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 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 assets under management are now in index funds and quant funds, and that about 90% of daily trading volume is driven by these and similar strategies.

Noted emerging markets fund manager Mark Mobius has voiced similar concerns about the explosive growth of 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 Federal Reserve will have to intervene, to prevent the economy from slipping into a severe recession, if not a depression. This is essentially what the Fed did in 2008-09, with its massive program of quantitative easing to combat that crisis.

Rising Social Unrest

With personal wealth cratering, 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 central banks such as the Fed intervene successfully to prop up asset prices, the status 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.