Think back to April 2020, when coronavirus-related lockdowns were hitting the global economy hard, and only the most sanguine optimists – and politicians – saw any likelihood of a rapid reopening and rebound.

At that point, the risk of deflation loomed large in the minds of many investors because of the steep drop-off in consumer demand. Prices for bitcoin, (BTC), seen by some cryptocurrency traders as a potential hedge against inflation, stagnated below $10,000, even though central banks around the world were printing trillions of dollars of fresh money.

A year later, the mentality has changed radically: With vaccines rolling out and economists now projecting a buoyant recovery, four in five investors see inflation as far more likely than deflation, according to a new survey by German lender Deutsche Bank.

It’s the second month in a row investors have logged such an overwhelming position, and so the idea appears to be sticking. Perhaps not coincidentally, bitcoin prices are now over $50,000.

“A vast majority (81%) agree that inflation is more likely after the pandemic while only 10% thought we would see deflation,” according to Deutsche Bank. The survey was conducted earlier this month and covered about 700 global investors.

Some 43% of investors responded that higher-than-expected inflation and rising bond yields pose the biggest risks to market stability, according to Deutsche Bank.

  • Most respondents see U.S. inflation averaging above the U.S. Federal Reserve’s long-term target of 2%, but remaining under 3%.
  • About 61% respondents saw no risk of major market convulsions this year due to any plans by Federal Reserve officials to taper their asset purchases of $120 billion per month.
  • In 2013, a Federal Reserve-induced “taper tantrum” sent traditional markets into a tizzy.
  • Some 21% said a taper tantrum would happen this year, while 18% said they didn't know.
Chart shows a majority of respondents expect higher inflation within one to five years due to the pandemic.
Source: Deutsche Bank Research
Chart shows a majority of respondents do not expect a Fed taper to be a major market event.
Source: Deutsche Bank Research
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