After Brexit, here are the risks the market is still underestimating: Traders

A continued decline in global growth and struggling European stocks could present the biggest risks to the global markets, according to two market watchers.

"Global growth is going to continue to decelerate roughly about 2 percent over the next 12 to 18 months," Chad Morganlander of Stifel Nicolaus said Tuesday on CNBC's Power Lunch. He added that this adversely impacts global earnings in the United States, especially for S&P 500 companies.

"So we would be concerned about that, especially with valuations at forward looking [price-to-earnings] multiples of 17 times. We believe we're a bit stretched," Morganlander said.

The S&P 500 and Dow plunged in the immediate market fallout after the United Kingdom voted to leave the European Union, alongside an even sharper decline in many European markets. But rather than spotting bargains, Morganlander said potential investors should focus on credit growth, particularly in emerging markets.

"If you start to see a rapid deterioration there, that would be a bear sign for the overall global economy and the global markets," he added.

Oppenheimer technical analyst Ari Wald said continues risk from European financials pose the biggest concern now.

Looking a chart of the STOXX Europe 600 bank index going back to 1995, Wald said the trends indicate further declines are ahead, so this is one area of the market investors should continue to sell.

"We can see this equity market topping out at the same level it topped out at in 2000 and 2007, so still in secular decline, now breaking a seven-year uptrend as well," he said Tuesday.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more