How young people plan to spend stimulus checks: Deutsche Bank

Students wait in line to vote at a polling station on the campus of the University of California, Irvine.

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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%).

Previous payments

‘Aggressive group’

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.”

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