Fear inflation.

Global fund managers are growing increasingly concerned about faster inflation, according to Bank of America Merrill Lynch's benchmark monthly survey, even as fewer investors think the world economy will record stronger growth over the next twelve months.

However, the May edition of BAML's "Fund Manager Survey, which polled 178 investment managers who run more than $640 billion worth of assets, also noted that the consensus for a recession was split between the last three months of 2019 and the first quarter of 2020, as the bank's Global FMS Macro Indicator fell for the sixth consecutive month and slid into negative territory for the first time since November 2016. Against that, a full 80% of survey respondents said stocks have yet to peak and can extend their rally in the near-term.

"This month's survey presents good and bad news," said chief investment strategist Michael Hartnett. "Although cash levels remain high and growth optimism is at the lowest level in over two years, a majority of investors say there is room to grow in this equity bull market and don't see signs of recession anytime soon. Fund managers think the May rally can extend in the near-term."

A net 79% of the investors polled expect core inflation to rise over the next year, the survey indicated, while only a net 1% think the global economy will strengthen over the same time period. That's the weakest reading since February 2016, BAML noted, and partly reflects why "short U.S. Treasury bonds" is the survey's second-most crowded trade.

Tech stocks remain the favorite trade in the survey, BAML noted, with the so-called "long FAANG+BAT" trade -- a reference to a group of stocks that includes Facebook Inc. (FB) , Amazon Inc. (AMZN) , Apple Inc. (AAPL) , Netflix Inc. (NFLX) , Google parent Alphabet (GOOGL) as well as Asia tech giants Baidu Inc (BIDU) , Alibaba Group Holding (BABA) and Tencent Holdings Ltd. (TCEHY)  -- topping the survey for a fourth consecutive month.

Facebook, Amazon, Apple and Alphabet are holdings in Jim Cramer's Action Alerts Plus.

In terms of potential risks, investors cited the threat of a "hawkish" mistake from either the U.S. Federal Reserve or the European Central Bank, overtaking recent concerns of a trade war between Washington and Beijing. 

"The top three (risks) are rounded out by concerns over geopolitics causing oil to reach $100/bbl (12%)," BAML noted. 

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