As the U.S. continues its economic rebound, other regions of the globe are steeped in economic malaise. Paul Schatz, President of Heritage Capital, is most concerned about China and France, as each country faces enormous but very different headwinds.

France, Europe’s second largest economy, is projected to grow just 0.3% this year, according to the European Commission. Schatz notes President Francois Hollande and his socialist government are doing little to revive the sagging economy. “France is too big to fail and too big to save. They are really stuck because they need fiscal reform and they won’t get it from anyone in the European Union.” The FTSE 100 (^FTSE) is little changed this year.

Earlier this week in a speech, European Central Bank President Mario Draghi said, “Risks to the economic outlook continue to be on the downside,” reminding investors the Euro zone continues to struggle.

As for China, the world’s most populous nation is in the midst of a red hot housing boom which Schatz believes is quickly becoming a bubble eerily similar to what the U.S. faced in 2008. “When and if they decide to prick it or pop it, we will feel it here," he said.

The difference is China’s fiscal position, according to Schatz. “China has $3 trillion of cold hard cash to play with to support things that we did not have here. So you will have nowhere near the global contagion like we did in ‘08.” Hong Kong's Hang Seng Index (^HSI) has advanced 3% this year.

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Then of course, we have Japan. The country declared a recession earlier this week, surprising many global investors. It's the second major surprise from the country this fall, the first being an aggressive quantitative easing program back in October. Schatz is one of many investors unsure of whether or not Japan’s unorthodox fiscal strategy will work.  So far this year, Japan's Nikkei (^N225) has gained 8%.

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