Well, if John Higgins of Capital Economics puts his money where his mouth is:
In the bearish camp is John Higgins, senior markets economist at Capital Economics. He expects to see the S&P 500 back down around 1,000 by the end of 2010 and cited several points to warrant caution
Here is a reminder of how far the market has come this year:
If they believe their view, they can buy the 1100 puts and sell the 1060 puts for June, at a net cost of 11 points. This strategy produces 40 if the market is below 1060 in mid June, and 0 if it is above 1100, and a smooth movement between those levels (it is called a PUT SPREAD). Therefore Mr Higgins could almost quadruple his money if the market goes down 7% by then. If it hasn’t happened by then, Mr H can make money by doubling up on a December strategy of some similar kind.
Being able to predict the future in these markets is incredibly lucrative. JH must be a very wealthy man. Or 2010 is about to make him very wealthy.
Or he is wrong.