A majority of investors harbor fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a Citigroup Inc. survey of clients.

Though most expected modest gains next year in the S&P 500 Index, price pressures and a policy reversal by the Federal Reserve are big risks, according to the survey of more than 90 pension, mutual and hedge funds this month.

Close to 60% of respondents are gearing up for “sticky” inflation and only 23% see it as a “transitory” phenomenon. The majority also saw the Fed raising rates in the second half of 2022 or first half of 2023.

That’s worrying for investors hoping to get continued juice out of a rally that’s taken the S&P 500 Index up 16% so far this year, and bad news for bondholders. Those adhering to a traditional 60/40 stock-bond portfolio strategy have already suffered the worst losses in almost a year this month as equities faltered and yields surged.

Citigroup clients expected 10-year Treasury yields to break 2% in 2022, with rates already climbing 20 basis points this month to around 1.5%. That’s come as U.S. inflation expectations have jumped on a spike in energy prices.

On average they targeted the S&P 500 index at 4,630 by December 2022, and 4,487 at the end of this year.

Their median cash holdings remained at 5% of assets managed, in line with long-term averages, according to the survey between Sept. 14 and Sept. 22.

With assistance from Sam Potter.

This article was provided by Bloomberg News.