Kathy Boyle, president of Chapin Hill Advisors, is pointedly bearish on the market, particularly because of the troubles posed by financials.
She expects the market to drop significantly over the summer, with the S&P 500 falling to 1,080, the Dow tumbling below 10,000, and the Nasdaq sinking to 1,530.
As such, she recommends bearish plays, such as Proshares inverse ETFs that benefit from bearish moves in the major indexes. Among them: The UltraShort Financials ProShares .
As a general rule for stocks, Boyle likes defensive issues in the consumer staples category such as Procter & Gamble and Colgate. Conversely, she warns against stocks like fertilizer producer Potash that have dramatic run-ups which will be subject to profit taking during market downturns.
"I honestly still don't think the market has priced in everything that's out there because nobody really understands the complexities of some of these derivatives and some of these swaps," Boyle says. "I think this is a black box and we don't know what's in it."
Still, there are some analysts and portfolio managers who think that now could be a time to find some bargains in bank stocks. That's even in the face of warnings by a Federal Reserve official that the institutions have been plagued by excessive sloppiness and will need to raise cash to compensate for losses.
Lehman itself has rebounded in the past two days, after plunging earlier in the week, amid increasing optimism about the firm. Lehman has taken steps to clean up its balance sheet, slashing its risky debt holdings by as much as 25 percent and raised $8 billion in capital this year to shore up its balance sheet, according to an internal memo obtained by CNBC.
Deutsche Bank reiterated its "buy" rating on Lehman stock. That comes a day after Merrill Lynch upgraded its rating on Lehman to "buy" from "underperform."
"I do like Lehman Brothers historically. I have been an investor. I probably would put some more in there, but I wouldn't make a pick based on one company," says Michael Kresh, president of M.D. Kresh Financial Services, who prefers to play the entire sector through mutual funds and ETFs. "Realistically we know some of these players are going to go down." (See the WSJ's Greg Zuckerman warn on financials in the accompanying video)