Foreign & Colonial says that the collapse in investor sentiment is creating compelling stock market opportunities.
F&C UK head of equities David Manning says: "This situation presents buying opportunities in specific stocks whose current discounts are unquestionably overdone.
"A situation where Colt Telecom, which is forecast next year to report sales of just £360m and operating losses of over £40m, has a higher market value than the combination of Pilkington and Readymix, who together make profits over £400m on sales of £7bn is simply untenable."
In its third quarter report, the fund manager says that this is the first time that all major equity markets show a decline since the third quarter in 1990.
It adds that 74 of the FTSE 100 stocks are showing negative returns while historical blue chip companies such as ICI and Barclays have collapsed.