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'Run for cover,' former Fed head Alan Greenspan warns investors

Markets could still go up, but “at the end of that run, run for cover,” warned the former head of the Federal Reserve.
Image: Former Federal Reserve Chairman Alan Greenspan arrives for a hearing on Capitol Hill in 2008.
Former Federal Reserve Chairman Alan Greenspan arrives for a hearing on Capitol Hill in 2008.Lawrence Jackson / AP file
/ Source: CNBC.com

Former Federal Reserve Chairman Alan Greenspan warned on Tuesday that the U.S. could be headed into "stagflation" and that it was unlikely the current market would go higher.

“It would be very surprising to see it sort of stabilize here, and then take off again,” Greenspan said in an interview with CNN. Markets could still go up, but “at the end of that run, run for cover.”

Greenspan told CNN the bull market is over, pointing to how stocks have fumbled in recent days. On Tuesday, stocks rallied but they tumbled on Monday and have been in a decline since October, weighed by concerns over global trade conflict and slowing global economies. The S&P was on track, as of Monday’s close, for the worst December since 1931.

Greenspan’s interview was aired Tuesday, one day before current Fed chief Jerome Powell announces another possible interest rate hike and the central bank’s outlook for 2019. The Fed has been trying to restore rates to more normal levels after a decade of historic lows.

But Powell has taken criticism from President Donald Trump for raising rates. Stocks have had a volatile few months, something that is believed to be weighing on the president, who posted on Twitter on Monday that it was “incredible” the Fed was considering a rate hike.

In the CNN interview, Greenspan said the U.S. could be headed into “stagflation,” an economy characterized by high inflation and high unemployment such as was seen in the 1970s.

“How long it lasts or how big it gets, it’s too soon to tell,” said Greenspan.