The threat of a government shutdown led investment markets to close out the third quarter with a whimper rather than a bang. All the uncertainty has tended to obscure the fact that most U.S. stock market investors have experienced significant gains so far this year.
And the recent quarter was no exception. Despite the rocky final week, U.S. stocks are up double digits year-to-date. Looking abroad, both developed international and emerging markets had a strong third quarter showing. The biggest surprise is Europe: a basket of European stocks rose 13% over the past three months.
Bonds have continued to provide disappointing returns both in terms of yield and total return. Corporate Bonds, Municipal Bonds, and longer term Treasuries have seen rising yields this year. The rises, of course, have caused losses in those positions.
Nobody could have predicted, at the start of the year, with all the hand-wringing over the fiscal cliff and new tax legislation, that we would be standing nine months into 2013 with significant investment gains in the U.S. markets and a resurgence in global investments led by, of all places, Europe.
This much we can predict: the recent uncertainties–the paralysis in Congress, worries about the direction of interest rates and whether the Fed is going to stop intervening in the markets–will give way to new worries, new uncertainties, which will make all of us feel in our guts like the world is going to heck in a handbasket. But the headlines obscure the fact that investment returns are created the hard way, by millions of people getting up in the morning and going to work and spending their day finding ways to improve American businesses, generate profits, create new products and new markets, day after day after day.
Whatever ups and downs you will experience–and you WILL experience them, perhaps in the next quarter or the next year–that underlying driver of business enterprises and stock value is constantly working on your behalf. That will be true no matter what the headlines say, no matter how spooked you feel about whatever scary thing is going on in the world. Nobody enjoys the investment ride the way children enjoy the thrills of a roller coaster, but both seem to ultimately deliver their riders to a semblance of safety in the end.