Slashing costs and trimming staff has not solved the problems of developed world companies, and this is why earnings are likely to fall, Richard Cookson, chief investment officer at Citi, told CNBC Tuesday.
"The corporate sector continues to simply slash costs rather than focus on top-line growth," he said. "If you carry on just cutting costs and cutting people, at some stage the growth will stop."
The Citi executive dismissed recent falls in the price of oil and other commodities by pointing out that long-term decline in the oil price would lead to oil-producing countries spending less on imports from elsewhere.
"It's a developed world problem, not just a UK problem," he added. "If you put in place the fact that real earnings are nugatory, to put it mildly, then you have got a longer-term problem."
August was an uncomfortable month for investors as concerns about the euro zone debt crisis and the first ever downgrade of the US credit rating sent markets downwards.
"Babies were thrown out with the bath water," George Godber, fund manager, Matterley Asset Management, told CNBC Tuesday.
'Growth Is So Low'
He advocated caution as the summer draws to a close.
"Markets are very good value on a 18-month view, but on a three-month view they're quite tricky," he added.
"We are going to be very susceptible to any sign of improvement or deterioration in GDP because growth is so low."
After the second round of quantitative easing drew to a close, the much-anticipated announcement of further changes to monetary policy in the US has not yet materialized.
Friday's speech by Ben Bernanke at the Fed's annual symposium in Jackson Hole postponed a decision on the matter.
With uncertainty remaining, analysts' forecasts for company results should be taken with a pinch of salt, according to Cookson.
"There's not a single market on God's earth where the consensus of analysts have predicted a fall in profits," he said. "From a long-term strategic perspective, looking at forwards earnings, all we know is that they are going to be wrong."
"Growth per se is not what we are looking at when investing, so much as what do you pay for the growth risk?" he added. "There's a point at which things become sufficiently cheap or you just expect to be taken out through M&A."
Japan and "bits of Europe" are relatively cheap at the moment, while the US is still over-valued, according to Cookson.
There have been "huge withdrawals" out of emerging market funds in recent weeks, according to Godber, a sign of increasing nervousness in the market.