The market is hot right now and seemingly past due for a hit. Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage? Then start dollar cost averaging back in to the market?
I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.
If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge. What you are proposing is market timing followed by DCAing back into it. Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead.
For example, suppose you are paying $2k/month on a mortgage with $125k left. If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage. You might even get really, really, really lucky and sell right before a big drop. But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.
Time in the market is much more important than timing the market.
A-fucken-men to that.
Plus, the less cash you have in your house, the easier it is to weather the economic crashes, possible job losses, provides more capital to jump on the many opportunities that crop up in crashes, etc, etc.
In a major crash, it's not like everything always just stays exactly the same and life chugs on like normal until recovery. The whole world gets all whacky and things can shift significantly in individual industries and regions. In a major crash, you want to be as flexible as possible in order to come out with the best outcome.
In fact, if everything did just stay the same and chug along until recovery, then leaving everything as-is is by far the best option.
Either way, if market timing was predictable, then we would have thousands of threads about all of the various approaches to market timing with countless of the local mathy-types posting endlessly about different statistical models, etc, etc.