Stimulus Checks Headed for the Stock Market

With the next round of stimulus checks, worth $1,400, ready to be delivered, investors in the US stock market may get a good amount of money soon.

A survey by Deutsche Bank revealed that about a total of 37% of Main Street investors are looking to put a large part of their stimulus check into equities. Some of these small but mighty investors may be a part of the Reddit community. They’ve become infamous in recent months by creating volatility in heavily shorted stocks, such as Bed Bath & Beyond Inc., GameStop Corp., Koss Corp., AMC Entertainment Holdings Inc., and Rocket Companies Inc. Social media platforms, such as Reddit’s WallStreetBets, fueled the interest in these companies.

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The Deutsche Bank survey also found that most of these new traders are below 34 years of age, with around 61% between 18 and 24 years. These respondents consider social media as the most important source of information. Earlier this year, due to the power of these groups, popular trading app Robinhood had to abruptly restrict trading in heavily shorted stocks. The move wreaked havoc on the stock market on January 27 and pushed total composite trading volume on the New York Stock Exchange, NYSE American, NYSE Arca, and NASDAQ to the highest levels since May 2019.

Online brokers, including Interactive Brokers, E*Trade (owned by Morgan Stanley), and TD Ameritrade (owned by Charles Schwab), have been witnessing a surge in daily average trades. Retail traders, who are growing in number, have partly supported the S&P 500, helping it go up 73% since the pandemic-induced low on March 23, 2020. About this, the Deutsche Bank said, “We view surging exposure by new retail investors in the US as having been a key driver of the speed, duration, and composition of the equity market rally since the March bottom.”

This may work well for future gains. Chris Robinson of TJM Institutional Services believes that cash, together with the latest round of stimulus checks and perhaps more COVID-19 relief packages in the future, will help keep stocks going.