Fund managers are betting on higher inflation but loading up on equities anyway. BofA's latest survey showed the net percentage of respondents expecting rising prices hit its pandemic-era peak, yet equity allocation jumped to a record. The contradiction signals trouble. Stocks aren't the inflation hedge investors assume, and the 1970s offer a stark warning.

The issue comes down to duration. Stocks carry the highest duration of any major asset class, meaning investors lock in their returns indefinitely. Unlike bonds, there's no reset point to capture higher yields. The 1970s proved this devastating—equities fell hardest as inflation surged because investors fled the long-duration bet.

The outlook looks worse today. Tech stocks have the largest duration, dwarfing even the dot-com bubble peak. With inflation resurgent and leading indicators pointing higher, the market's duration-heavy setup becomes a vulnerability. AI productivity hopes rest on disinflation arriving at the same time as inflation—a tall order when fiscal deficits are already inflationary.