How the young people want to issue incentive checks: Deutsche Bank – Community News
Stimulus Check

How the young people want to issue incentive checks: Deutsche Bank

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

Robyn Beck | AFP | Getty Images

A Deutsche Bank study could give an idea of ​​how much money from US stimulus checks will end up in the stock market.

An online survey of 430 investors who use online brokerage platforms found that half of respondents between the ages of 25 and 34 plan to spend 50% of their incentive payments on stocks.

That led the German investment bank to state that “a large portion of the upcoming US stimulus checks will likely find their way into equities,” although Deutsche Bank acknowledged elsewhere in the report that, contrary to respondents the bank polled, most of the U.S. recipients of incentive checks do not have trading accounts.

Meanwhile, the 18- to 24-year-olds involved in the study planned to use 40% of all equity stimulus checks, and the 35- to 54-year-olds surveyed planned to use 37% of their stock market investment checks. . The over 55s surveyed said they would only invest 16% in stocks.

The online survey, led by Deutsche strategist Parag Thatte and published late last month, found that respondents plan to put a large share (37%) of any impending stimulus directly into stocks, generating significant inflows into the market of $ 170 billion could mean.

The overall sample had a nearly equal representation of those under 34 (41%) and 34-54 (37%) and a slightly smaller proportion of those over 55, Deutsche Bank noted. In terms of income distribution, the largest group was in the $50,000 to $100,000 (34%), equivalent to the US median income of approximately $69,000. Most respondents were either full-time (59%) or retired (12%).

Past payments

The investigation found that past stimulus payments, handed out in recent months in an effort to jump-start the US economy amid the coronavirus pandemic, “were widely reported as being used to invest in stocks”.

A vast majority (72%) of respondents said they received a stimulus check and more than half (53%) said they invested some of the stimulus money in the stock market. Younger people were much more likely to invest in stocks using the payments, the study found.

While the analysts noted that these checks still made up a small fraction of the total amount invested in the market, they predicted a change with the next batch of payments. “In the future, however, respondents plan to put a large proportion (37%) of all upcoming stimulus measures directly into equities, which could mean significant inflows,” the bank said.

‘Aggressive cohort’

New retail investors over the past year have been seen as a key driver of a rally in the US stock market, described by strategists as the ‘retail wave’ of 2020. The survey found that more than half of all respondents had reduced their investments in equities over the past year. increased, with just under half (45%) investing for the first time.

“Behind the recent surge in retail investment is a younger, often new-to-invest and aggressive cohort that isn’t afraid to leverage,” Deutsche Bank strategists Jim Reid and research associate Raj Bhattacharyya said in a report last week that built on the results of the investigation. Results.

“Given the stimulus packages currently valued in Biden’s plan at about $405 billion (before Senate revisions), that gives us a cap of about $150 billion that could go into US stocks based on our research.” although they noted that only a small fraction of stimulus check recipients have trading accounts.

“If we estimate this to be about 20% (based on some historical assumptions), that would still bring in about $30 billion in firepower — and that’s before we talk about potential boosts for 401,000 plans outside of trading accounts.”

International markets will closely monitor the progress of the Covid relief bill in the coming days. The Senate on Saturday passed the $1.9 trillion economic relief and stimulus bill, paving the way for unemployment benefit expansions, a new round of stimulus measures and aid to state and local governments.

The legislation includes direct payments of up to $1,400 to most Americans, a $300 weekly unemployment benefit increase in September and a one-year extension of the child tax credit. The Democrat-controlled House will approve the bill later this week, and President Joe Biden is expected to sign it before unemployment relief programs expire on March 14.

The retail investment theme is also seen as a reason for the recent volatility of some of the less favored stocks in the US. Some investors have used the social media platform Reddit to coordinate trades in certain names, pushing the prices of those companies up, leading to huge losses for some hedge funds that had bet against them.

— CNBC’s Jacob Pramuk contributed to this story.

— Correction: This story has been updated to clarify that the young survey respondents were all users of online brokerage platforms and therefore are not representative of the young US population in general.