macrocephalopod

I'm all for discussions and food for thought. But your key proposition - that the price of a financial futures contract is the aggregate market's expectation of the underlying's future price - is stated with no evidence, and it contradicts 70 years of asset pricing theory.

Ok. Let’s do this exercise, if you can bear with me. You buy the SPX today. What is the market’s expected price for the SPX 1yr from now? And what is yours?

Well, I consider SPX and virtually all other indices and individual stocks to be overvalued. I currently expect a total SPX return of around 1.1%. Forward dividend yield is about 1.4%, so I guess I'd expect a price decline of around 0.3%. Let's say market expects the same.

Thanks. Asset pricing theorists say that there is a risk premium embedded in the market. Let's say it's 6%. Shouldn't we (ie the market in the aggregate) be expecting a +6% TR above RFR? Is there are way to know what the actual market expectations are?

No, there's no way to know what the market is expecting. The current price of an SPX futures contract expiring in 1 year doesn't tell you what the market is expecting - that's the key assumption you've made without evidence or logic.

IMO the only thing the market "expects" of an equity futures contract is that it's priced very close to what the cash+carry arb says it should be. That gives people who want long exposure a way to effectively buy the index on margin, at close to the risk-free interest rate. It

also gives people who want short exposure a way to achieve that without paying short-sale fees or risk having their position closed out before they want. It's just a financing vehicle, nothing more than that (i.e. not telling you what market "expects" in the future).

As you wish. I would point you in the directions of options though. I would look at the price at which the market is pricing a 50% probability of being above or below in 1 year time. It’s pretty good evidence of what the market expects.