Markets Have Faced a Year of Chaos and Still Done Awfully Well

Jeff Sommer writes Strategies, a weekly column on markets, finance and the economy.

The markets have been rocky. But the remarkable thing is how good returns for most investors have been over the past 12 months -- even including the downturn that started when the United States and Israel attacked Iran on Feb. 28.

They show that for the average domestic stock mutual fund or exchange traded fund, the losses have been relatively small -- a decline for the first quarter of the year of 1.2 percent. That's according to final investor returns that have arrived from Morningstar, the financial services company.

The actual, up-to-the-last-minute returns for many investors improved on Wednesday, when the stock market surged and oil prices dropped with the start of a fragile cease-fire in the Iran war. At the market close, the S&P 500 was down less than 1 percent since the start of the year.

The Morningstar data shows that even with the setback of the war, the average domestic U.S. stock fund gained 16.8 percent over the 12 months through March. And over five years -- a stretch that includes the dismal runaway inflation of 2022 -- the average domestic stock fund returned 8 percent annualized.

This record of resilience adds weight to a compelling -- but far from foolproof -- argument that investors are best off sticking with the stock market, even when they are troubled by the state of the nation and the world.

That narrative goes like this: Since World War II, the U.S. stock market has bounced back regularly from seemingly irretrievably destructive developments like wars, pandemics, domestic unrest, recession, inflation and flawed economic policies. Corporate earnings have provided the glue holding investor returns together -- and most forecasts for corporate earnings remain strong, as they have been for the last few years.