Direction of Equity indexes and funds - peaked or more to go?

[Clariman]

In the middle of the year I need to pay stamp duty and fund a gap on a new house purchase. About 60% of that will need to come out of our Equity ISAs. They are mostly FTSE trackers, with some in LS80, LS60, PNL and CGT.

I am wondering whether I should take the money out now and put it in an easy access account or leave it until nearer the time. Are there any predictive indexes around? Any ideas?

Thanks
C

[DrFfybes]

Generally one would not put cash one needs in 6 months into equities.

Look at it the other way - if you had the cash in instant access right now, and markets were at an all time high, would you think "I know, I'll put it in equities for 6 months".

I'm cashing in UK trackers at the moment. Cash is paying not entirely dissimilar to Dividends, and I strongly expect markets to drop well below current levels before the year is out.

Paul

[kempiejon]

In the middle of the year I need to pay stamp duty and fund a gap on a new house purchase. About 60% of that will need to come out of our Equity ISAs. They are mostly FTSE trackers, with some in LS80, LS60, PNL and CGT.

I am wondering whether I should take the money out now and put it in an easy access account or leave it until nearer the time. Are there any predictive indexes around? Any ideas?

Thanks
C

I suppose it'd help to know how much of the equity ISA that 60% of stamp and gap equates too. If it were me and only a minority amount of the ISA I'd leave it there as even if the markets tank I'd have enough to cover the gap, if it's most of the ISA fund it might be prudent to take it out now just in case the equity falls and you're short. I don't mind taking a risk with equities as I'm convinced they'll go up - but I'd not like to comment on the next 6 months. I guess it depends on your attitude to risk and size of the ISA pot. Cash it in for certainty.

[kempiejon]

I'm cashing in UK trackers at the moment. Cash is paying not entirely dissimilar to Dividends, and I strongly expect markets to drop well below current levels before the year is out.

Paul

To trend OT for a sec the interest might not be too far from dividend yield but double digit inflation is eating your cash that equities might mitigate.
I guess if your conviction is that markets will fall I hope your play works for you. I moved most of my cash buffer into equities around Christmas after a cautions period the previous year building the buffer. Like I said to C risk is a factor.

[Clariman]

FYI the sum required would be 20-25% of what I have in Equity ISAs.

Thanks for the common sense answers so far.

Clariman

[gpadsa]

Are there any predictive indexes around?

This claims "The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by 11 months." https://www.conference-board.org/topics ... i-nov-2022

Presumably during a run-up & then recession prices would swing around a lot

gpadsa

[mc2fool]

Are there any predictive indexes around?

This claims "The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by 11 months." https://www.conference-board.org/topics ... i-nov-2022

Yes, but as it says, it's a predictive variable for the business cycle, not the stock market. Indeed, it uses stock prices, the FTSE All Share index, as one of the components of its calculation, as stock markets themselves are supposed to be predictors of the business cycle.

[mark88man]

Some insight would be helpful into correlation ie into whether equity markets lead or lag housing markets.

The double whammy situation is you stay invested the market moves down. You do the transaction with a higher %age of ISA - then the housing market including your new asset then also moves down

The double un-whammy (better word needed) is the market moves up. You do the transaction with a lower %age of ISA then the housing market including your new asset then also moves up

Other combinations are available.

You don't need to worry about inflation if your transaction price is fixed so I would be tempted to move the bulk of your requirement into cash - although the market seems buoyant so your call !!

[Wuffle]

5 months to go, 25% required.
Ease 5% out at the end of each month.
Nobody would bat an eyelid were the money going the other way.

W.

[dealtn]

Are there any predictive indexes around?

Thanks
C

On what basis do you think a reliable predictive index could exist. The current market is a best guess predictor of the future, so the tradeable futures price reflects things such as market interest rates etc.

Can you, or anyone, explain how a free arbitrage would work such the current price and a predicted future one can be exploited?

[swill453]

If your stocks comprise enough now to fund the house, I'd cash in now. A big market drop could lead to the purchase falling through.

Scott.

[tramrider]

5 months to go, 25% required.
Ease 5% out at the end of each month.
Nobody would bat an eyelid were the money going the other way.

W.

This is very sensible. Pound cost averaging is said to be good for money going into investments, so it is equally good for money coming back out!

[OhNoNotimAgain]

In the middle of the year I need to pay stamp duty and fund a gap on a new house purchase. About 60% of that will need to come out of our Equity ISAs. They are mostly FTSE trackers, with some in LS80, LS60, PNL and CGT.

I am wondering whether I should take the money out now and put it in an easy access account or leave it until nearer the time. Are there any predictive indexes around? Any ideas?

Thanks
C

Yes, the traded options market.

[vand]

I would make a plan to pound cost average out the amount I know I will need.

[Lootman]

In the middle of the year I need to pay stamp duty and fund a gap on a new house purchase. About 60% of that will need to come out of our Equity ISAs. They are mostly FTSE trackers, with some in LS80, LS60, PNL and CGT.

I am wondering whether I should take the money out now and put it in an easy access account or leave it until nearer the time. Are there any predictive indexes around? Any ideas?

Yes, the traded options market.

I did not think it was possible to trade or hold listed options in an ISA. Holding them outside of an ISA would potentially have CGT issues.

But in principle, yes, options could help in a couple of ways here. You could sell the funds now but replace with (say) an index call option, thereby maintaining your equity exposure but at a small fraction of the cost and risk.

Or you could keep the funds but hedge the downside risk using an index put option.

However I would not recommend the use of options for someone who doesn't have experience in them.

[Newroad]

Hmm.

Each to their own and Clariman, as for all of us always, needs to form his/her own opinion.

Were it me, however, the answer would be strikingly obvious and is largely implied by DrFfybes earlier post - if I had a fixed near-term date where I needed a specified amount and I needed to ask the question (i.e. someone not so wealthy that the answer is largely irrelevant) - then I'd sell what is needed now to invest in high-yielding guaranteed fixed term instrument(s) maturing with the right amount on the right date.

One of the other lines of argument noted above, i.e. 5% a month for 5 months, is explained as giving similar benefits to pound-cost-averaging (though in reverse). This doesn't make sense to me - pound cost averaging tries to get a sensible but unspecific outcome - whereas what is needed here is a specific outcome. In the cited scenario, a (say 20%) equity market drop in month 1 works poorly (as does, by broad analogy, an equity market drop in month 5 for pound cost averaging). The difference is, in this scenario, one is forced to crystallise the loss (to pay the tax etc) whereas with pound cost averaging, you can just keep going.

Finally though, the post title seems less about mechanics and more about market view. My own take - more likely down than up over that timeframe - but the spectrum of possibilities are perhaps wider than normal. There's a lot going on in the financial markets and around the world in general at the moment.

Regards, Newroad

[tjh290633]

I have one comment to make on Newroad's post above. What if your fixed interest security with the desired maturity is standing above par and has a negative or zero rate to maturity. If so, you are better off with any cash account that pays interest. If the security is indexlinked, what if the index falls while you are waiting?

TJH

[Newroad]

Hi Terry.

Perhaps what I wrote was unclear. By "high yielding fixed term instrument", I intended something like

A fixed term savings account which matures at the right time, or
A gilt which matures at the right time, or
Something else with similar properties

In any case, I think there are few if any such instruments at present which exhibit the characteristics you describe over a six-month timeframe, but maybe you know of one?

Finally, to avoid doubt, "high yielding" needs to be considered in context, e.g. with NS&I, prefer a 4.0% fixed term rather than a 2.6% easy access account, as long as the maturity matches (it actually doesn't in the NS&I example, but the figures are illustrative).

Regards, Newroad

[tjh290633]

In any case, I think there are few if any such instruments at present which exhibit the characteristics you describe over a six-month timeframe, but maybe you know of one?

I just had a quick look at https://reports.tradeweb.com/closing-prices/gilts/

All the index-linked gilts up to 11/2036 maturity are on negative yields. In the conventional gilts, UKT 5 03/2025 is standing at about 106, ie, over par. The rest of the shorter ones ar just below par.

TJH

[Newroad]

Hi Terry.

Clariman was talking about 6 months away?

"... In the middle of the year I need to pay stamp duty and fund a gap on a new house purchase ..."

Further, Indexed Linked gilts by definition cannot guarantee "... maturing with the right amount on the right date ..." so as far as I can tell are not germane to the discussion?

Regards, Newroad

PS I'm no bond expert, but the closest I could find was a 0.75% Gilt maturing 22/07/2023 with a spread of 98.27 - 99.27 (Hargreaves Lansdown)