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A survey by Deutsche Bank gave an insight into how much cash can come from US stimulus checks in the stock market.
The responses to the survey showed that half of 25- to 34-year-olds plan to spend 50% of their stimulus payments on equities, prompting the German investment bank to declare that a large amount of upcoming US stimulus checks are likely to cost them shares. “
Meanwhile, 18- to 24-year-olds involved in the survey planned to use 40% of any stimulus checks on equities, and 35- to 54-year-olds surveyed plan to spend 37% of their checks on investments in equities to use the stock market. According to the more than 55-year-olds, they only invested 16% in equities.
Overall, the online survey among 430 retail investors found that respondents plan to place a large portion (37%) of any upcoming stimulus directly in equities, which could be a significant $ 170 billion market inflow, Deutsche Bank estimate.
The report, written by Deutsche Bank strategist Jim Reid and research fellow Raj Bhattacharyya, builds on a survey led by Deutsche strategist Parag Thatte, published late last month, and focuses on a growing trend of younger people do retail investments.
Deutsche Bank said the overall sample was almost equal to those under 34 (41%) and 34-54 (37%) and a slightly smaller proportion of those over 55 years of age. In terms of revenue distribution, the largest group was between $ 50,000 and $ 100,000 (34%), which corresponds to the US median income of about $ 69,000. Most respondents were either full-time (59%) or retired (12%).
The survey found that previous stimulus payments have been handed out in recent months in an effort to get the US economy going amid the coronavirus pandemic, “is widely reported to be used to invest in stocks.”
An overwhelming majority (72%) of respondents reported getting a stimulus test and more than half (53%) said they invest a portion of the stimulus money in the stock market. Younger people are much more likely to invest in stocks using the payments, the research reads.
While the analysts noted that these checks were still a small part of the total funds in the market, they predicted a change with the next number of payments. “In future, however, respondents plan to place a large portion (37%) of the upcoming stimulus checks directly in equities, which could represent a significant inflow,” the bank said.
New retail investors are seen as a major driver for a boom in the U.S. stock market over the past year, described by strategists as the ‘retail wave’ in 2020. The survey found that more than half of all respondents in the past year increased their investments in equities, with just under half (45%) investing for the first time.
“Behind the recent increase in retail investment is a younger, often newly-invested and aggressive group that is not afraid to use leverage,” Reid and Bhattacharyya said.
“Given stimulus tests are currently provided in Biden’s plan (before the Senate review) at about $ 405 billion, which gives us a maximum of about $ 150 billion that could go on U.S. stocks based on our survey,” although they noted that only a portion of stimulus check recipients have trading accounts.
“If we estimate it at about 20% (based on historical assumptions), it will still yield about $ 30 billion in firepower – and that’s before we talk about possible boost of 401,000 plans outside of trading accounts.”
In the coming days, international markets will closely monitor the progress of the Covid assistance bill. The Senate has the $ 1.9 billion in economic relief and incentives bill on Saturday, paving the way for expanding unemployment benefits, another round of stimulus controls, and aid to state and local governments.
The legislation includes direct payments of up to $ 1,400 to most Americans, a $ 300-a-week boost to unemployment benefits in September and a one-year extension of the child tax credit. The Democratic-controlled House will pass the bill later this week and President Joe Biden is expected to sign it into law before the March 14 unemployment benefits program expires.
The retail investment theme has also been seen as a reason for the recent volatility of some less beloved stocks in the US. Some investors have used the social media platform Reddit to coordinate trading in certain names, which has increased the prices of the leading companies. to huge losses for some hedge funds that bet against it.
– Jacob Pramuk of OilGasJobz contributed reporting to this story.