Global Selloff Spares No Asset

The unprecedented volatility of late has placed some values out of whack with fundamentals and left some investors befuddled.

"Part of this frustration is that there's not a single event that we can point to that caused this global selloff -- first in Asia, then in Europe and now in the U.S.," says Hank Smith, chief investment officer with Haverford Investments. "If it's forced liquidation, we don't know how much leverage hedge funds have and we don't know what stage we are in. Are we almost near the end of this hedge-fund forced liquidation?"

Smith notes that the bear market has taken over many large-cap, "quality" stocks like Johnson & Johnson (JNJ Quote) and Procter & Gamble (PG Quote), which were at or near 52-week highs when it began. He says declines are only exacerbated by the fear that pervades the market, as other investors sit on the sidelines and wait until things begin to turn around.

"The bear market took over everything -- nothing has escaped it," says Smith. "Great big names are just getting tomahawked by 20%, 30% in just a few trading days. It's unbelievable. And that cycles back to the fear."

Gary Hager, president and founder of Integrated Wealth Management, believes that the volatility will last through early November, then start to dissipate. Once that happens, he predicts, investors will jump out of the trenches and dive back into the market, though the economic recession will last far longer, since stock movements tend to precede activity in the real economy.