How much money have you lost in the market so far this year?

Probably not a lot if you invest primarily in local stocks because they have outperformed the market over the last six months.

These days "outperforming" often means losing less money than other investors. Such a "victory" doesn't contribute to long-term asset accumulation, but it may be the most Washington investors can hope for.

"Sometimes not losing money or making just a small return -- like a Treasury bill return -- is the best option," said Steven H. East, chief economist for Friedman, Billings Ramsey Group Inc. in Arlington.

East is forecasting that the economy will keep growing at a solid 3.5 percent annual rate for the rest of the year, but "the stock market is going to continue to struggle with a Fed that continues to raise rates and with worries about oil prices."

The market is particularly hazardous for individual investors because few industries have been able to resist the malaise in the markets, which has left the Dow Jones industrial average off 4.7 percent for the first half, the Nasdaq Stock Market composite index off 5.5 percent and the Standard & Poor's 500-stock index down 1.7 percent.

The Washington Post-Bloomberg index of regional stocks fell slightly less than the S&P. It's off 1.6 percent, with the majority of District, Maryland and Virginia stocks down for the first half.

None of this was supposed to happen. Stocks came into the year on a roll, accelerating steadily after the November election. But the market went off the tracks when crude oil prices hit $60 a barrel, the Federal Reserve kept boosting interest rates and the war in Iraq refused to get off America's radar screen.

Weaving around those hazards proved tricky for investors, because the markets did not always react the way most people expected.

Iraq helped Washington's defense contractors and government services firms maintain their status as the region's most unshakable industry. Most players made single-digit gains, although shares of Bethesda-based Lockheed Martin advanced 17 percent. And United Defense Industries of Arlington was up 59 percent before the completion last month of its $4.2 billion sale to British-based BAE Systems.

But as Bank of America chief market strategist Joseph P. Quinlan said last week, Iraq "represents the unappreciated wild card to the financial markets."

What he calls the "Iraq effect" produces three negatives: "policy paralysis in Washington, deterioration of the U.S. balance sheet [with big budget and trade deficits] and rising anti-Americanism abroad, a trend that could undermine global profits."

Interest rates, oil prices and Washington's threatened tilt toward protectionism all are risks to the market, Quinlan said, but "Iraq and the uncharted territory the country finds itself in ranks among the most significant risks to U.S. financial markets over the latter half of 2005."

You'd think economists would know enough about interest rates to predict accurately the market impact of the Fed's methodical escalation of interest rates in nine steps over the last year, all of them by quarter-point increments that were fully forecast.

But while the Federal Reserve was cranking up the short-term interest rates that it controls, the long-term rates that are determined by global financial markets have defied conventional wisdom.

Rates on 30-year mortgages are lower today than they were when the Fed started boosting rates last summer, and so are rates on government bonds.

The behavior of interest rates over the past few months has been so unusual that economists are reluctant to predict what will happen next -- or how any changes might affect the stock market.

Most forecasts are that long-term rates will rise somewhat in the next few months, and that the stock market will struggle until the Fed stops boosting short-term rates. But William H. Gross of Pacific Investment Management, who runs the world's biggest bond fund, predicts long-term rates will start falling by the end of the year as the economy slows down. That also could be a negative for the market.

The one certainty about interest rates is that they have made real estate one of the best investments so far this year. Almost all of the region's real estate investment trusts are upr, as is NVR Inc., the region's biggest home builder, and Criimi Mae, the Rockville specialist in mortgage investments.

Real estate was supposed to be hurt by rising interest rates, and many experts began warning investors last summer that it was time to get out of REIT and home-building stocks. That was bad advice then, and it may still be bad advice, but interest rates remain the biggest risk for investors in real-estate-related stocks.

The direct impact of record oil prices can be seen in the region's energy stocks, which mostly made double-digit gains in the first half of the year while paying healthy dividends to investors.

Energy's biggest winner was USEC Inc., the Bethesda-based business with the U.S. Enrichment Corp. subsidiary that makes nuclear fuel for power plants. USEC stock was up 51 percent. Constellation Energy Group Inc., the holding company for Baltimore Gas and Electric, was up 32 percent, AES Corp. of Arlington, operator of a worldwide chain of power plants, gained 20 percent. Local utilities Pepco and WGL Holdings also were up for the quarter, along with the three coal companies that are based in the Washington region.

Other sectors of the local economy are having a spotty year, forcing investors to target specific companies rather than attractive industries.

The diverse list of the top performers so far this year makes the point that this is a stock pickers' market:

New River Pharmaceuticals, up 101 percent, is a start-up drug company in southwestern Virginia that is altering versions of commonly abused drugs, such as oxycodone, to make them more difficult to use recreationally.

Blackboard Inc. of Washington, up 62 percent, makes interactive software for schools and colleges.

Cuisine Solutions Inc. of Alexandria, up 54 percent, makes packaged fancy foods, primarily for the restaurant industry. That duck with orange sauce you enjoyed in a hotel dining room may have come frozen in a plastic bag from Cuisine Solutions' kitchen.

Jos. A. Bank Clothiers Inc. continued to expand its Maryland-based chain of men's stores and remained a favorite retail stock, up 53 percent for the six months.

Talk America Holdings Inc., the Reston telephone company recovering from a brutal 2004 that whacked its stock price in half, climbed 51 percent.