According to a survey by Germans, young people want to spend almost half of their stimulus checks on stocks
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 survey responses showed that half of 25 to 34 year olds plan to spend 50% of their stimulus checks on stocks, leading the German investment bank to state that “a large portion of the upcoming US stimulus checks are likely will find their way. ” in stocks. “
Meanwhile, 18- to 24-year-olds who participated in the survey planned to do 40% of all stimulus tests on stocks, and 35- to 54-year-olds who wanted to do 37% of their checks on stock market investments. The surveyed over 55-year-olds stated that only 16% invested in stocks.
Overall, the online survey of 430 retail investors found that respondents plan to invest a large portion (37%) of all upcoming incentives directly in stocks, which Deutsche Bank estimates represents a significant inflow of $ 170 billion into the market could.
Written by Deutsche Bank strategist Jim Reid and research associate Raj Bhattacharyya and first published late last month, the report focused on a growing trend among younger people to invest in retail investments.
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%).
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 said they had received a stimulus payment, and more than half (53%) said 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 these checks still accounted for a small fraction of the total funds invested in the market, they forecast 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.
New retail investors are seen as the main driver of a rally in US equity 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,” noted Reid and Bhattacharyya.
“Given that Biden’s plan (prior to the Senate revision) currently includes around $ 405 billion in stimulus checks, this gives a maximum of around $ 150 billion, according to our survey US stocks could flow “although only a portion of recipients of stimulus checks 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 follow the progress of the Covid Relief Act in the coming days. The Senate passed a $ 1.9 trillion economic relief and incentive bill on Saturday that paved the way for an increase in unemployment benefits, another round of economic reviews and aid to state and local governments.
The law provides for direct payments of up to $ 1,400 to most Americans, a $ 300 increase in unemployment benefits weekly through September, and an extension of the child tax credit for one year. The Democratically controlled house is set to pass the bill later this week, and President Joe Biden is expected to sign it before the unemployment benefits programs expire on March 14th.
The retail investment theme has also been seen as a cause of the recent volatility in some of the less popular stocks in the United States. Some investors have used the social media platform Reddit to coordinate trading in certain stocks and raise the prices of these companies, which has resulted in huge losses for some hedge funds that had bet against them.
– CNBC’s Jacob Pramuk contributed to this story.