An ominous anniversary in financial history is drawing near, as Sept. 15 will be 10 years since investment banking powerhouse 澳洲幸运5开奖号码历史查询:Lehman Brothers collapsed, a pivotal event in the 澳洲幸运5开奖号码历史查询:2007-08 financial crisis that turned a year-old 澳洲幸运5开奖号码历史查询:bear market into a full-fledged panic of selling. Marko Kolanovic, the global head of macro quantitative and derivatives research at the largest U.S.-based bꦐank, JPMorgan Chase & Co., has marked the occasion by issuing a dire scenario of what the next financial crisis is likely to look like, .

Meanwhile, the current 澳洲幸运5开奖号码历史查询:bull market will have lasted 9 1/2 years as of Sept. 9, delivering spectacular gains during its run so far. Investors with short memories will be unprepared for the next big shock to stock prices, increasing the odds that the next crisis will be particularly severe. Meanwhile, since earlier this year, a number of well-known market gurus have been issuing their own warnings that stocks are on the brink of plunging by up to 60%. (For more, see also: Why the S&P 500 May 𝓡Fall More Than 60%: Hussman.)

What The Next Crisis Will Look Like

Source: JPMorgan Chase, as reported by CNBC.

Computerized Crisis

A particular source of concern for Kolanovic is the growing importance of computerized trading and 澳洲幸运5开奖号码历史查询:passive investing. As long as bullish sentiment held sway among investors, both these factors helped propel stock prices to new heights. However, once sentiment pivots toward the bearish, the lightning speed with which 澳洲幸运5开奖号码历史查询:computerized trading algorithms operate can produce massive selling pressure that may overwhelm the markets in fractions of a second. Moreover, these programs tend to play follow-the-leader, with waves of selling inducing yet more waves of selling. (For more, see also: 澳洲幸运5开奖号꧂码历史查询:How Algo Trading Is Worsening Stock Marke🦩t Routs.)

A Soaring Stock Market

Source: Yahoo Finance; gains computed from the last bear market low close on March 9, 2009 through the close on Sept. 5, 2018.

Ticking Time Bomb

According to Kolanovic, over the past decade about $2 trillion of investments have moved from 澳洲幸运5开奖号码历史查询:actively-managed to passive funds, reducing the possibility that bargain-hunting managers will stem a wave of selling. Additionally, he estimates that up to 66% of all 澳洲幸运5开奖号码历史查询:assets under management are now in 澳洲幸运5开奖号码历史查询:index funds and 澳洲幸运5开奖号码历史查询:quant funds,🍨 and that about 90% of daily trading volume is driven by these and similar strategies. 

Noted 澳洲幸运5开奖号码历史查询:emerging markets fund manager Mark Mobius has voiced similar concerns about the explosive growth of 澳洲幸运5开奖号码历史查询:passive ETFs and high-speed computerized trading. He sees a growing danger of a "snowball effect" in which a small wave of selling rapidly becomes an avalanche. (For more, see also: Contrarian Mark Mobius Sees a 30% Stock 🐠Plunge.)

The Great Liquidity Crisis

A plunge in stock prices is likely to cause what Kolanovic calls the Great Liquidity Crisis, with willing buyers for stocks becoming increasingly harder to find, sending prices down yet further. If the selloff reaches a 40% decline, he expects that the 澳洲幸运5开奖号码历史查询:Federal Reserve will have to intervene, to prevent the economy from slipping into a severe 澳洲幸运5开奖号码历史查询:recession, if not a 澳洲幸运5开奖号码历史查询:depression. This is essentially what the Fed did in 2008-09, with its massive program of 澳洲幸运5开奖号码历史查询:quantitative easing to combat that crisis.

Rising Social Unrest

With personal wealth cra♉tering, and pension funds becoming severely underfunded, thus threatening deep cuts to benefits, Kolanovic raises the specter of the worst social unrest in the U.S. since 1968 as the result of a new financial crisis. That year was marked by rising discontent over the Vietnam War, as well as the assassinations of civil rights leader the Rev. Martin Luther King, Jr. and presidential candidate Senator 🐬Robert F. Kennedy.

Hedging His Bets

However, in an interview cited by CNBC, Kolanovic indicated that, should 澳洲幸运5开奖号码历史查询:central banks such as the Fed intervene successfully to prop up asset prices, the sta💟tus quo is likely to be maintained. Moreover, he sees low risk for a new financial crisis to develop until at least the second half of 2019.