Global Selloff Spares No Asset

The U.S. government seemed to be the only thing investors have any faith in Friday, as every asset class outside of Treasury bonds and the greenback took a nose dive.

Three elements are causing a broad selloff and exacerbating one another's effect: A psychology of panic and fear, a weak economic outlook across the globe, and technical factors like the forced liquidation of hedge funds from margin calls. Scared investors started fleeing stocks en masse in September, and as prices hit certain benchmarks, there was more forced selling.

Daily announcements of weak earnings and new predictions of a global recession only lead to more selling, whether in stocks, commodities or other holdings that once seemed like refuge from the storm.

"Gold was safe haven mostly when people were trying to protect themselves from inflation," says Christian Menegatti, lead analyst at economic research firm RGE Monitor. "But I don't see any inflationary pressures around the corner -- in fact, I see the opposite, deflationary pressures."

Indeed, Nouriel Roubini, a leading economist and chairman of RGE, has predicted that the U.S. will suffer the worst recession in four decades. Roubini told a conference of hedge-fund managers on Thursday that there will continue to be a "massive dumping of assets" as hundreds of additional hedge funds fail, according to Bloomberg.

Third-quarter earnings reports have come in at or above expectations for several major names, including Microsoft (MSFT Quote) and Google (GOOG Quote). But the outlook commentary, littered with uncertainty, failed to reassure investors about future potential.