Students wait in line to vote at a polling station on the University of California campus at Irvine.
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A survey by Deutsche Bank gave an insight into how much cash from US economic checks could end up on the stock exchange.
The responses to the survey of 430 retail investors showed that half of 25-34 year olds plan to spend 50% of their stimulus payments on stocks, leading the German investment bank to state that “a large part of the upcoming US economic reviews” done will likely find its way into stocks. “
Meanwhile, 18- to 24-year-olds who participated in the survey planned to use 40% of all stimulus checks on stocks, and 35- to 54-year-olds who planned to do 37% of their checks on stock market investments. The surveyed over 55-year-olds stated that only 16% invested in stocks.
The online survey, conducted by German strategist Parag Thatte and published late last month, found that respondents plan to invest a large portion (37%) of all impending stimuli directly in stocks, which is a significant inflow into the market of $ 170 billion.
The overall sample was almost equally represented as those under 34 (41%) and 34-54 (37%) and a slightly smaller proportion of the over 55-year-olds, according to Deutsche Bank. In terms of income distribution, the largest group ranged from $ 50,000 to $ 100,000 (34%), which is the US median income of around $ 69,000. Most of the respondents were either employed full-time (59%) or retired (12%).
Previous Payments
The poll found that previous stimulus payments issued in recent months to stimulate the US economy amid the coronavirus pandemic “have been widely reported as being used to invest in stocks.”
A large majority (72%) of respondents stated that they had received a stimulus check, and more than half (53%) stated that they had invested part of the stimulus money in the stock market. According to the study, younger people were much more likely to invest in stocks with the payments.
While analysts found that these checks still account for a small fraction of the total funds invested in the market, they predicted a change with the next series of payments. “In the future, however, respondents plan to invest a large portion (37%) of all upcoming stimulus checks directly in stocks, which could represent a significant inflow,” the bank said.
“Aggressive Cohort”
New retail investors are seen as the main driver of a rally in US stock markets over the past year that strategists have dubbed the 2020 “retail wave”. The survey found that more than half of all respondents increased their investments in stocks in the past year, with just under half (45%) investing for the first time.
“Behind the recent surge in retail investment is a younger, often re-investing and aggressive cohort that is not afraid to leverage,” said Deutsche Bank strategist Jim Reid and researcher Raj Bhattacharyya in a report that results based on the polls last week.
“Given the stimulus checks currently foreseen in Biden’s plan (prior to the Senate revision) amounting to approximately $ 405 billion, we have a maximum of around $ 150 billion, according to our US poll – Stocks could flow “even though only a small percentage of stimulus-check recipients noted have trading accounts.
“If we estimate this to be around 20% (based on some historical guesswork), that would still yield around $ 30 billion in firepower – and that’s before we talk about possible top-ups to 401,000 plans outside of trading accounts.”
The international markets will closely monitor the progress of the Covid Relief Act in the coming days. The Senate passed the $ 1.9 trillion Economic Facilitation and Incentive Act on Saturday, paving the way for the expansion of unemployment benefits, another round of economic reviews, and support from state and local governments.
The legislation provides for direct payments of up to $ 1,400 to most Americans, a weekly increase in unemployment benefits of $ 300 through September, and an extension of the child tax credit for one year. The Democratic-controlled House will pass the bill later this week, and President Joe Biden is expected to put it into bill before the unemployment benefits programs expire on March 14th.
The investing issue for retail investors has also been seen as a cause of the recent volatility in some of the US stocks that are beloved. Some investors have used the social media platform Reddit to coordinate trading of certain names and raise the prices of the leading companies leading to huge losses for some hedge funds that had bet against them.
– CNBC’s Jacob Pramuk contributed to this story.
