Three Trends That Could Spell Big Trouble For Wall Street

Investors paying too close attention to the Fed and the rally it has fueled on Wall Street in the aftermath of the Great Recession have probably overlooked three trends that could spell big trouble for stocks over the long term. The first trend is the slowdown in globalization, as evidenced by the de-acceleration of international trade and global economic growth. OECD, for instance, estimates that international trade grew at 2% in 2015, a level consistent with severe recessions, while the Federal Reserve has repeatedly used the slowdown in global economic growth, as a reason for keeping a dovish monetary policy. That's certainly bad news for American multinational corporations, which derive a big chunk of their revenues and earnings from overseas markets. Last year, for instance, Caterpillar missed revenues and earnings forecasts because of its poor performance in Brazil and China. The second trend, as documented by a recent McKinsey report, is debt, piles of new debt accumulated in the aftermath of the Great Recession on top of old debt, which fueled the bubble that preceded the Great Recession.