'Footsie to fall 90% from all-time high'

The severity of the ongoing economic and market torment has now led one analyst to forecast that the FTSE 100 index could plummet to below the 1000 level in the coming years.

Looking bearish: The merchants of doom are out, with one analyst predicting more big falls

Bill Adlard, a professional trader and market analyst, at Chart-Guide.com gave This is Money, the most gloomy - but notably the most accurate - forecast for how the index would fare in 2008.

Now Adlard says: 'I believe over the coming five years the FTSE 100 could fall by around 90% - from its all time high in 1999 of 6930. It could easily be below 1000 in five years time.

'The UK market will reflect what happened in the US between 1929 and 1932 when the Dow Jones dropped by 90% from 397 to 40 points. I expect something of the same from the Footsie.'

Speaking to This is Money 12 months ago, Adlard said that given the coupling of poor economic data and the ongoing global credit crunch, he believed that the index could pull back to its lows of 2003 – a fall of more than 40%.

In early trading on 10 October, 2008, the Footsie, had collapsed to 3873 - a fall of 40% since the start of the year - and Adlard's prediction had come to fruition.

By the year's end, the index had clawed back some of its fall and finished 31% down over the 12 months.

At mid morning trading on 28 January, 2009, the Footsie was at 4266.31. On 31 December 2007, the index was riding far higher at 6457 – giving a fall of 34% in the past 13 months. It hit its all time high of 6930, back on 31 December 1999, and today's level exemplifies a drop of 38% since then.

For the rest of 2009, Adlard expects the index of the UK's top 100 firms to 'thrash about between 4,500 and 3,500' before ultimately crashing through the lower barrier.

Justin Urquhart Stewart, at Seven Investment Management, says: 'It is possible that the index could fall that far but I do believe it is unlikely.'

For his part, Mark Dampier, head of investment research, at financial adviser, Hargreaves Lansdown, believes that the mountain of problems and debt to be worked through is immense and as such does not lend itself to much good news right now.

The situation has not got much better given that the International Monetary Fund (IMF) declared that the British economy will contract by 2.8% this year - the worst of any Western country.

Dampier says: 'The world economy is in a mess. Take Spain as an example, which is looking at having some 20% unemployment. Could the market fall further? Of course it could, the Footsie reaching 2000 would not be unreasonable. But I am always sceptical of making such large predictions.

'The stock market is not pricing in a great depression scenario, so if the environment greatly deteriorates, the market will fall further. And the landscape certainly does not look great for 2009.'

Dampier believes that the in the UK, we need to see the housing market bottom out and the sector 'could easily fall another 20%'. He adds: 'Balance sheets need to be squared up, people need to start paying back their debt and banks need to re-capitalise.'