Why coronavirus could cause a 1990s-style bubble in risk assets

Threat of slump in global economy

The coronavirus outbreak will significantly impact risk assets over the coming "years, rather than months", according to economist and author Anatole Kaletsky, who warned that central bank reactions to the illness could artificially inflate asset prices and lead to a "greater-than-expected boom and bust" across global stockmarkets.

Speaking at Investment Week's Funds to Watch conference at The May Fair Hotel last week, Kaletsky suggested a sudden and drastic collapse in asset prices could spark an economic downturn, which would lead to an economic period more similar to the 1990s tech boom and bust, as opposed to the 2008 Global Financial Crisis. The funds hit by the coronavirus sell-off "At the start of the year, it looked as though the world economy was beginning to fire on all cylinders, and what would end the cycle - if anything - would be a relatively conventional boom-bust in asset markets," he said. "T...