Stock Market Crash: 3 Reasons for Bubble Fears

  • Dan Cupkovic manages inverse “black swan” ETFs that track the S&P 500 and Nasdaq indices.
  • He told Insider there are three reasons to worry about a potential stock market crash right now.
  • Cupkovic predicted a 20% crash if the worst scenario happens.

As the developer of the underlying index for three ‘Black Swan’ ETFs, Dan Cupkovic has to be particularly prepared for a potential stock market crash. And due to macro volatility and geopolitical tensions, he’s noticed more pessimism from investors in recent months.

“The likelihood that we see a more extensive downside is increasing,” ARGI Investment Services’ Cupkovic told Insider in a recent interview. “Everyone’s ready for something bad to happen, and there’s clearly heightened fears that the bubble will pop.”

A black swan is an extremely rare event that triggers a significant market crash. Cupkovic worked with Amplify Investments to develop a suite of three exchange-traded funds, trading under the tickers SWAN, QSWN, and ISWN, to offer returns in case that happens. They are designed to respectively invert returns from the S&P 500, Nasdaq, and international markets thanks to investments in Treasurys and long-term call options.

“Those are two very diversely correlated assets, and the intermediate-term treasuries act as a sort of safety belt,” Cupkovic told Insider. “That makes for a very appetizing risk-return dynamic.”

Markets were choppy in January, with growth stocks noticeably struggling. That turbulence could continue, according to Cupkovic – which would be good news for the three black swan inverse ETFs.

“The black swan strategy sings when the market starts to lose more than 10%,” he said. “I think we could be set for a really poor year – what happened in January might just be a normal correction with more losses to come.”

Cupkovic shared three market risks he’s particularly worried about.

Dan Cupkovic

ARGI Investment Services’ director Dan Cupkovic worked with Amplify to develop a suite of three ‘black swan’ ETFs.


Geopolitical tensions

Cupkovic is most concerned about ongoing geopolitical tensions between Russia and Ukraine. He said a major confrontation between the US and Russia could trigger a 20% downturn for US equities.

“Russia-Ukraine is at the top of my list in terms of what I’m worried about – that could be a major macroeconomic shock,” Cupkovic said. “If we see major fighting in Ukraine that’ll be very negative, and I think there’ll be a 20% downturn.”

If that happens, Cupkovic recommended investing in fixed income assets, which investors tend to turn to in a more volatile market.

“Traditionally, when the market goes down, our basket of Treasurys would go up,” he said. “That’s why we put 90% of our portfolio into the bond market.”

UBS also recently suggested three investing strategies to shield a portfolio if Russia invades Ukraine. The Swiss bank recommended diversifying, continuing to hold stocks in unaffected sectors, and targeting global outperformers like energy and cybersecurity stocks.

Market correction

Cupkovic is also skeptical that the January stock market slump will prove to be temporary. At some point in the next two years, he’s expecting a much more significant downturn.

“I’d probably put the risk of a stock market crash at six-and-a-half out of ten,” Cupkovic said. “There’s also still lots of Covid-19 uncertainty – if you look at the VIX index,


has been high for several months now.”

He added that a major sell-off occurring at the same time as Russia invading Ukraine would constitute a black swan event and could push stocks into a longer-term

bear market


“If there is a macro geopolitical event, there’s a higher likelihood that we see a more extensive downside,” Cupkovic said. “That’s when you get into bubble popping territory.”

slow growth

Lastly, Cupkovic pointed to the IMF’s recent low growth forecasts as a potential market risk. He said economies are overdue a


after the post-2008 boom, even though growth was briefly interrupted by the pandemic in 2020.

“When it comes to boom-and-bust growth cycles, I think we have to take the Covid-19 recession with a pinch of salt,” Cupkovic said. “It was only 65 days, and we’d obviously turned off the engine of the economy on purpose.”

Cupkovic also said he’ll be keenly watching this earnings season, which could produce further signs pointing to a bear market. Meta Platforms suffered the largest wipeout in US history last week as it lost nearly $240 billion of value based on a shocking fourth-quarter earnings report in just one trading day.

“If you look at the last few years of stock market growth, it doesn’t really correlate to the companies actually earning more money,” Cupkovic told Insider. “Lower earnings forecasts could be a headwind that we’ll have to deal with.”

“In a couple of years from now, I think the likelihood of a recession goes up from probable to likely,” he added.

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