The global rally in financial markets is unsustainable because it only seems to respond to changes in the real economy when it fits a certain narrative, according to the CIO of investment firm Fasanara Capital.
"I call it fake markets… you know, these days they talk about fake news (but) these are fake markets in a way right?" Francesco Filia, CIO of Fasanara Capital, told CNBC on Wednesday.
Filia argued financial markets had become "complacent" and "insensitive" to fundamental changes in the economy.
He suggested while markets appeared to surge higher on so-called good data, a mirrored response lower on negative sentiment had not been evident.
"I think this kind of market environment is both unstable and unsustainable… at some point, something is going to happen that is going to all of a sudden wake up markets as to this overvaluation," Filia said.
'If something cannot continue, it will stop'
European bourses were trading lower on Wednesday after European Central Bank President Mario Draghi appeared to hint the ECB would be prepared to scale back its monetary policy amid improving economic prospects for Europe.
Meanwhile, in the US, the broader S&P 500 index posted its biggest one-day drop in about six weeks overnight and closed at its lowest point since the end of May.
Wall Street's losses appeared to accelerate on news that the US Senate had delayed voting on a health care reform bill.
When Filia was asked to explain how his 'fake markets' theory stacked up with declining global stocks on Wednesday, he replied, "A pullback of 1 per cent in the stock market from all-time highs? I wouldn't call it exactly re-pricing things up. It's just slowing the pace at which you grow."
Filia cited "Stein's Law" as a fitting adage for the state of financial markets at present.
Herbert Stein, chief economist to US President Richard Nixon wrote: "If something cannot continue forever, it will stop."