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.

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…