This is what happened leading up to the market break down in 2008.  Large investors who were told they could protect their downside risk with asset allocation programs ended up owning the same investment profile.  They may have 20 different asset allocations with small exposure in each one.  The theory is pretty simple actually, if one asset declines the others may not or will not.  In a panic asset allocation is the straw that breaks the investment back as sellers start selling all of the assets seeking cash.    The problem that emerges is that as fear takes over there are less and less funds committed to the buy side.  When trouble emerges that is systemic there are few buyers.
 This is not 2008 with an attack on the banking system that could have destroyed the U.S. financial system.  Without the actions of the Federal Reserve and the success of TARP we could still be trying to manage a depression.  Now the problem that maybe faced is that is low interest rates helped banks regain their liquidity but at what cost?  Now all three main types of borrowers including individuals, corporations and governments are loaded down with records amount of debt.  That is a natural outcome of low interest rates.  People and orgs borrow money because the low cost makes it psychologically acceptable.  This can cause two drip, drip, drip water torture events.  One is that defaults similar to what is happening with auto loans now slowly start increasing.  At first the markets will ignore this problem, but if it spreads to credit card debt and if home sales continue to decline it could mean consumers will be the first to experience financial stress.  They will soon be asking “why did I buy that car, house or boat?”  Why did I borrow money for a college education at an expensive school when I could have went to one at half the cost?  Eventually corporations that are borrowing large amounts of money at high yields because their prospects really are not good will come under fire and bankruptcies will start emerging.  Eventually investors will wonder about the role of inflation as the value of currencies are questioned as governments are forced to borrow more and more money to pay their rapidly increasing interest costs.  The canary in the economic in this scenario I believe remains the price of oil.  If it climbs faster and higher than most believe possible inflation could be come a huge problem speeding up the decline of the world economies.   The second drip, drip event  is the markets drop slowly and investments still have the illusion of hope.  Hope is poison in the decision making process when it has to do with stock ownership.
Carl