% since the start of the year. This is due to rallies in stocks like Goldman Sachs, Boeing and Caterpillar, which benefit from higher interest rates and a more aggressive economic recovery.

By and large, the survey shows that “investor sentiment [is] clearly bullish, “said Michael Hartnett, chief investment strategist at Bank of America.

However, investors make adjustments to their portfolios.

Managers have cut their tech allocation to their lowest overweight since January 2009. The survey also revealed a significant shift in commodities to an all-time high. The managers have placed their largest overweight position in banks since March 2018. You have also taken the biggest step towards energy since November 2018.

The optimism about stocks comes with high hopes for a V-shaped rebound. 48% point to this path for the economy. 91% of managers expect stronger growth, the highest level in the history of the survey.