Why 'Wall Street excesses' pose 'greatest risk'

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The divide between Wall street and Main Street

Call it the Derek Smalls Recovery, named after the Spinal Tap bass player in the famed mockumentary who strove to be "kind of like lukewarm water."

It's a time in which consumers and companies cut back on spending rather than make investments, where technology leaders fail to innovate and deflation and increased regulation become ever-larger threats.

It all adds up to "a world where Wall Street and the owners of capital boom while Main Street and the workers struggle," in the words of Bank of America Merrill Lynch chief investment strategist Michael Hartnett, who advised in a note to clients Friday that investors had better start thinking about market trouble for later in the year.

"The greatest risk of all is that Wall Street excesses rather than Main Street recovery forces the Fed to tighten," Hartnett said. "More than five years after the global financial crisis it's still a 'lukewarm' recovery. The 'fire' of zero interest rates and central bank liquidity continues to be doused by the 'ice' of deleveraging, regulation and deflationary tech innovation. Meanwhile Wall St booms."

Indeed, signs continue of an uneven recovery.