The world will slump into a depression similar to that in the 1930s if stimulus measures are pulled out too soon, Roger Nightingale, economist at Pointon York, told CNBC Monday.
But stock markets are likely to ride the tough times without major problems, as economic activity is better than it was six months or a year ago, Charles Lemonides, Chief Investment Officer at Valueworks LLC, said.
"I think the economy is in a great deal of trouble," Nightingale told "Worldwide Exchange."
"You must draw a line through the data, and the data hasn't looked good," he said.
The amount of money poured into the economy has not yielded the appropriate response, Nightingale said, despite the fact that factory activity in the euro zone expanded for the first time in 17 months in October.
Manufacturing also rose in Britain and China, suggesting global economic recovery is under way.
"If this stimulus is reduced at all, if this stimulus in fact can't be continued… then in fact we're going to go into renewed big softness. I think the Chinese are right, the Chinese business secretary, who said he was worried that in fact we are heading for the possibility of another '30s-type depression," Nightingale said.
Stock Markets May Still Rally
However, stock markets will continue to go higher as they have decoupled from the economic reality, and what happened over the past 10 days has been "an accidental tightening of money in America" where bond issuance was miscalculated. But monetary loosening will resume, Nightingale said.
"I think the economy is in a degree of trouble and I think that most central bankers think so as well," he said.
Many analysts have said China will lead the world out of the economic slump, but Nightingale said the figures out of China raise questions because imports of raw materials and consumer goods do not tally with growth figures.
"I would like to know what it's going on in the Chinese economy, it's a very good economy but it's possible that it's not performing anywhere near as strongly as some people suggest," he said.
But this does not mean stocks will not enjoy further rallies.
"Look at the 1930s, you had markets which were strong…the economy was weak, the markets were ok," Nightingale added.
Investment opportunities can be found precisely when the economy is weak, and right now the economy is transitioning "to a better place," Lemonides said.
"I think there's a ton of value in the market," he said. "If you look company by company, the opportunity is enormous."
Lemonides used the CIT bankruptcy as an example of how times have changed in one year.
"A year ago that would have been an awfully important development, 6 months ago that would have been an awfully important dev… today it's fine and completely healthy that they go through a bankruptcy."
"It's in bad times that you make your money, that's when you put your money to work," Lemonides added.