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"Whipsawed" is the best way to describe recent action in the major asset classes. What was down is up, and what was up is down.

Consider the horse race for March, as per our table below. Commodities were the bottom performer, posting a total return loss of -6.5%. A month earlier, commodities were the leading asset class, posting a 12.2% gain in February. Meanwhile, REITs were the big winner in March, completely reversing their last-place status the month before.

In fact, what little postive-return consistency there was in February and March among the major asset classes was concentrated in cash and foreign bonds.

The back and forth is hardly surprising. The unfolding drama in finance and the wider economy leaves investors jumpy as they ponder where the next shoe will drop. We're already up to our necks in fallen footwear and few pundits (including this one) are prepared to say it's over.

Yesterday was a perfect example. It's not every day that the U.S. Treasury Secretary gives press conferences outlining ambitious proposals for overhauling financial regulation in the U.S. and dramatically expanding the powers of the Federal Reserve. Yes, the plan may be dead on arrival in Congress, as has been widely reported, but it's clear that the turmoil on Wall Street continues to reverberate throughout the wider economy, and the government.

Meantime, large financial institutions keep announcing the price tag of previously believing that bull markets last forever. Yesterday, the Swiss banking giant UBS AG (UBS) announced that its first-quarter loss would top $12 billion, largely due to mounting troubles from the subprime mess.

If investors are skittish in such an atmosphere of uncertainty, no one should be shocked. Strategic-minded investors, however, should be looking to take advantage of the volatility when opportunity arises. For equities in particular, there's a recession premium associated with buying when the crowd wants cash. What's the catch? The recession premium probably won't pay off for years, and the only way to boost the odds of success are buying at lower prices and extending one's investment horizon.

These are extraordinary times and markets are likely to be whipsawed for the foreseeable future, interrupted by periods of calm that give way to a fresh round of drama. Once the economic outlook stabilizes, something approaching a more normal state should return to the risk/reward profile of the major asset classes. But for the moment, ours is a fluid period. As Wall Street and Main Street grapple with the prospect of recession, prices will be volatile. So it goes when uncertainty comes in larger-than-usual doses.

Source: Asset Class Review: Whipsawed