The June Gloom.

Bill Parrott |

During the month of June, the beaches of Southern California are usually covered with a marine layer until mid-morning.   From the pier in Huntington Beach to the jetty in Mission Beach this haze hangs around until the sun powers through the clouds and exposes the beach goers to the glory of all California has to offer.  This is referred to as the June Gloom.

On the beach you can often hear people (tourists) grumbling about the overcast sky and the cold weather.   The vacationers are in Southern California and ready to take advantage of the miles of coastline.   Some visitors get disgruntled and pack it in early not knowing the sun is working her magic behind the scenes.  This short term thinking causes many visitors to miss out on the sun and fun. The patient beach goers, however, are rewarded with postcard weather.

Stocks, at times, are in fog and this puts investors in a stubborn mood.   The fog layer on the stock market will keep a lid on their upside until it’s burned off.   The haze is habitually brought on by negative press coverage, faulty forecasts, “expert” opinions, analyst recommendations, or some other defective barometer.

In 2016 the average daily change in the S&P 500 is .04% or $4 for every $10,000 invested.   Last year the average daily change was .01% or $1 for every $10,000.[1]    These moves are benign.   The lack of movement in the stock market causes investor to make changes to their portfolio when non is needed.  

A classic example of investors selling a stock due to nothing is McDonald’s.  Last year it hovered around $95 from February to October.   It was written off because they had apparently lost their way and a number of “new” burgers were better.   Since October, MCD is trading at $124 up 30.5 percent.   A move like that can pay for a lot of happy meals.

Facebook is another stock held back for one reason or another.  It was trading around $75 from February 2014 to July 2015 before it shot up to $118 for a gain of 57 percent.  Like.

Exxon was selling in the low $70s because the price of oil was supposed to trade lower.  This gloom hung around from November 2015 to February before it rose to $90.  Investors pumped it up 21 percent. 

These three stocks, and many more, were held back because of some type of haze.   Individuals who get sucked into a short term thinking vortex always miss out on long term gains.   When your stocks are under a cloud of uncertainty sometimes it pays to wait for it to burn off.

The end of a matter is better than its beginning, and patience is better than pride.  Ecclesiastes 7:8.

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

June 1, 2016

[1] Yahoo! Finance historical stock prices.