November was a rough month for asset returns, but it would have been a lot rougher without yesterday’s buying frenzy in the wake of the news of a coordinated central bank intervention on behalf of the eurozone. Even so, most risky assets suffered hefty losses in November, reversing a large slice of October’s rally. Hardest hit in November: emerging market stocks, which sank 6.7%. The only winner among our broadly defined list of major asset classes: Inflation-indexed Treasuries, which advanced 0.8% last month.

The unmanaged Global Market Index, which passively weights all the major asset classes, turned down in November as well by retreating 2.1%. For the year so far, GMI is lower by 1.7%. In the wake of yesterday’s rebound in the capital and commodity markets, there’s hope that the year can be salvaged in terms of 2011 performance. But getting from here to the end of the month covers a lot of unknown unknowns. As Channing Smith, co-portfolio manager at Capital Advisors Growth Fund, tells The Wall Street Journal: “It is troubling to think that we were possibly at a Lehman moment over the last couple of days. This is by no means over in Europe.”

In other words, deciding if yesterday’s rally has legs is up for debate. By contrast, expecting lots of volatility looks like a safer bet for the foreseeable future.
“We had the worst Thanksgiving week since the ‘30s and then you turn around, you have a 8 percent rally in three days,” says William Nichols, senior managing director in equity trading at Cantor Fitzgerald LP, via Bloomberg. In the same article, David Kelly, chief market strategist for JPMorgan Funds, observes: “If I’m a long-term investor, I’d try to ignore the volatility. To me the most remarkable thing in all these screens today, the S&P 500 is within 10 points of where we are at the start of the year. It’s very important for long-term investors to recognize that most of the zigs were offset with zags.”