Dangerous time for investors as the ‘artificial economy’ unwinds

The sharemarket rout is set to rip through the ‘artificial economy’ and ‘delusional’ property bubble, one analyst says.

Delusional house prices are due a reckoning, says Lucerne’s Jerome Lander. Picture: Valeriu Campan

Sharemarket and property investors are about to experience a reckoning that sweeps away the pretence of “fake wealth and artificial economy”, Lucerne Investment Partners portfolio manager Jerome Lander says.

In a note to clients issued on Monday, Mr Lander said investors were “reacting in horror to the reality of the coronavirus as it begins its exponential growth around the world”.

His note came as the Australian sharemarket was experiencing its biggest one-day fall since the global financial crisis, with the S&P/ASX 200 plunging 6 per cent to a 14-month low of 5840.90 amid a collapse in oil prices.

“This is a truly frightening pandemic with significant ramifications which much of the developed world is unlikely to cope with well,” Mr Lander said.

“The reality is ICUs [intensive care units] are likely to be overrun around the world and people will increasingly seek to avoid social contact and hide at home in order to avoid contracting the deadly virus.”

Mr Lander said a 10 per cent ICU admission rate for Italy’s 1492 cases of coronavirus was a “truly horrifying statistic”.

Underlying economic weaknesses was being expose, he said.

“One bubble after another is at risk of popping, as the fake wealth and artificial economy of the last few years explodes in the face of a devastating global recession.”

With sharemarkets now “crashing, with delusional housing prices likely to follow”, he predicted central banks would shortly attempt to restore order to financial markets through so-called quantitative easing.

“Unlimited QE is likely but won’t help alter the destruction from the pandemic,” Mr Lander said.

“These are truly dangerous times for all investors, but particularly for those holding large amounts of overvalued equity and property assets at fake economy prices.”