The recent rise in stocks and talk about green shoots in the markets are optimistic assumptions, as the world downturn "still has a way to run," Hugh Hendry, Chief Investment Officer at Eclectica, told CNBC Tuesday.
World gross domestic product looks overestimated, because global consumption has been based on debt, and this cannot continue, Hendry told "Squawk Box Europe."
"In the last five weeks we had a rally in risk. Big deal," he said.
"I am fearful of the surplus countries, like China and Germany. I think GDP has been overstated," Hendry added.
"My notion was, you had Bernie Madoff doing US GDP accounting." China "built capacity to serve a world that doesn't exist. We're drowning in capacity. The idea to propose we build more… that ain't a remedy," he explained.
Although companies' results beat forecasts, this is mainly because they marked their expectations too low, but their outlook is grim, according to Hendry.
"I believe the downturn in the global economy still has a way to run. We've only been given evidence of further deterioration," he said.
The rise in bond yields shows that the yield curve is flattening, pointing to more economic weakness ahead.
"What it reveals is that it's terrifying. This rise in bond yields shows… the private sector is countering the Fed and is tightening policy," Hendry said.
During the Great Depression, there had been rallies in the stock market, but stocks generally fell, Hendry reminded, explaining his bearish stance on stocks. He added that nobody can predict where the bottom was for the stock market.
"Monkeys spend all their time picking bottoms. I refuse to pick bottoms as I don't live in trees," he said.
- Watch the full interview with Hugh Hendry above.