Former Federal Reserve Chairman Alan Greenspan was interviewed by Betty Liu on Bloomberg Television’s In The Loop discussing the future of equity markets:
“I have always looked at what we call the ‘equity premium’ in financial markets. That is the rate of return over the sovereign debt yield that financial markets are more exactly equity markets require in order to invest. That yield got to an extraordinarily high, in fact the 50 year high, when the crash occurred, and that said that we were way out of line of where we ordinarily would be and it was just a matter of time before the equity premium declined.
“It’s now come back to what I would say is closer to normal after being exceptionally high and that means that, no we are not yet in a stressful position. But the stock market has recovered so sharply, for so long you have to assume somewhere along the line, we’re going to get significant correction. Where that is, I do not know.”
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