Here in Southern California we have a weather phenomenon called June Gloom. Often during June the temperature differential between the land and the ocean causes a foggy “marine layer” to encase at least the coastal areas of SoCal for much of the day. The marine layer may burn off as the day goes on or it may not, depending on how close you are to the beach. The result is mild but foggy weather that is more humid than normal for the area. Some people don’t like it – it’s harder to work on the tan during June – but I really like it because it is comfortable.

Stocks Anything But Gloomy

Contrast typical June weather in SoCal with the performance of the stock market thus far this month. Stock performance has been a bright spot in a news cycle preoccupied with Covid-19 and racial protests. The S&P 500 is up about 5.5% so far with 3 weeks to go. The Nasdaq 100 index is up only about 2.5% this month but is now above the pre-Covid highs. Investors are optimistic that the worst is over and that we are now in the economic recovery phase. Last Friday’s report that the US economy gained 2.5 million jobs in May and that the unemployment rate dropped to 13.3% buoyed investor hopes. Is it time to go all in on the stock market? Are you already late to the game?

Not So Fast

The indicators that I watch all show that we are in an uptrend phase in stocks. That doesn’t mean you should go all in. It does mean that you can go back to your normal allocation of stocks within your portfolio. For instance, if you normally like to be at 60% stocks and 40% bonds, for example, go ahead and do that now. Moreover, just because there has been some good news recently doesn’t mean that all of the bad news is over. As states reopen their economies, there could be a spike in Covid-19 cases, or at least Covid-19 will remain with us. People will still get sick and die, and there will be reactions to this within the economy. We are heading into the Summer season now but what will happen when the weather turns colder later in the year? Research into vaccines and treatments look promising but a vaccine is no sure thing.

Discipline

I advocate a disciplined approach. Just as I advocated that you don’t panic on the way down, I advocate that you don’t panic as we emerge from the worst times. Think and act like a long-term investor.

IMO

Just because the stock market has been strong so far this month doesn’t mean you should go all-in. The road to recovery ahead still looks bumpy to me. All of this means that you should stick to your plan and be disciplined about re-entering the stock market. I realize I am likely preaching to the choir but the message of discipline is important and bears repeating.