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Tags: greenspan | investors | run | cover | worst

Greenspan: Investors Should 'Run for Cover'

Getty/Mark Wilson

By    |   Tuesday, 18 December 2018 03:11 PM EST

Former Federal Reserve Chairman Alan Greenspan warns investors that the seemingly endless bull-run stock-market rally really has finally come to an end.

Greenspan said he doesn't see equity prices going any higher than they are now.

"It would be very surprising to see it sort of stabilize here, and then take off," Greenspan told CNN.

U.S. stocks have fluctuated drastically during President Donald Trump’s tenure, at times reversing course on his comments about the Federal Reserve’s interest rate hikes, the ongoing trade dispute with China or the possibility of a government shutdown. Equity indexes slid to their lowest close in 14 months on Monday, and pared some of those losses Tuesday.

If markets do rally to break out of the recent slump, he warned that any recovery will be short-lived. "At the end of that run, run for cover," said the former Fed chief, who retired from the central bank in 2006.

"The volatility is a function of how we speak, think and feel — and it's variable," he said.

"Unless you can somehow radically change human nature and how we respond, this is what you'll always get and have been getting. You have to count on it, if you're going to understand how the market functions."

Greenspan, who was first appointed to the Fed by President Ronald Reagan and became the longest-serving chairman, remaining in his role into the George W. Bush administration, said a key driving factor in the market's volatility has been the "pronounced rise in real long-term interest rates," CNN quoted him as saying.

However, U.S. Treasury Secretary Steven Mnuchin blamed volatility in equity markets partly on high-speed trading and the effect of the Volcker Rule, adding that he planned to conduct an inter-agency review of market structure.

“Over a longer period of time the market reflects various different economic components but a normal trading day now is a 500-point range. A lot of that has to do with market structure, and that’s something we’re going to take a look at,” Mnuchin said in a roundtable interview Tuesday at Bloomberg’s Washington office.

Mnuchin declined to comment on other possible reasons for stock turmoil, saying that he didn’t want to make remarks on the economy or broader markets during the Federal Reserve’s policy meeting Tuesday and Wednesday in Washington.

Mnuchin said he will ask the Financial Stability Oversight Council, which he heads, to study stock market volatility. While he has not “pre-judged” what exactly is behind the sharp moves before a review is complete, Mnuchin said problems with market structure “may be one of the reasons.”

“In my opinion, market structure has led to a lot more volatility,” Mnuchin said. “Part of this is a combination of the market presence of high-frequency traders combined with the Volcker Rule.”

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Former Federal Reserve Chairman Alan Greenspan warns investors that the seemingly endless bull-run stock-market rally really has finally come to an end.
greenspan, investors, run, cover, worst
Tuesday, 18 December 2018 03:11 PM
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