Sudden, severe stock sell-offs sparked by lightning-fast machines. Unprecedented actions by central banks to shore up asset prices. Social unrest not seen in the U.S. in half a century.
That’s how J.P. Morgan Chase‘s head quant, Marko Kolanovic, envisions the next financial crisis. The forces that have transformed markets in the last decade, namely the rise of computerized trading and passive investing, are setting up conditions for potentially violent moves once the current bull market ends, according to a report from Kolanovic sent to the bank’s clients on Tuesday. His note is part of a 168-page mega-report, written for the 10th anniversary of the 2008 financial crisis, with perspectives from 48 of the bank’s analysts and economists.