Barry James said the global market was “upside down” and in the “latter stages” of an economic meltdown.
In a flashing red warning, share valuations have soared to their second-highest ever level, suggesting that many stock investments are over-bought and could be in bubble territory.
The only other time indicators were at this level was before the dot com crash at the turn of the millennium.
Mr James, president of the James Advantage Fund, said although there were currently good signs, there were vital concerns for the future.
He added companies’ price-earnings ratios, which is used to value their current share price against their per-share earnings, were giving a worrying indication when looking at past experience.
Speaking on CNBC, he said: ”Even though [the market] looks beautiful, setting new highs, good momentum, and earnings have been coming in good, here are some of the things we’re worried about.
“Number one is valuation levels. If we look at cyclically adjusted P/E, we went back to 1994 and researched team data that said there’s about a one in two times that the market was down in the next 12 months, and about one out of three times it was down more than 10 per cent.
“Also, we see that the market is upside down. In the 18 months ending in June, we saw companies that had no earnings, they were losing money, outperform those that were making money and Tesla is a prime example of that.”
He added: ”It doesn’t mean that we’ll see a volcanic eruption in the immediate future, and these market peaks take a long time, but we’re definitely in the latter stages of this market advance.
“We’re going to see the inevitable correction, I just wish I could say I knew when.”
Stock markets in both the United States and Britain have continually topped their highest ever levels in recent months.
But experts are now worried that history is about to repeat itself.
American’s top stock indices the Dow Jones and S&P 500 are up a staggering 20 per cent and 16 per cent respectively over the past 12 months, while Britain’s FTSE 100 has surged as much as 15 per cent over the past 12 months.
If companies are in good health and profits are growing, soaring share prices may be justified.
But one method of assessing share values, the Shiller PE (Price to Earnings) ratio on average inflation-adjusted earnings from the previous 10 years, suggests that stocks are very expensive.
Another measure of stock health, also suggests the picture may not be as rosy as soaring indices suggest.
Dividend cover for UK’s largest listed companies, a measure of how sustainable share payouts are, is at its lowest level since 2009, according to new analysis by The Share Centre.