Conditions for investors around the world are getting worse. Let's start with Europe, the world's second-largest economy.

The European Union is a collection of states that are vastly different from one another. They are separated not only by language (which impedes labor mobility, resulting in semi-permanent labor productivity disparity between countries), but also by culture, economic growth rates, indebtedness and history, Madison.com reported.

European political (EU) and monetary (EMU) unions were great experiments that made a lot of sense on paper. Europe, at roughly the same size population and economy as the US, was at a competitive disadvantage as dozens of currencies embedded extra transaction costs in cross-border trade, and each currency on its own had little chance of competing with the US dollar for reserve currency status.

An overwhelming 86% of Germans believe their economy is doing well, up from 75% last year, according to a Pew Research Center survey conducted in spring. Views of the economy have been consistently positive since 2011, reflecting Germany’s quick recovery from the global financial crisis. By comparison, just 2% of Greeks, 15% of Italians, 21% of French and 28% of Spanish say their economies are doing well.

There were also important non-economic considerations. Germans were haunted by their past; they had started two world wars in the 20th century, and a united Europe was their way of lowering the risk of future European wars.

Though treaties put limits on budget deficits (limits that, ironically, Germany was the first to exceed), each country went on spending its money as it wished. Some were relatively frugal (like Germany); others (Portugal, Ireland, Italy, Greece and Spain) went on spending binges.

Concerns High in Italy

In all honesty, Italy is more concerning than the UK although the latter voted to exit the EU bloc. Italy is the third-largest economy in the EU, and its debt stands at 132% of GDP, second only to Greece (171%). The 17% of Italian bank loans are noncurrent; in the depths of the financial crisis, that number was only 5% in the US. Italian lenders account for nearly half of bad debt in the EU.

Unless the EU passes a new law that bends the 2014 law—or the Italian government takes matters into its own hands, violating EU rules—the world may see Italian debt holders and depositors who were hit with the cost of bank bailouts taking to the streets and demanding "Italexit."

China's Debt Bubble

China is the world's second-largest economy and is experiencing the largest debt bubble one would probably ever see in his lifetime. From 2007 to 2014, the country's debt quadrupled, to $28 trillion from $7 trillion. Over the same period, China's economy grew to $10.5 trillion from $3.5 trillion.

These numbers are staggering and point to one indisputable fact: All Chinese growth since 2007 has come from borrowing. There was no miracle in it. But it gets worse...much worse. The numbers also show that every $1 of new debt brought only pennies of GDP growth. In the absence of skyrocketing debt, the Chinese overcapacity bubble, which was already fully inflated pre-2007, would have burst years ago.

As the government continues to engineer growth by borrowing, every yuan of debt will bring less growth.

Japan's High Debt

Japan is the most-indebted developed nation in the world, with a debt-to-GDP ratio of more than 230%. Japan has been on the bandwagon of quantitative easing and endless stimulus longer than anyone else, and has nothing (except a lot of debt) to show for it.

Japan also has the oldest population in the world—26% of its people are older than 65 (in the US the figure is 15%). Rising debt and an aging population are a double negative for the economy, as debt per capita is rising at a faster rate than total debt. And since the working population is declining faster than the population as a whole, debt per working person is growing at an even faster rate.

This is an overview of the challenging environment facing investors around the world. It's evident that stock-market performance has not been driven by the improving health of the global economy. Just as negative interest rates are not a positive for the continued health of the economy, current stock-market performance does not augur rosy future returns for stocks. In fact, the opposite is true.