By Lewis Krauskopf
NEW YORK (Reuters) – A portion of President Joe Biden’s coronavirus assistance package is about to hit the stock market and could boost GameStop and other stocks accepted by individual investors on social media forums .
The emergency relief package, which is on track to be signed into law later this week, will provide $ 400 billion in direct payments of $ 1,400 per person, helping individuals earning less than $ 80,000 annually and couples earning less than $ Earn 160,000. The government should be able to deliver checks almost immediately as soon as Congress finalizes the bill and Biden signs it.
“I do think a lot of the stimulus money will end up in the market, and I think it’s a positive catalyst,” said Randy Frederick, vice president of trade and derivatives for Charles Schwab.
A survey by Deutsche Bank among 430 retail investors last month found that, on average, they plan to place 37% of any stimulus checks directly in equities.
At this rate, the amount of the latest package that can go into equities ranges from $ 25 billion, if only traders with online accounts spend money on equities, to as much as $ 150 billion, if all stimulus recipients spend their checks in the market. the same relationship, according to Deutsche Bank strategist Parag Thatte.
U.S. equity funds see an almost record flow of about $ 15 billion a month, “so incremental flows due to stimulus payments can be significant, especially if deployed quickly,” Thatte said in an email.
Despite a recent decline in equities, including a 10% correction in the technology Nasdaq, the benchmark S&P 500 is near record highs and climbed more than 70% from lows in March 2020.
If stimulus payments do flow to the stock market, it could go out of proportion to GameStop or to other stocks that are favorable to retail investors working on social media platforms.
Frederick said that younger adults tend to be at the bottom of income groups, and therefore more likely to receive incentive payments, and that younger investors are more likely to invest in so-called ‘meme stocks’.
Shares of GameStop soared to start the week, following news of the video game’s e-commerce strategy, while other equity-favored stocks on forums like Reddit’s WallStreetBets were also meeting.
There has been some evidence of stimulus excitement among investors on social media platforms. On the popular WallStreetBets forum, an account called “IwantSpaceX” was posted: “Let us IN our Stimmy checks!”
The stimulus payments could boost the interest of individual investors who have already risen, with the COVID-19 pandemic leaving Americans more time in front of their computers or on their smartphones.
Goldman Sachs strategists recently increased their net demand for equities in 2021 from $ 100 billion to $ 350 billion, reflecting faster economic growth and higher interest rates than we previously assumed, additional stimulus payments to individuals and increased retail activity in early 2021 ‘.
“We expect households to be the largest source of equities this year,” Goldman strategists said in a note.
Brokerage TD Ameritrade opened nearly 1.76 million retail accounts during January to September 2020, a record amount for the company for the first nine months of a year.
“People have time, people have interest and now they’re actually starting to understand what it’s investing in,” said JJ Kinahan, chief market strategist at TD Ameritrade. “You really started to see an interest from the individual investor in a way we’ve never seen before.”
(Reporting by Lewis Krauskopf; Editing by Megan Davies and Aurora Ellis)