Will this recession spell the end of the cult of equity? If you took a snapshot of your pension fund today — in fact, don't, because you might be tempted to shoot your fund manager — you would be tempted to boot every share into the ditch.

This is a bad time to judge equities because we are witnessing a market collapse in which investors are dumping any asset that is perceived to expose them to a modicum of risk. Shares are being dumped by the bucketload and market traders are running scared of sellers. Even commodities are under pressure. Gold, the normal safe haven, rallied yesterday but then suffered. It is only cash and cash equivalents that will do.

Investors were chasing short-dated gilts and US Treasury bills as they fled whimpering into the reluctant embrace of the state. Among the vast ranks of hedge fund managers who have swaggered through the equity lists over the past five years, there will be many casualties. For the rest of us, we recall with bitterness the Woody Allen quip that a stockbroker is someone who invests your money until it is all gone.

Pension funds used never to buy shares in companies. They stuck to corporate bonds and risk-free gilts. In Britain, investment by pension funds in equity began with George Ross Goobey, who ran the Imperial Tobacco pension fund in the 1950s. It really got going only in the 1960s and 1970s, and its heyday has been the period from 1980 to 2000, when fund managers stuffed portfolios with company shares. Over that period, mostly they won.

The logic was that the combined capital and income return from a share beat fixed-interest investments over the long term, even if they suffered short-term volatility. But the past decade has been rotten for shares. An investment of £100 in the FTSE 100 index made in October 1998 would be worth only £79 today, and that fails to take account of inflation. It has been a rollercoaster ride with the dot-com boom, the slump and the recovery in natural resources and financial shares.

Now it is the banks' turn to drive us into perdition. The question that will be in the minds of every saver is whether these shares are a sensible place to put cash you set aside to be forgotten for decades until it is needed, desperately, when you quit employment.

That is the big picture, but the trouble is that the minutiae remain horribly compelling. Looking at the war of attrition conducted yesterday on screen, the values of some shares look absurdly cheap. Even if we assume we are about to enter a lengthy recession, do we truly believe that BP, our biggest company, is worth less than six years of earnings? The oil giant's shares are yielding 6per cent, and, even as the oil price tumbles, do we think it will cut its dividend?

Likewise for National Grid. What risk does this utility face from collapsing financial markets? But the shares yield an income of almost 5 per cent while the yield on BT, the telecoms giant, is in double digits. In a global recession, bad debts accumulate and profitability erodes, but people carry on heating homes, driving cars and making calls because they have no choice.

You might think that these share valuations are confirmation that Mr Allen is correct, that brokers are cretins and that the whole thing is best avoided. Or you might think that it is worth a small flutter, even as you sink the rest of your spare cash into gilts.

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