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Americans Plan to Use Stimulus on Stocks

Written by Monica Savaglia
Posted March 16, 2021

A lot of Americans are awaiting their stimulus checks after the final approval of the recent COVID-19 relief bill. On Thursday, March 11, President Joe Biden signed the $1.9 trillion American Rescue Plan into law — a day earlier than he had initially planned. Some Americans were lucky enough to see stimulus checks hit their bank accounts the very next day.

For some, this relief has been a long time coming and much needed to get by. In February, the official number of unemployed Americans was 10.1 million according to the Labor Department. That statistic comes from the monthly jobs report that the Labor Department puts out on the first Friday of each month. It indicated the official unemployment rate was around 6.3% in February. However, the latest data show 18.3 million people were receiving weekly unemployment payments through January 30. 

Millions of Americas need the economic relief provided by the bill, especially those families struggling to get by because one or both providers are out of work. The law includes $1,400 checks for middle and lower-income Americans, extends unemployment insurance through most of the summer, and provides $70 billion to increase vaccine distributions and coronavirus testing. Individuals making up to $75,000 and couples making up to $150,000 per year are eligible to receive a $1,400 check. Americans earning between $75,000 and $80,000 and couples earning between $150,000 and $160,000 will receive some of that money but not the full $1,400 amount. 

For many, these checks will be a massive sigh of relief. For others, they'll be a breath of fresh air — money they don’t necessarily need but extra income they can use toward something they’ve delayed purchasing, which could give a nice boost to the economy. A new report from Deutsche Bank indicates that half of 25- to 34-year-olds surveyed plan to invest 50% of their stimulus checks in the stock market. Other age groups are thinking similarly. 

Deutsche Bank said: 

Going forward, however, survey respondents plan to put a large chunk (37%) of any forthcoming stimulus checks directly into equities, which could represent a sizable inflow.

It appears that new retail investors have been a key driver of the rally in the U.S. stock market over the past year, often described as the “retail wave.” Deutsche Bank’s survey found that more than half of all respondents raised their investments in stocks over the past year, with just under half (45%) investing for the very first time.

In 2021, there has been a lot of stock market interest and excitement from retail investors compared to recent years. Maybe some of these people have more time to read and keep up with the stock market and now are ready to start investing. It appears that more people who have been interested in the stock market, but didn’t necessarily understand it or felt like they were confident enough to trade, are now investing and seeing the benefits of investing. 

A recent survey by Mizuho Securities has also revealed some interesting data: Nearly 2 in 5 Americans expecting to receive stimulus checks anticipate using a portion to invest, with Bitcoin expected to account for 60% of the total invested, which could total nearly $40 billion. 

Goldman Sachs chief U.S. equity strategist David Kosin said:

We expect households will be the largest source of equity demand this year. We raise our household net equity demand forecast to $350 billion from $100 billion, which reflects faster economic growth and higher interest rates than we had assumed previously additional stimulus payments to individuals, and increased retail activity in early 2021.

This round of stimulus checks is expected to increase consumer spending.

Many Americans have been watching their spending. However, with the help of this recent stimulus, they will feel a little bit less worried about their money. The investment research firm CFRA expects a 5.5% bump in U.S. economic output in 2021, which would continue the economic recovery that started in the third quarter of 2020. CFRA also expects economies in every region of the world to rebound. Sam Stovall, the chief investment strategist at CFRA, says that will happen with growth ranging from about 3%–8%. 

This stimulus gives people the chance to take part in an expected good year for stocks. There's a buying opportunity happening now and American retail investors will be able to benefit from it. 

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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