A market surge is as likely as muddle or mayhem

It could go either way: stockmarkets are poised either for an almighty crash or a sudden surge. Then again, markets could also continue to reflect the 'muddle through' scenario, where policymakers, particularly those involved in attempting to solve the eurozone crisis, do just enough to keep investors sweet.

The latter is the majority view of our panel of asset allocators, but they too recognise the possibilities of a sudden surge in either direction.

Stockmarkets are cheaper than they were a year ago, but are they cheap enough? Having been pretty bearish for most of 2011 and further extolling the virtues of wealth preservation rather than creation in last month's Money Observer magazine, the Christmas and early New Year rally looks to me like a false dawn.

There was certainly an element of year-end window dressing from index-benchmarked fund managers keen to add a touch of gloss to a pretty poor year. And the enthusiasm that extended into the first few weeks of January seemed to be based more on hopes for reasonably robust growth and corporate earnings than on any evidence that these happy events would come to pass.

In Europe, the looming credit crunch that I forecast back in November's edition may have been averted by the European Central Bank (ECB), for now. Not so my prediction of Europe-wide recession. More than 500 of the region's banks borrowed an unprecedented €489 billion from the ECB, which it made available to help ease the strains in the region's financial system. But those banks remain reluctant to lend to each other, or to the wider private sector, or to buy the region's troubled government bonds.

Instead, as recent figures show, they are parking it back with the ECB itself - a record €493 billion was put on overnight deposit with the ECB on Friday 13 January. That doesn't bode well for growth, or confidence.

In the meantime, Greece is lurching inexorably towards default and eventually to exit the eurozone, with serious repercussions not just for Greece and other eurozone members but global growth prospects too.

Gold has been disappointing in the past three months, but I continue to see it as a good hedge against inflation and currency debasement. Indeed, there is a growing clamour for the ECB to start printing new money to buy the region's troubled sovereign bonds. The policy tool cupboard is looking bare and, despite the ECB's reluctance, this may be the only path to eurozone redemption.

But such a move might also be the catalyst for equity markets to make that sudden, sharp surge. In the meantime, a sensible way to play the current situation is to back actively managed, unconstrained multi-asset funds and trusts. Several have been adept at reacting swiftly to changing conditions, certainly more quickly and effectively than most private investors.

The Troy Spectrum fund is one such multi-asset vehicle. It's a global fund of funds, investing with proven fund managers with strong track records. If appropriate, the investment team at Troy, led by Sebastian Lyon and Francis Brooke, can also invest directly in bonds, equities, cash and other investments.

As with many of the funds and trusts managed by the group, there's a strong focus on capital preservation. Recently, the fund has been holding 20% in cash or near-cash assets, such as gold, in order to avoid losses. But that also provides liquidity to take advantage of opportunities when valuations look more attractive.

Another fund with a fine track record is Newton Real Return, run by Iain Stewart, one of the few fund managers who can truly lay claim to running an absolute return fund - it has generated one every year since 2004, when it adopted its aim. It attempts to produce an equity-type return of cash plus 4% a year over three to five years but with less volatility than pure equity funds.

Fidelity's Trevor Greetham is another multi-asset investor I admire and by referencing his 'Investment Clock' the Fidelity Multi-Asset Strategic fund has been adept at keeping pace with the fast-changing fortunes of various asset classes over the past three years.

Among investment trusts that prioritise capital preservation, the admirably consistent Capital Gearing's (CGT) premium is now less demanding at 9%, having been as high as 21% in 2011. Ruffer Investment (RICA), Lindsell Train Investment Trust (LTI) and Personal Assets (PNL) are also worthy of your consideration.

The 'cult of equity' has fewer followers than a decade ago and more investors are likely to lose the faith in the next few months. But we should also be ready to don some metaphorical sunglasses, because when the light eventually reappears, it could be quite blinding.

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