The death of Alan Greenspan at 100 creates an unexpected moment of institutional reflection as the Federal Reserve under Kevin Warsh explicitly reverses the accommodative frameworks Greenspan helped build, with market consequences only beginning to be priced.

Key Highlights

  • Warsh's hawkish posture marks a structural break from Greenspan-era accommodation, with multiple 2026 rate hikes now projected.
  • Second-order effects include compressed risk asset multiples, wider credit spreads, and unwinding of near-zero-rate leverage.
  • The VIX remains subdued despite the pivot, historically preceding the most disruptive market repricing events.

Warsh's emphasis on price stability over growth management is a structural break from the put-option approach to monetary policy that defined much of the 1990s and 2000s. Scenarios of up to 75 basis points of tightening in the second half of 2026 have not yet been absorbed by equity markets trading at elevated multiples.

The second-order effects are compounding. Corporate credit spreads remain historically tight relative to underlying default risk, passive leverage accumulated during the era of near-zero rates is unwinding at the margin, and the absence of protective positioning amplifies potential drawdown if the rate hike scenario materialises.

Investors accustomed to the reflexive central bank backstop should treat the Greenspan retrospective not as nostalgia but as a guide to what is now being deliberately dismantled. The shift from managing growth downside risk to enforcing price discipline has consequences for duration exposure across both equity and fixed income allocations that current positioning does not adequately reflect.