According to Bank of America, investors are concerned about a potential economic scenario of stagflation, which poses a greater risk than a recession. Bank of America highlighted sectors that historically outperformed the market during stagflationary periods: Communication services, utilities, energy, consumer staples, and healthcare. Additionally, real estate and financials also showed slightly better performance during stagflation. On the other hand, industrials, consumer discretionary, materials, and technology sectors underperformed during stagflation. The bank's survey revealed that 71% of fund managers anticipate stagflation impacting the global economy in the next 12 months. Other firms like Stifel, BCA Research, and UBS Global Wealth Management have also expressed concerns about stagflation. Recent statements from Fed policymakers have further raised worries about the possibility of higher inflation and slower growth in 2025.