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China has finally made it past the bouncers and granted entry to an exclusive club. The club’s ‘pass’ literally means investors have to hand over hard earned dollars.

This End of Financial Year is even more important to a vast number of Australians.

Have you ever wondered why stocks keep heading north, and bond yields keep falling? The laws of Economics and Finance usually suggest when stock markets are at all time highs (as they are now), that the economy is in expansion; ie it is doing really well. This means unemployment should be at lows, and inflation is probably strong. It also suggests that interest rates are probably high in response to those two measures. But interest rates aren't high... Instead, interest rates are also at all-time lows, or negative in some examples (Switzerland, Europe, Japan).

It's that time of year in Australia when everyone gets a little manic. It's not just to do with the impending school holidays and figuring out babysitting schedules, rather it's the last chance to get one's 'house in order'. June 30 represents the End of the Financial Year (EOFY), and in other jurisdictions, it equates to a half year or quarter end. Usual things that happen this time of year include investors taking stock of what is in their portfolio. Some transactions have made good profits, and there are others an investor would prefer not to own. So selling some ‘losers’ can help offset some of the tax effect of gains.

The Australian stock market was one of the worst performing in major markets. The ASX200 shed almost 3%, with the Banking sector bearing most of the weight. Putting it in context, if you excluded the Banks, Aussie stocks would have risen 0.3%. Banks sold off almost 10% in partial response to the new Bank Levy hidden in the 2017 Budget, as well as ANZ, NAB, & WBC all going ex-dividend and paying hefty dividends. It should be noted the sector actually added nearly 30% to the end of April, so one could argue there was potentially some profit taking in the mix. The Banks are now trading at PEs of around 12.8x, which is more in line with long term averages (12.1x). Around the world, UK markets did well, lifting almost 5%. On a 12mth basis, UK markets are now up 25%... but that performance can mostly be explained the low start base (BREXIT vote last year). Iron ore prices fell $9.50/t to $58. Oil was a fraction weaker at $50/b. The RBA left cash rates unchanged, and longer term interest rates drifted lower.