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Market Still Has Further To Fall: Economist

The current market jitters are part of a long term bear market cycle which could last until 2020, an economist told CNBC Thursday.

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Since the start of July, markets around the world have seen a degree of volatility that has not been felt since the 2008 crisis, as fears of a double dip recession spread. Worries about euro zone debt and the first ever downgrade of the US' credit rating by Standard & Poor's have heightened fears in the market.

"We are working our way through a 15-20 year secular equity bear market that began in 2000 and will probably end in 2015 or 2020," Chris Watling, chief executive of Longview Economics, said.

"There's lots of volume (of sales) and lots of fear, but you need more extreme signals before it hits the low."

Some market watchers believe that there is now value to be found in some stocks after the recent declines.

Investors are increasingly looking to companies with large emerging markets exposure, as the crisis in the developed world continues. LINK

Watling argues that most sell-offs historically have three phases: a big initial wave (which he thinks we are "probably still in"; a relief rally, and then a new low. He spoke about "extreme pessimism" in the markets at the moment and believes that they are around 85 percent of the way towards the bottom.

On Wednesday, the three major French banks – Societe Generale , BNP Paribas and Credit Agricole – became the latest victims of a global sell-off in equities. US banks have also suffered this weeks, with financial stocks the biggest decliners of the 10 industry groups in the S&P 500.

"There is a huge interconnectedness in the Western financial system, and clearly we're seeing that play out in the way US bank shares are performing," Watling added. The impact of this crisis is particularly severe because "the whole Western system has become heavily financialized."

However, he argues that the current market downturn is actually "healthy" in a sense.

"The market is working its way through the weak fish of Europe and working its way through, possibly to a break-up of the euro zone," he said. "Just as the Asian crisis caused great challenges in the US in 1998, that's what we're seeing today."