There are ten key factors facing the economic recovery which investors need to be cautious of, Jim O’Neill, head of global economic research at Goldman Sach, wrote in a research note Sunday.

O’Neill’s first factor is the fiscal issues facing the euro zone and the battering that many of its debt-laden countries are getting in the bond market.

"Those of us that have been arguing that the issue is containable … are starting to struggle as the price action remains pretty unforgiving, especially now towards Spain, and even France," he said.

The euro zone’s fiscal and debt situations aren’t as bad on an average basis compared to other counties such as the U.S. and Japan, according to O’Neill.

"Japan’s is much worse. Many think that the (European Monetary Union’s) fiscal position is just a ‘warm up’ act for the real stuff coming up," he said.

Read More: – By Robin Knight, CNBC Associate Web Producer

Tax hikes expected to hit after the expiration of the Bush tax cuts will cause today’s corporate profits to tumble next year — probably right after a stock market collapse, says economist Arthur Laffer, chairman of Laffer Associates and inventor of the Laffer Curve.

“My best guess is that the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession,” Laffer says.

Laffer warns of these coming tax hikes:

• the highest federal personal income tax rate will go to 39.6 percent from 35 percent;

• the highest federal dividend tax rate pops up to 39.6 percent from 15 percent;

• the capital gains tax rate will hit 20 percent from 15 percent;

• the estate tax rate soars to 55 percent from zero.

“Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts,” he wrote in the Wall Street Journal. “Tax rate increases next year are everywhere.”

Laffer says the coming hikes — coupled with the prospect of rising prices, higher interest rates and more regulations next year — are causing businesses to shift production and income from 2011 to 2010 to the greatest extent possible.

Read More: – By Julie Crawshaw, Moneynews

Signs the global economic recovery is faltering and Europe’s fiscal crisis is spreading added to investor concern that banks will have difficulty in clawing back the $2.4 trillion they’re owed by that region’s most indebted nations.

The cost of insuring against a default on financial-company bonds surged, with the Markit iTraxx Financial Index of credit- default swaps linked to the senior debt of 25 European banks and insurers climbing 6 basis points to 189, according to CMA DataVision in London, near the highest level since March 2009. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments fell 1.5 basis points to 167, compared with the record-high 174.4 reached on June 4.

Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance maturing bonds and fund deficits, according to Bank of America Corp. data. A U.S. jobs report at the end of last week fell short of economists’ forecasts, while a spokesman for Hungary’s prime minister said it was “no exaggeration” to suggest the eastern European nation may default.

“The market is so volatile right now, it’s ready to blow up on any headline no matter how meaningful it should be,” said Aziz Sunderji, a credit strategist at Barclays Capital in London. “People are extremely risk-averse.”

Read More: – By John Glover, Bloomberg

Every once in a while, the term “shadow inventory” makes it into the business headlines. Invariably, stories warn of a looming flood of foreclosures that will drag the housing market down as soon as homeowners begin to feel optimistic again.

But what is shadow inventory — and is it really such a big threat?

Different experts have different definitions. Some only include homes that have already been repossessed by banks and are awaiting distressed sales. Others include those whose owners are long-overdue on mortgage payments, while others still count homes whose owners would like to sell but are waiting for conditions to improve.

8 Million More Foreclosures May Be Waiting

“The definition of shadow inventory has gotten out of control,” says Rick Sharga, senior vice president at RealtyTrac, an online market for distressed homes.

As a result, estimates of homes in the shadows vary widely between 2 million and 8 million. By comparison, approximately 5.5 million homes are expected to change hands this year, of which about a third are in some kind of distress.

High estimates usually include include repossessed homes that have not yet been listed for sale, homes that have been moved from the delinquent bucket and into foreclosure, and homes that are more than 60 days delinquent.

Read More: – By Dahlia Fahmy, ABC News