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Dow to Slump Below 10,000 on Rich Man's Panic

Investors should expect the Dow Jones Industrial Average to fall below 10,000 points, as the current credit crisis is a repeat of the 'Rich Man's Panic' of 1907, Tom Hougaard, chief market strategist from City Index, told CNBC.

"We've been here before … About one hundred years ago we had an identical credit crunch," Hougaard said, adding that the Dow lost nearly 50 percent in over two years due to the 1907 crisis, which indicates further downside yet to come for today's markets.

The 'Rich Man's Panic' was caused by a severe lack of liquidity as banks pulled back lending and led to numerous bank runs and eventually the creation of the Federal Reserve in 1913.

"It's most likely to get worse before it's going to get better … I don't think we're really seeing this capitulation just yet, but we're close," Hougaard said, adding that the S&P 500 could take out the low of the 2002 bear market, which was 944.

(Watch Tom Hougaard's interview above for predictions on dollar direction).

The history books do point to an investment opportunity to come though, for investors willing to take a risk on a bear-market rally, he said.

"Once we come out of this mess we can expect some kind of V-shape recovery … like we did one hundred years ago," Hougaard said.

Hougaard echoed comments made by Robin Griffiths, technical strategist at Cazenove Capital, who told "Squawk Box Europe" that there is likely to be a bear-market rally in the fourth quarter, but further declines after that for six to nine months.

The second leg down in the Dow could find new lows of 9,500 to 7,500, Hougaard said.

(Watch Robin Griffiths' full interview on CNBC here >>>).

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