I am not a permabear. I am not the kind of investor who takes glee in market downturns because I’m short. I would much rather have the markets soar 20% because it means more people are engaged and investing and (theoretically) clicking my bylines.

But let’s be realistic people. This rally can’t last.

I keep reading a lot of rather ugly headlines — and while the news is certainly mixed and you can find signs of hope if you look, it’s hard to ignore the broader narrative of increasing risks and trouble ahead for equity markets.

Here’s a quick roundup of the stuff that you should be worried about:

On Sentiment

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  Click to EnlargeEveryone is bullish, and why wouldn’t they be after 15% gains year-to-date? Unfortunately, there’s a difference between bullishness and irrational exuberance. An Investors Intelligence survey indicates advisers are approaching optimism in the “danger area” that often precipitates a decline. According to II, the last time sentiment pushed past these levels was in March, before markets softened up. Before that, bullishness was in the “danger area” last summer … right before the debt ceiling nonsense gutted the markets in August.
• Right now, the CNN Fear & Greed index has moved all the way to “extreme greed,” a rating of 92 out of 100. When you look at the metrics that this quirky index watches — from junk-bond demand to put and call ratios — the verdict is greed across the board. Seems a bit too rosy to be believed, doesn’t it?

On Domestic Issues

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  Click to EnlargeRichard Yamarone, a Bloomberg economist, put together this important comparison between shipping giant FedEd (NYSE:FDX) and America’s GDP. Notice the correlation? Well, unfortunately, FedEx just reported its package volume was down 5%, “priority” international export volume was down 2% and the company had to lower full-year earnings estimates as a result. Draw your own conclusions on what that means for the big picture.
• In other corollary news, Norfolk Southern (NYSE:NSC) has seen weak volumes “in certain markets” and the impact of rising fuel costs. The fuel thing we hear a lot, so I won’t mess with that too much, but check out this from a company press release: “Decreased coal and merchandise shipments, offset in part by growth in intermodal volumes, are together expected to reduce revenues by approximately $120 million compared with third quarter 2011.” In short, lower demand for energy as well as goods for sale are both to blame. Not good.
• On the hard data front, the Conference Board’s key index of leading economic indicators has rolled back again. The LEI dipped dipped 0.1% in August after rising 0.5% in July and dropping 0.5% in June. Weakness in August came from declines in manufacturing, consumer confidence and work hours.
• On housing, real estate research firm Zillow just released a report on August home values, indicating a 0.1% decline. Not a huge amount, obviously, but it’s the first monthly decline after nine months of gains. So does this mean the housing “recovery” is stalling?
• Also it’s worth noting that housing starts missed expectations in August. Despite rising 2.3% month-to-month and 29% over 2011 numbers, the 750,000 annual rate was short of the 767,000 forecast. Worse was that July numbers were also revised down.

On Global Issues

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  Click to EnlargeThe big news recently was that China manufacturing as measured by the HSBC flash PMI remains negative, with output down for the 11th straight month. Looks like China continues to suffer, and that slowdown may become a crashdown if things don’t ease up.
• Japanese exports sunk for the third straight month, with government data showing shipments slipped almost 6% from 2011 levels. More troubling is this from the Financial Times: “The figures underpin a structural shift in the country’s economic relationship with the rest of the world. Adjusted for seasonal variations, Japan has recorded trade deficits in each of the 18 months since the earthquake and tsunami, after decades of more or less uninterrupted surpluses.” Uh oh.
• Europe appears to be mending a bit after the OMT program announced by the European Central Bank recently. But things are hardly under control. Bloomberg reports that an “accelerating flight of deposits” continues to plague the eurozone with about $425 billion pulled from banks in Spain, Portugal, Ireland and Greece over the last year or so. That may have decelerated recently, but the sucking sound made by that much cash leaving can’t be ignored and could cause serious systemic risks overseas.
• Oh yeah, and investors are apparently already bracing for the meltdown. In anticipation of possible downgrades of Spainish and Italian debt — both sovereign and corporate — big investment firms like Pramerica and Thornburg are dumping positions in Europe according to The Wall Street Journal. And Citigroup (NYSE:C) has just warned Irish investors that they’re going to take a bath on their bond trades. In the words of  Citi’s head of European economics: “Ireland faces an almost impossible task to get back to fiscal balance.” Not encouraging.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via@JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.