Asset allocation mattered little, until it mattered a huge amount. Through the first half of 2011, stocks, corporate bonds and treasuries muddled upward together. In August, the European mess got going properly and the flight to safety was on. By year-end long-term Treasuries had piled up vast gains, high-quality corporates had logged a sound year, and big-cap stocks were where they started. Riskier flavours of equity fell.

In 2011, then, the situation in Europe almost single-handedly determined which assets flourished. The crisis being hardly over, it is natural to expect the pattern to hold in 2012. If we are in for a eurozone meltdown, hold those treasuries. If some flavour of resolution is in store, treasury yields should rise and equity markets rally.

That is a simple notion and very likely wrong. A resolution of the eurozone crisis would almost by definition mean that there were no widespread defaults by the peripheral economies or massive write-downs for bondholders. That would be desirable; it would mean that the eurozone had bought itself time to deleverage. But it means that Europe will remain in the situation that the US and (in some respects) Japan are in now: awash in growth-constraining public and private debt, needing growth to pay it down, with the monetary-stimulus option having become ineffective or even (according to some) actively counter-productive.