Over the last few years, nearly everyone who has put money in international equities has seen their portfolio values rise. Since 2011, the MSCI World Index has climbed by 44 percent, while a number of individual countries, such as Germany, India and Japan, have seen their markets rise by even more.
Investors, though, will need to temper their expectations going forward, said Richard Turnill, BlackRock's global chief investment strategist. Most markets are "pretty elevated," he said, and there are three issues that could make future market growth harder to come by. "Compared to [other] periods in history, and certainly in the last six years, the future looks much tougher," he said.
Here are his three biggest concerns for global markets.
After the recession, governments around the world slashed interest rates and embarked on quantitative easing programs. While opinions differ on how effective those measures were, there is one consequence that nearly everyone agrees on: low rates have helped push stock prices higher.
This may have been a positive at first, but it's now a worrisome development, said Turnill. Monetary policy has sent bond yields to such historically low levels that the only place people have been able to find any sort of return has been in stocks, and high-yielding equities in particular, such as in REITs, utilities and some telecoms. Now these companies are expensive and could get pricier the longer rates stay low.
"Large amounts of money are sitting in instruments that offer zero or increasingly negative returns," he said. "And that environment creates an enormous search for yield."
Even if investors wanted to buy high-quality bonds, they're competing with governments for those assets. Turnill points out that the Bank of Japan owns 37 percent of the Japanese government bond market. Investors have essentially been pushed out of the high-quality fixed-income market, which means there's only one place to go: into riskier assets.
"Investors are increasingly encouraged to start to step out of safe-haven assets (like government bonds) with no yield and to take on some risk," he said. "But some of these trades are now looking very crowded, and valuations on some of these assets are high." For instance, in July the 12-month forward-looking PE ratios for utilities within the S&P 500 reached almost 19 times, the highest in the past five years.
While it has recently fallen back to more usual levels, "we remain vigilant," said Turnill.
If rates rise rise — and Fed Chair Janet Yellen essentially said on Aug. 26 that U.S. rates will climb at least once before the year's over — then these high-yielding assets could become less attractive and lose value.
"You have to think about what a correction in rates means for some of these assets," said Turnill.
Turnill is also keeping a close eye on rising inflation, which could force rates to move higher. There is some evidence that the U.S. market is starting to heat up, he said, although it's coming off a low base.
In America, inflation is running near 1 percent per month, up from about zero in 2015. It's less of a concern in Europe, where inflation hasn't surpassed 0.3 percent this year, according to Trading Economics.
That's OK for now — "Central banks are more tolerant of running the economy a bit hotter for a period," he said — and inflation overall can be a good thing, because it means we're not in a period of deflation, which was a big concern for many over the last few years.
However, he doesn't want to see inflation get too hot too quickly or the central banks will have to step in once again. "One scenario that could upset the market is if those reflationary pressures build and we get a more material shift in monetary and fiscal policy," he said.
If that happens, we could see upward pressure on bond yields. And since bond prices fall when yields rise, those people who are crowded into these assets could be in for a rude awakening.
You might also have even more people buying dividend stocks. "Interest rates may rise, fiscal policy could be expanded, the supply of bonds may increase, and money could flow into minimum volatility and safer high-dividend stocks and bond proxies," he said. This is one reason to be cautious about dividend stocks, he noted, since they've been bid up so much already.
There are three things that have a profound impact on global markets: China, commodities and currencies. All are related, and they can send markets moving in one direction or another.
One of the reasons why markets were so volatile at the start of the year was because of concerns around Chinese growth. In January the Chinese government revealed that its GDP grew 6.9 percent in 2015, the slowest annual growth its seen in 25 years. The last few months, though, have been relatively quiet, even with still weak economic data coming out of the country, said Turnill. In July, data from the government's Purchasing Managers Index, a main economic indicator in the country, came in at 49.9, which was below analyst expectations.
If the data gets worse, that could spark investor fears again. "Any new evidence of weakness in the Chinese economy, and particularly the Chinese consumer, would be a concern," he said.
As we've learned over the last two years, when the Chinese economy slows, so does demand for commodities. While oil prices seem to have stabilized around between $40 and $50 a barrel, Turnill is paying close attention to where the price of crude and other commodities, like gold, which is up 24 percent year-to-date, might be headed.
"Investors should be encouraged that prices are stabilizing," he said. "But demand is weak and the price could move back materially lower. That's something we need to focus on."
When it comes to currencies, a combination of a higher U.S. dollar — which would hurt exports — and a weaker China will cause some market volatility, he said. At the moment, though, the greenback has fallen relative to some other currencies. For instance, the dollar has fallen by about 15 percent compared to the Japanese yen and 3 percent against the euro. It's up 2.5 percent against the renminbi year-to-date.
Whether any of this materializes or not remains to be seen, but investors should be aware of what's going on in the world. "You have to be very conscious of these risks," he said.
— By Bryan Boryzkowski, special to CNBC.com