Welcome to the "New Normal": S&P 500 Stocks With Bearish Options Sentiment Data

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Two years ago, Bill Gross and Mohamed El-Erian, the top dogs at PIMCO, coined the term "The New Normal" in order to describe what they expect to be a decade of middling economic growth, relatively high unemployment, and meager stock market returns.

A contemporaneous report by Arijit Dutta of Morningstar makes clear that few people at the time wanted to accept such a dismal forecast.

"[Mr. Gross'] ideas carry a lot of weight indeed, which doesn't make it any easier for most people wedded to the notion of a secular bull market interrupted by periodic setbacks (whom Gross called "children of the bull market") to digest this sketch of a new, lesser-return normal," wrote Dutta in 2009.

Mr. Gross' outlook has been much derided in the years since he first touted it. Former White House economic advisor Lawrence Summer, former chairman of the U.S. Council of Economic advisors Christina Romer, and widely published investment analyst Kenneth Fisher are among the government technocrats and private sector pundits that have voiced their opposition, according to Sree Vidya Bhaktavatsalam of Bloomberg.

Fast-forward to 2011, and fiscal and political imbroglios in Europe and the U.S. are heavily weighing down markets, just as Mr. Gross predicted. The most recent Federal Reserve press release forecasts sluggish economic activity "at least through mid-2013."

"A lot of the new normal characteristics have played out ... Some people confused new normal with fatalism, but the intention was the opposite. There was the hope that policy makers would recognize that there are structural responses they needed to embark on," Mr. El-Erian told Bloomberg in an interview.

Do you accept the idea of a "New Normal"? Or do you believe the U.S. will rebound into a new period of solid growth?

Just in case you find yourself on the pessimistic side of the fence, here is a list of S&P 500 stocks that options traders believe have significant downsides. Do you agree with their outlook?

List sorted by percent increase in put/call ratio. (Click here to access free, interactive tools to analyze these ideas.)

1. CareFusion (NYS: CFN) : CATV Systems industry with a market cap of $4.9B. Put/call ratio has increased 410.00% over the last ten trading days (from 0.30 to 1.53).

2. Cablevision Systems (NYS: CVC) : Medical Instruments & Supplies industry with a market cap of $5.47B. Put/call ratio has increased 762.50% over the last ten trading days (from 0.32 to 2.76).

3. Safeway (NYS: SWY) : Grocery Stores industry with a market cap of $6.41B. Put/call ratio has increased 213.79% over the last 10 trading days (from 0.58 to 1.82).

4. Covidien (NYS: COV) : Medical Instruments & Supplies industry with a market cap of $23.22B. Put/call ratio has increased 191.11% over the last 10 trading days (from 0.45 to 1.31).

5. Campbell Soup (NYS: CPB) : Processed & Packaged Goods industry with a market cap of $9.86B. Put/call ratio has increased 134.62% over the last 10 trading days (from 0.52 to 1.22).

6. CarMax (NYS: KMX) : Auto Dealerships industry with a market cap of $6.18B. Put/call ratio has increased 107.28% over the last 10 trading days (from 1.51 to 3.13).

7. Precision Castparts (NYSE: PCP): Metal Fabrication industry with a market cap of $21.01B. Put/call ratio has increased 105.41% over the last 10 trading days (from 0.74 to 1.52).

8. Principal Financial Group (NYS: PFG) : Asset Management industry with a market cap of $7.58B. Put/call ratio has increased 92.42% over the last 10 trading days (from 0.66 to 1.27).

9. El Paso (NYS: EP) : Specialized Semiconductor industry with a market cap of $6.12B. Put/call ratio has increased 77.91% over the last 10 trading days (from 0.86 to 1.53).

10. Linear Technology (NAS: LLTC) : Oil & Gas Pipelines industry with a market cap of $14.03B. Put/call ratio has increased 84.21% over the last 10 trading days (from 0.57 to 1.05).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Andrew Dominguez does not own any of the shares mentioned above. Data sourced from Finviz and Schaeffer's.

At the time this article was published The Motley Fool owns shares of El Paso. Motley Fool newsletter services have recommended buying shares of Precision Castparts, Linear Technology, and Covidien. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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