A pedestrian wearing a protective mask walks past the Macy’s Inc. flagship store in the Herald Square area of New York, USA on Tuesday, November 17, 2020.
Victor J. Blue | Bloomberg | Getty Images
On a given day, the line winds outside the Gucci boutique at the Mall at Short Hills in NJ around the second floor all the way to the escalator.
Among the buyers waiting to enter are Gucci’s typical customers as well as new customers who have just become $ 1400 richer.
“Stimulus was definitely beneficial,” said Cowen & Co. retail analyst Oliver Chen.
As the economy picks up and the market peaks, aspiration purchases such as handbags, belts and shoes – especially those with large, recognizable logos – are gaining momentum, Chen said, fueled by the latest round direct payments made by Congress and President Joe Biden through the U.S. bailout plan.
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Like the first two direct investigations, this stimulus is intended to provide a stopgap for those hard hit by the coronavirus crisis.
For the most part, checks are still used that way.
About 25% of households spend this third round on payments, according to the Federal Reserve Bank of New York. Specifically, 13% of the latest stimulus test is expected to go to food and other essential items and only 8% to non-essential items. The rest will be used for debt repayment and savings.
But for many who have already been able to pay off debt and save more through the whole pandemic, ‘the stimulus test feels like free money,’ said Andrea Woroch, an expert consumer saver.
“People have this urge to flush themselves out, almost as a reward for being locked up for the past year,” she said.
What Woroch calls ‘revenge spending’ is perfectly OK, as long as there is room for it in your budget (which could mean cutting out something else).
However, Woroch usually recommends bragging about one big ticket item. She says building wealth is a better option.
According to CNBC’s Jim Cramer, after paying their bills, they should put the most money into an S&P 500 index fund. In fact, many young retail investors are already planning a portion of their stimulus payments to equities.
Here are some numbers that show why you should consider it as well.
The S&P 500, which is now hovering near a record high, has achieved an annual average return of around 14% over the past ten years.
Assuming you invested $ 1400 in the S&P 500 in 2010, your investment would have grown to more than $ 6,200 by March 2021, according to information provided by Morningstar Direct.
Going even further and the increase is astounding: A $ 1,400 investment in the S&P in 1980 would now be worth more than $ 150,000, Morningstar found.