London Daily

Focus on the big picture.
Monday, Oct 05, 2026

A chief investment officer at a $5.8 billion firm lays out why a dot-com-style bubble brewing in stocks will culminate in a 30-40% crash — and says the Fed could set it off

A chief investment officer at a $5.8 billion firm lays out why a dot-com-style bubble brewing in stocks will culminate in a 30-40% crash — and says the Fed could set it off

Chris Zaccarelli, CIO at Independent Advisor Alliance, breaks down how easy financial conditions are sending stocks down the path toward a crash.

Worries about a bubble in the stock market have been growing since valuations spring-boarded off their March 2020 lows amid unprecedented monetary support from the Federal Reserve.

These concerns have only grown stronger since November, when investors became excited about the prospect of robust fiscal stimulus from a Democrat-controlled government. Around the same time, pharma companies rolled out multiple COVID-19 vaccine discoveries.

The S&P 500, hovering near 3,900, now sits right around all-time highs and is up about 18% since the beginning of November.

As a result, some notorious bears like David Hunter, Mark Yusko, and Jim Rogers have been calling for a crash in 2021 or 2022.

Yet the major players on Wall Street don't see such a scenario playing out soon, with the economic recovery ahead and easy Fed policy in place for the foreseeable future. Neither does Chris Zaccarelli, the chief investment officer at Independent Advisor Alliance, which manages $5.8 billion in assets.

But if market conditions stay unchanged, Zaccarelli said a crash can indeed happen later rather than sooner, likely in 2023 or after.

He compared the current timeline with the dot-com bubble era, and said we're in the equivalent of 1997 or 1998, a couple of years or so before that bubble burst.

"I think we're definitely well on our way down that path. It's going to be very difficult for the Federal Reserve to pull back on the stimulus that they put into the system too quickly," Zaccarelli told Insider by phone on Thursday.

"I think there's a lot of political will to continue putting money into the economy through fiscal stimulus, through the Congress, as well as keeping monetary conditions very easy with what the Federal Reserve is doing," he continued. "So I think because those two large players in the economy have a lot of conviction towards running things hot, it's going to take us down that path."

In the meantime, Zaccarelli said he thinks the market could rise as much as another 100%. But it will then likely crash 30-40%, he said.

How the crash will happen


Zaccarelli laid out a specific series of events he thinks will lead stocks to this drop.

First, the easy financial conditions in place now will continue to drive up valuations. But such conditions will lead to sustained inflation above 2-2.5%, Zaccarelli said.

This will then force the Fed to raise interest rates, he said, which will remove liquidity from the system and send stocks tumbling. A lower level of liquidity means investors would have a more difficult time finding buyers for their assets, lowering prices.

"The Federal Reserve is going to be stuck between a rock and a hard place, and they're going to eventually do what they did in the late 1970s, early '80s, and just raise rates to crush inflation, and that's going to really hurt the market," Zaccarelli said.

Some experts say inflation is not expected to take hold in 2021 as the job market recovers losses suffered from the pandemic. They reject the idea that we will see inflation even afterwards, citing the lack of inflation following Global Financial Crisis stimulus and continued advances in cost-lowering technologies.

However, many anticipate it will pick up in 2022 and beyond as large monetary and fiscal stimulus packages increase the money supply. Inflation indicators like Treasury Inflation-Protected Securities (TIPS) and rising commodity prices are indeed showing that investors expect to see higher levels of inflation in the years ahead.

But the Fed has also committed to letting inflation run above 2% since it has lagged in recent years. They have said that they would let rates stay near zero through 2023, but it is unclear at what point afterward they would intervene to slow inflation's pace.

Current conditions make Zaccarelli's argument a compelling one. But time will tell how the trajectory of inflation, stock valuations, and the Fed's decision-making plays out.

Newsletter

Related Articles

0:00
0:00
Close
BT Accused of Pressuring Vulnerable Customers During Digital Landline Shift
British Carmakers Warn of Growing Pressure From EU-China Tariff Dispute
Green Party of England and Wales Adopts Motion Defining Zionism as Racism
Medical Charity Threatens NHS Legal Action Over Two-Year Autism and ADHD Assessment Waits
British Transport Police Report Record Rise in Violence on Railways
Glasgow Council Workers Face Pay Cuts Under Fire-and-Rehire Plan
British Medical Groups Press Prime Minister Andy Burnham to Cancel £330 Million Palantir NHS Contract
UK Faces Record Bluetongue Outbreak Across Livestock Farms
UK Schools Report Thousands of Child-on-Child Sexual Offences
High Court Overturns Ban Blocking Gaza Families From Reuniting With Relatives in UK
G7 Authorizes Emergency Fuel Release as UK Diesel Prices Hit £2 a Litre
France and Italy Draw 1-1 in Nations League Match
Pope Leo XIV and Prince Albert II of Monaco Meet in Metz
SNCF Expands Low-Cost Ouigo High-Speed Service Between Lyon and Bordeaux
Paris Expands Dedicated Cargo Bike Routes for Urban Deliveries
French Film Industry Pushes for Tighter Streaming Investment Rules
Marseille Court Hands Down Prison Terms in Public Procurement Corruption Case
LVMH and Kering Rely on US Demand as Chinese Luxury Spending Slows
Toulouse Aerospace Sector Launches €80 Million Modernization Fund
Javier Milei Courts French Investment in LNG and Lithium
Mistral AI Launches Sovereign Model for European Public Services
French Competition Authority Fines Retailers €40 Million Over Misleading Promotions
France Records Exceptional Electricity Exports as Nuclear Output Recovers
Dassault Aviation Expands Rafale Assembly Capacity at Mérignac
Sanofi Invests €1 Billion in New Biologics Production Hub Near Lyon
France Protests Germany’s Extension of Border Controls Into 2027
French Public-Sector and Transport Unions Threaten National Strike
France Deploys Riot Police After Violence in Lyon Suburbs
French Anti-Terrorism Prosecutors Investigate Radicalized Flydubai Co-Pilot
France’s Defense Budget Surpasses NATO’s 2% of GDP Target
French Government Faces No-Confidence Threat Over Budget
France and G7 Release 100 Million Barrels From Strategic Oil Reserves
France Convenes Emergency Defense Council Over Threats to Commercial Shipping
France and Germany Coordinate Military Response After Russian Strikes on Kyiv Infrastructure
UK Police Release Six Iranian Nationals on Bail After RAF Fairford Security Alert
UK Business Confidence Falls as Energy Costs and Tax Uncertainty Rise
Cornwall Insight Warns UK Energy Bills Could Rise 16% in January
UK Introduces Zero VAT on Household Electricity Bills
UK 30-Year Gilt Yield Hits 6% as Bond Market Pressures Intensify
UK Introduces Stricter Subcontractor Checks and Expanded Trade Union Access
Green Party Proposes Three-Year Emergency Freeze on Private Rent Increases
UK Treasury Committee Seeks Tax Clarification Over Manchester City Investigation
Royal Marines Deploy to Faroe Islands for Northern European Security Exercise
UK Business Confidence Weakens as High Costs Delay Investment
UK GDP Growth Revised Up to 0.5% in Second Quarter
Bank of England Warns of Financial Stability Risks From Autonomous AI
UK Expands Early Prisoner Release Scheme to Ease Overcrowding
UK Records Worst Bluetongue Outbreak on Record Across Livestock Farms
UK Government Faces Shrinking Fiscal Headroom Ahead of October 28 Budget
UK 30-Year Gilt Yield Reaches 6% as Energy Shock Drives Borrowing Costs Higher
×