As the market tumbles, here’s my Stocks and Shares ISA hit list
My Stocks and Shares ISA is the main home for my stock investments. The deadline for the current year is next month, when my £20k allowance resets. However, I still have plenty of the current year allocation to make use of. With the FTSE 100 down 500 points in the past month alone, I’m building up a hit list of what I want to buy.
Big banks aren’t the problem
I’ve developed quite a strong view over the past week regarding banking stocks. The failure of Silicon Valley Bank (SVB) in the US has been one of the main triggers behind the stock market falling lower in recent days.
Banking stocks here in the UK have also taken a hit. Yet I’m adding the big names to my list because I don’t think this fall is justified.
An example is Barclays. The stock has fallen 18% in the past month (down 11% in the past year). This is a well-capitalised global bank diversified in operating across the retail, corporate and institutional space. It couldn’t be further away from how SVB and smaller banks have been run.
The fact, HSBC bought the UK division of SVB this week is further evidence to me of two tiers in banking. We have the big global players… and then everyone else.
As a result, I think that both Barclays and HSBC could be smart buys for the long term. I’m going to wait because at the moment the trend is still lower, but would like to buy before the new ISA year. A risk is that both stocks keep falling after I buy.
Benefiting from volatility
The volatility in financial markets over the past few weeks isn’t something I think is going to disappear anytime soon.
As a result, I want to buy some stocks for my ISA that can benefit from big swings. In the FTSE 250, there’s IG Group and TP ICAP. Both companies facilitate financial trading. IG Group focuses on retail clients, whereas TP ICAP brokers deals for larger, more sophisticated investors.
Ultimately, higher volatility is good for business for these type of companies. It means more transactions, more trades and more activity. Both firms make a small margin on each trade, so this will help to boost profits this year.
One point to consider is that we could see central banks and governments look to step in to ease things if markets get seriously unhinged. Or maybe the events of the past few weeks are just a flash in the pan. If things return to normal quickly, my picks could underperform.
In all of this, I want to invest via my ISA. The main benefit here is that any gains on selling are exempt from capital gains tax. So if I’m correct and the stocks do well over the next year and beyond, I get to keep more of this profit for myself.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. SVB Financial provides credit and banking services to The Motley Fool. Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023