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- Former Federal Reserve Chairman Alan Greenspan said in an interview with CNN that stock market investors should “run for cover” amid the recent volatility.
- He also said that a notable rise in interest rates had proved to be the “key factor which is bringing the stock market down” and that the pressure would most likely continue.
- Asked whether he thought stocks were still in a bull market, he said, “Not really, no.”
Former Federal Reserve Chairman Alan Greenspan said in a television interview on Tuesday that he thought investors ought to “run for cover” amid the recent volatility.
Asked whether the stock market was still in the midst of a bull run, Greenspan told the CNN anchor Julia Chatterley: “Not really, no, it’s beginning to fumble. You can see it by the reaction in recent days.”
He added: “It would be very surprising to see it sort of stabilize here and take off again. But it’s happened in the past. However, at the end of that run, run for cover.”
A brutal start to December has US markets on track for their worst final month of the year since 1931. The past three months have been particularly painful for investors, with the S&P 500, which touched a 14-month low on Monday, down nearly 12% over that time. The primary driver behind the sell-off was the notable rise in long-term interest rates, he said.
Greenspan, who served as Fed chairman from August 1987 until January 2006, added that pressure from interest rates on stocks would persist. On Wednesday, the central bank is widely expected to announce an interest-rate hike for the fourth time this year and ninth time since the financial crisis.
He said he’d observed a “pronounced” rise in real long-term interest rates, a “key factor” he said was “bringing the stock market down.”
He added: “In fact, it accounts for all of the weakness recently, and I think it’s going to continue to account for it, because we’re in a period now where I think long-term rates are going to rise.”
More broadly, Greenspan sees the US economy moving toward a so-called stagflation environment in which there is both price inflation and a weakening economic backdrop.
To be sure, critics have viewed the former Fed chairman as having missed factors that contributed to the financial crisis. He wrote in a 2010 paper that he’d been “lulled into a sense of complacency.”
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