Nomura's widely-watched strategist, Bob Janjuah, believes that the is likely to fall another 10 to 15 percent in the near term, causing the U.S. Federal Reserve to unleash more stimulus policies in 2016.
"When we were up at (21,000 points) I thought we would see 1,700 (points) at some point in late (third quarter), early (fourth quarter)," Janjuah, a senior independent client adviser at the investment bank, told CNBC Tuesday. "We made some progress towards that target, I think there's a bit more to go."
The S&P 500, a broad measure of U.S. stocks, closed on Monday at 1,972 points, a key level some analysts are watching for support. The index has just suffered its worst month since May 2012 on the back of Chinese growth concerns and jitters that the Fed is about to raise interest rates.
Janjuah, who argued in a research note in early July that a "flash crash" was imminent, told CNBC that his prediction was now in danger of coming true, although he conceded that he was slightly inaccurate with the timing of the plunge in stocks and how U.S. Treasury yields have reacted.
He now predicts that a further selloff for the S&P is "likely" and says that the benchmark 10-year Treasury yield could reach roughly 1.80 percent "in the next six weeks" with investors flocking to bonds as a safe-haven asset. The yield on the 10-year note currently stands at about 2.17 percent.
China and the Federal Reserve will continue to be the two dominant themes for markets, according to Janjuah. He believes that the Chinese authorities have "lost control" over their own stock market and other global central banks - like the Bank of Japan and the Fed - will continue to pump more liquidity into their economies to account for softening growth in the world's second largest economy.
"What I think the global investor needs to understand is that globally there's not enough growth, there's way too much capacity and we've hidden that gap with this thing called liquidity - actually liquidity is debt," he said.
"The workers of the world have no pricing power, without pricing power you cannot get a sustained cycle of inflation. And a world where we have got excess capacity and not enough demand, that's deflation."
Janjuah is no stranger to gloomy predictions, and has made several bold calls in recent years. In November 2013, he said that the end of 2013 till the end of the first quarter of 2014 would be a buying window followed by a 25-50 percent sell-off over the last three quarters of 2014 – a forecast that failed to materialize.
Goldman Sachs is a little more positive with its outlook. Peter Oppenheimer, the chief global equities strategist at the bank, has a "neutral" outlook on the S&P 500 but disagrees that a sharp selloff is on the horizon.
"I wouldn't say the bull market was over in equities," he told CNBC Tuesday.
"The valuation driven part of the equity market bull (in the U.S.) is probably over, in other words, the period where the multiples have risen very sharply as interest rates have fallen."