Retail Investors Aim to Spend $170 Billion in Stimulus Aid on Stocks, Survey Says

Young Americans receiving a third round of stimulus checks—passed Saturday by the US Senate and awaiting final approval in the House—know just where to spend the money: in the stock market, to the tune of about $170 billion, a survey found.

Retail investors on online brokerages are planning to put about a third, or 37%, of their $1,400 stimulus checks into the equity markets, according to a survey last month from Deutsche Bank. The report reviewed 430 retail investors on online brokerages from Feb. 5-9.

That’s contrary to how they have bought individual stocks in the past. These investors have been using cash savings, not stimulus checks, to make investments. The survey found that, previously, 34% of respondents used cash savings, 20% reduced spending to invest, and 11% transferred funds out of other asset classes. Only 8% of respondents used previous stimulus checks to buy individual stocks.

The finding is in keeping with a growing trend over the past year, in which greater numbers of retailer investors have contributed to frothy stock market valuations. Goldman Sachs reports that the largest source of demand for US stocks this year is expected to come from households.

Younger investors have been bullish about the stock market. The vast majority are confident that public stocks make good investments. Of new retail investors, 68% believe the markets will rally over the next three months and 73% of them think stocks will climb over the next 12 months.

On Monday, investors anticipating the next round in stimulus checks piled into GameStop, which surged 41% to about $200 per share. The video game retailer’s shares have been at the center of a wild volatility involving “meme” stocks this winter, with young retail investors taking their advice from social media.

Retail investors expect to stay optimistic and hold even if the markets drops, the Deutsche Bank survey discovered. But their optimism has its limits. If the markets drop too much and enter correction territory (a loss of greater than 10%), the retail investors newest to the markets would then sell.

Until then, the survey indicated, investors on online brokerages aim to continue to be aggressive, using strategies in leverage and options trading.

Of the several hundred retail investors that responded to Deutsche Bank’s online survey, 41% were under 34 years of age, 37% were 34 to 54, and a smaller share were over 55. Many respondents were employed full-time.