Stock market is making new highs for the year, but the forecasts for the fastest U.S. earnings growth in 15 years are failing to convince options traders that the Standard & Poor’s 500 Index will extend its biggest rally since the 1930s.
According tothis report by Bloomberg, S&P 500 options to protect against declines in stocks over the next year cost 22 percent more than one-month contracts, the highest since 1999, data compiled by London-based Barclays Plc and Bloomberg show. The gap shows concern that analyst estimates for record earnings by 2011 may prove exaggerated, endangering an advance that pushed the S&P 500 up 63 percent since March.
The report also cited two Investment Gurus to build it case:
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According tothis report by Bloomberg, S&P 500 options to protect against declines in stocks over the next year cost 22 percent more than one-month contracts, the highest since 1999, data compiled by London-based Barclays Plc and Bloomberg show. The gap shows concern that analyst estimates for record earnings by 2011 may prove exaggerated, endangering an advance that pushed the S&P 500 up 63 percent since March.
The report also cited two Investment Gurus to build it case:
“There is still close to an 80 percent probability that a second market plunge and economic downturn will unfold during the coming year,” John Hussman wrote.
“Mutual funds, hedge funds, pensions and endowments were scared stiff, but now they’ve regained their appetite for risk,” said Jean-Marie Eveillard, senior adviser to the $8.6 billion First Eagle Global Fund in New York and a finalist for Chicago-based Morningstar Inc.’s fund manager of the decade award for non-U.S. stocks. “It’s a warning sign because everyone who wants to be invested already is.”
Click to read the complete article.
