Surprise No. 2: Corporate profits disappoint.

Slower global economic growth impedes corporate profit growth. (See previous section, "The Rationale for My Downbeat 2014 Expectations," for more reasons.)

As we approach earnings season, I estimate that 2013 S&P earnings approximated $108.50 a share.

For 2014, the consensus estimates that the S&P 500 will achieve profits of about $116 to $120 a share. (Recently, those projections have been skewing higher and seem to be moving to closer to $120 a share.) My base case estimate is for $112 a share, a gain of under 5% (year over year), which is, again, below consensus.

Slowing sales, a contraction in margins, the reduced influence/benefit from aggressive monetary policy and political uncertainties are some of the reasons why my baseline earnings expectation is for below-consensus 2014 S&P 500 profits.

Strategy: Buy index puts, sell index calls, or purchase inverse ETFs.

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