(Adds details from survey) MILAN, Oct 19 (Reuters) - Investor allocations to bond markets dropped to the lowest level on record in October, BofA Securities’ monthly fund manager survey showed, as pessimism on inflation and China further clouded the outlook for the global economy. “Investors are now very overweight inflation assets (i.e. commodities, banks) relative to history while at the same time very underweight assets that are vulnerable to interest rate hikes (i.e. bonds, EM, utilities),” the investment bank said on Tuesday. Global bond allocation fell to a net -80%, the lowest level ever recorded in the survey, as worries about inflation continued to raise rate hike expectations. Investors also lifted their cash allocations to a 12-month high, prompting BofA strategists to describe the monthly survey of fund managers as the least bullish since October 2020. Investors have pencilled in one Federal Reserve rate hike for 2022 while expectations for the size of U.S. fiscal stimulus have dropped to $1.7 trillion from 1.9 trillion, it said. That has also boosted the percentage of investors expecting the U.S. dollar to gain to its highest levels since June 2018. For the fifth straight month, fund managers identified inflation as the biggest tail risk for markets, with 48% of respondents citing it. The gap between those who think inflation is transitory - 69% of investors - and those who think it is permanent - 38% of investors - continued to narrow. A net of -6% of respondents to the survey are expecting a stronger economy, the lowest level since March 2020 and down from a 91% peak in March 2021, BofA said on Tuesday. (Reporting by Danilo Masoni; Editing by Saikat Chatterjee and Catherine Evans)