It has been a fine half year for stocks, money market funds and, to a lesser extent, bonds — so good, in comparison with last year, that you may feel like celebrating when you look at your quarterly portfolio statement.

But this rosy picture doesn’t capture the entire situation for the mutual funds and exchange-traded funds used by most American investors.

For one thing, while the recent market returns are real enough, the reports are missing critical information that would make the returns look less fabulous.

A quirk in the calendar and in government disclosure rules always makes the fund numbers look considerably better when periods of poor performance move too far into the past to be included in the quarterly reports required for publicly traded funds. That happened this past quarter, when the miserable returns of 2022 were no longer fully represented in their stark awfulness.

For another, bond returns, which are positive for the calendar year, have flagged recently. That’s largely because of uncertainty about the state of the economy and the outlook for inflation and interest rate increases. Although inflation dropped to a 3 percent annual rate in the latest Consumer Price Index report, the Federal Reserve is likely to raise interest rates again at its next meeting on July 25 and 26, and could keep doing so in further meetings. Bonds could suffer.

Only money market funds — often dismissed as a form of “cash” and not included as one of the major asset groups — are in an unequivocally positive position. Yields on the 100 biggest money-market funds tracked by Crane Data average 4.94 percent, up from 0.6 percent just a year ago, and many funds are paying more than 5 percent annually.

As the Fed raises its benchmark federal funds rate, money market fund rates follow. “I think they will keep grinding higher for a while,” Peter G. Crane, the president of Crane Data of Westborough, Mass., said in an interview. The good times for money market funds aren’t over quite yet.

But for longer-term investors — those with horizons of a decade are more — the returns on stocks and bonds are more important than those for the inherently short-term money market funds. And the latest stock and bond numbers don’t change the big picture at all. The stock market over long periods tends to outperform bonds and cash investment, but at the cost of much greater volatility.

An odd thing happened to stock and bond fund returns this year, though you may not notice unless you take the time to look under the hood, as Daniel Wiener, chairman of Adviser Investments in Newton, Mass., pointed out in an email.

He noted that 12-month performance tallies for a wide variety of funds had shifted from sharply negative in the first quarter this year to sharply positive in the second quarter. This shift had little to do with the recent performance of stocks and bonds.

Instead it was about what happened last year, and how the dismal market of 2022 is being recorded in 12-month performance results.

“Massive gains” are being reported for the second quarter, Mr. Wiener said, but they shouldn’t be taken at face value. “It’s all in the point-in-time periods over which returns are measured,” he added.

Recall that the first half of last year was traumatically bad for many investors, especially the second quarter. Those four months were included in the 12-month returns that investors received in their fund statements in the spring, but they dropped out of the 12-month returns through June, the ones that people are looking at now.

For example, the S&P 500 rose 15.9 percent in the calendar year through June, a big rise for six months, no question. For the 12 months through June, it rose a staggering 17.6 percent.

But consider the tallies that were correct just one month earlier — yet never viewed by most fund shareholders because these numbers didn’t correspond to the quarterly reporting schedule mandated by the Securities and Exchange Commission.

The S&P 500 rose 8.9 percent in the calendar year through May, still a decent increase. But the startling thing is the 12-month gain of that index through May was only 1.2 percent.

The 12-month return in the S&P 500 jumped 16.4 percentage points in just one month. And the higher return reported in June, the 17.6 percent 12-month increase, is the commonly seen metric, giving rise to far more optimistic feelings about the stock market than a mere 1.2 percent return.

What happened? Two things.

The stock market rose 6.5 percent in June. But the more consequential change was the S&P 500’s 8.4 percent decline in June 2022. That year-old monthly loss was included in the 12-month return through May 2023, but dropped out in the far more important June 2023 quarterly report.

Using data provided by Morningstar, a financial research company, I found that this pattern extends across funds of many kinds.

Stock and bond investors in mutual funds and E.T.F.s. had positive returns on average for the second quarter, which ended on June 30, as well as the first quarter, which ended on March 31.

Yet the average 12-month returns for stocks and bonds shifted radically from quarter to quarter, mainly because of what happened in 2022, not this year.

Here are the numbers from the most recent quarter:

And here they are for the first quarter, just three months earlier:

So what’s the real picture here?

In simple terms, stock and bond markets are up this year but were down last year. Most investors have lost money since the market peaked in January 2022. Over the longer periods required by the S.E.C. for standard fund returns — one, three, five and 10 years and from the fund’s inception — broad stock market funds are generally positive. Bond funds tend to be positive for the longer periods — five and 10 years or more — but negative over one and three years.

Odd things happen for longer-term returns, too. Even the seemingly stable 10-year returns can shift sharply from month to month, altering investors’ perceptions of the strength of the market. That happened four years ago.

As I pointed out then, the S&P 500 plummeted more than 50 percent from Sept. 7, 2007, until March 9, 2009. But in the spring of 2019, the last of that horrendous decline aged out of the 10-year trailing stock market returns. The 10-year returns rose abruptly for hundreds of funds.

It’s important to understand that this is happening because when evidence of sharp losses recedes into the past, it’s easy to overlook the risks involved in investing.

Even knowing that the markets periodically inflict great pain, I continue to be fairly upbeat about stocks — and the U.S. economy — for the long haul, while expecting traumas more frequently than anyone would like.

So for short-term financial needs — those of the next year or two — I view the risks of stocks as way too high for comfort, and I’m minimizing my holdings of long-term bonds right now, too. Bonds of short duration and, especially, cash are better for shorter horizons.

Happily, money market funds are performing splendidly. They seem a good bet for the next six months or so.

On Wednesday, the S.E.C. adopted a series of complex measures to enhance the funds’ stability in a potential crisis down the road. We’ll have to see how that plays out.

For now, I’m pleased that my fund returns are looking much better now than they did three months ago, but I’m not confident that will be true next quarter or even next month.

That’s not because I know where the markets are going. I don’t. But I do know that they frequently fall. And I know for certain that one year ago, in July 2022, the S&P 500 rose 9.1 percent.

That was good news back then. But it also means there is a strong chance that my 12-month stock market return will decline this month. That’s because a gain of 9.1 percent is a high hurdle and, in any given month, it’s unlikely that the market will surmount it.

But buffered by bonds and money market funds, I’ll invest in the stock market anyway.


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