July's top market insight

The most interesting insight this month:

The ASX 200 has been more polarised by large winners and large losers that I’ve ever witnessed before.

As the Australian share market sits near all-time highs it has partially been powered by ‘tax-loss selling’ running towards the end of financial year. July marks the start of the financial year, it also marks the end of tax-loss selling.

Tax-loss selling is where an investor sells and asset that are trading at a loss. This sale creates a capital loss that can off-set a capital gain realised on other investments.

For example an investor might have bought Afterpay Touch (APY) and sold the shares for a large gain this financial year. At the same time, their AMP shares have created a loss. By selling the AMP (AMP) shares before 30 June, the losses on AMP can reduce the income-tax payable on the profits from APY.

The majority of the ASX 200 was either up more than 10% or down more than 10% this year. This is surprising for a year when the ASX 200 index (XJO) is up only 7.13% for the financial year. The very broad range of returns for most of the market emphasises the significant difference between aspects of the market, the ‘right’ shares and the ‘wrong’ shares.

With interest rates lower and the chances of the PE expansions having an even greater impact on markets in the year ahead highlights the increased risk of even broader ranges of returns for the next 12 months.

See Gary Glover’s table separating the winners and losing companies this financial year in this interview.

Podcasts:

We regularly interview industry exports on numerous topics available in the Podcast playlist here.