Alan Greenspan: the bull market is over

published 27 December 2018

928_MW_P12_strategy_guru — Alan Greenspan, former chairman of the Federal Reserve

The bull market is over, according to Alan Greenspan. The former chairman of the US central bank told CNN's Julia Chatterley that he would be very surprised to see the equity market "stabilise here, and then take off". And while he acknowledged further gains might well be possible in the short term, the eventual reckoning would be all the more painful. If stocks do go up, then "at the end of that run, run for cover".

While he was in his post, Greenspan was often criticised for his tendency (known as the "Greenspan put") to cut interest rates when stockmarkets appeared to be running into trouble. But despite his actions as central banker (or perhaps because of them), Greenspan doesn't think there's any way to prevent market volatility. "Unless you can somehow radically change human nature and how we respond, this is what you'll always get and have been getting."

The current jitters have been triggered by a "pronounced rise in real (after-inflation) long-term interest rates". But even if it wanted to, the Fed might struggle to cut rates, given that Greenspan also worries that the US is now heading for a period of stagflation where inflation rises even as unemployment is picking up and the economy is slowing. The last time the US experienced such conditions was in the 1970s and early 1980s, amid unrest in the oil market and turmoil in the global monetary system. "How long it lasts or how big it gets, it's too soon to tell. We'll know it when we get on top of it."