Stock markets have already discounted "some very bad news" and there is no reason to fear stocks will sink, despite gloomy prospects for the global economy, Marc Faber, publisher and editor of the Gloom Boom & Doom Report, told CNBC on Thursday.
"My view is simply: relax. I don’t think that equities will collapse. I think we have major support going back to August 2010 when the S&P was at 1010," Faber said.
Just over a year later, the S&P briefly dropped to a low of 1074 on October 4, 2011, he said.
"We have a lot of support around 1100, and if the S&P drops 200 points, I guarantee you the Fed will come in with QE3 and QE4 and so forth," he said, referring to a next round of quantitative easing by the Federal Reserve.
The European Central Bank and International Monetary Fund would do the same, but indirectly, he said.
Many analysts have argued that the ECB’s recent long-term refinancing operation, which saw it lend money to banks at its record low rate of 1 percent for three years, is an example of indirect quantitative easing.
Faber nevertheless expressed concern over the way in which governments are handling the current debt crisis, not just in Europe but also in the United States.
"If we look at U.S. government debt, it reached $1 trillion in 1980 and in the year 2000 we were at $5 trillion. So between 2000 and 2011 we’ve grown three times and the expansion of the debt will continue," he said.
"The day interest rates go up for whatever reason, the cost of financing will also become burdensome," Faber added.
"I’m negative about the outlook for the world because we are trying to solve the crisis created by excessive debt growth and excessive leverage with even more credit and leverage, which will just postpone the problem," Faber said.
He said investors should opt for diversification given the current uncertainty.
"You could have strong asset markets. Commodities or metal prices could go up. In my view I think that equity markets have to a large extent already discounted some very bad news," he said.