• On the 3rd of July, the S&P500 index closed at an all-time high 2,996 points. But are equities that expensive? read here

Why the next US downturn could be a shocker

New York, USA - July 29, 2016: The headquarters of the NASDAQ Stock Exchange, the second largest trading market in the world, in Times Square in New York, New York.

Why the next US downturn could be a shocker

Is the next US downturn years away, or just around the corner?  Either way, leading US economist, Professor Jeffrey Frankel, says it will be severe. And the reason, he says, is the Trump administration’s relentless pursuit of fiscal expansion and financial deregulation.


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Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. It’s the monetary system that’s the problem here and it hardly matters if it’s the right or the left that is in power, the voting public demands its sugar fix and politicians must comply or be quickly shown the door, conservative and sustainable monetary policy is a political death sentence in today’s world where money can be simply created to satisfy any need . Evidence of this fact is the massive annual deficits the US is running in an apparent boom period, a deficit level only reserved for war times and not seen since the Vietnam war. And if the Fed can’t do much because they are trapped by their own policy which is to forever increase money supply, as all reserve banks are. Maybe it’s a currency war by stealth which is why the next crisis may be one of currency and that could be unfolding right now in emerging market currency volatility.

  2. Many financial commentators have been predicting a turn around over the last few years (much like the property market).
    I think all major indices (household equity allocation, market cap to GDP, Q ratio, CAPE, and even ave P/E) are showing a worse than average return over the coming 10 years.

    The the more important questions are:
    (i) who will be smart/lucky enough to predict the crash just before it happens
    (ii) who will have enough cash floating around to take advantage of the crash


    • You can’t easily prepare for the first option, but you can for the second one. Now is the time to get the house in order, not when the correction arrives.

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