The strategy works better during periods of higher volatility, when options are more expensive. Going by predictions from market handicappers, that’s the most likely current scenario to come. The average year-end target for the S&P 500 from strategists in the latest Bloomberg survey was 4,242, implying a 4 per cent decline by December. While at least four of them have since raised their forecasts, the upgrades came with a dose of warning: get ready for turbulence.

David Kostin at Goldman Sachs just increased his projection to 4,700, tying with John Stoltzfus at Oppenheimer Asset Management as the most optimistic strategists tracked by Bloomberg. The journey to the new target, however, is “unlikely to be a smooth ride,” he warned.

“The path of the virus and its economic impact have proven difficult to predict,” Kostin wrote in a note earlier this week. “Later in the year, uncertainty around fiscal and monetary policy will likely drive volatility.”

Retail traders, among the first to embrace beaten-down airlines and cruise owners during the pandemic, are now taming optimism amid a spike in Delta cases. Over the last two weeks, their buying of reopening stocks roughly halved from a month ago, according to data compiled by Vanda Research. Meanwhile, they snapped up shares of vaccine manufacturers and those that cater to stay-at-home demand.

Broadly, the drumbeat of warnings is getting louder. The proportion of newsletter writers classified in Investors Intelligence’s weekly survey as being in the camp calling for a market correction rose to 31 per cent at the end of July, near the highest level since early 2020, data compiled by Yardeni Research show.

Macro headwinds aside, the chart can be seen as ominous. The S&P 500 has avoided a 5 per cent drawback for 190 days. Granted, it’s a sign of resilience and could keep going – the stretch through February 2018 lasted twice as long. What’s worrisome is the extreme velocity. The current episode, started in early November, has seen the index rising at an annualised pace of 46 per cent, a feat never seen before, data compiled Susquehanna International Group and Bloomberg show.

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To Chris Murphy, co-head of derivatives strategy at Susquehanna, the odds for some retrenchment have increased and investors should consider buying put spreads on the SPDR S&P 500 ETF Trust (ticker SPY) to hedge against potential losses.

“We typically see one or two 5 per cent pullbacks every year, even during a bull market,” Murphy said. “And if things are even more sped up than has happened in the past, I would expect it as more likely that we’d be seeing one sometime soon.”