US President Joe Biden’s US$1.9 trillion stimulus is to start flooding into the US economy soon, and some analysts have said much of that money might end up invested in stocks or bitcoin.
Over the weekend, the US government began sending the US$1,400 direct payments that are to go to nearly everyone in the US.
About US$400 billion in payments are to flow directly to households, going to individuals earning less than US$75,000 a year or married couples making up to US$150,000, as well as their children.
The direct payments amount to US$5,600 — tax free — for a typical family of four, funds officials hope will boost the US economy.
However, a majority of Americans have said that rather than spend, they would use the money to pay off debts, add to savings or to invest, according to one survey by Bank of America Corp, which interviewed 3,000 people.
The bank found that 30 percent would use the money to repay their debt, 25 percent would save it and 9 percent would invest.
Those funds would “stay within the financial system and don’t create demand for goods and services in the real economy,” the report found.
With only 36 percent saying they intend to spend the checks, “it’s not clear who will be doing all the sustained, voracious consumption markets now are pricing in,” it said.
Major stock indices hit new records two days in a row after Biden signed the stimulus measure into law last week, as investors are betting the rush of funds would spur a rapid recovery of the world’s largest economy.
Mizuho Securities Co found that about 10 percent of the stimulus, or about US$40 billion, would be invested in equities or in cryptocurrency such as bitcoin.
A survey of 235 people making less than US$150,000 found that 35 to 40 percent of respondents said they would invest part of their stimulus checks in stocks and cryptocurrency.
Sixty-one percent of those investors intend to buy bitcoin, said Dan Dolev, one of the leaders of the Mizuho study.
“We were very surprised” that bitcoin “is a bigger investment vehicle than stocks,” he said on CNBC.
Bitcoin on Saturday reached US$60,000, an all-time high.
Another survey of 430 people by Deutsche Bank AG found that “survey respondents plan to put a large chunk [37 percent] of any forthcoming stimulus directly into equities,” which it called a sizeable inflow into the stock market.
In two prior rounds of stimulus checks last year as the COVID-19 pandemic brought the economy to a screeching halt, only about 8 percent of the funds went into stocks, the bank said.
The survey showed that young people, aged 25 to 34, account for the biggest share of people planning to play the markets with their stimulus money, followed by those aged 35 to 44.
Goldman Sachs Group Inc estimated that with the Biden plan, “households will represent the largest source of demand for US stocks in 2021.”
Goldman Sachs economist David Kostin said the bank estimates household demand for equities this year would jump to US$350 billion from US$100 billion, “which reflects faster economic growth and higher interest rates than we had assumed previously, additional stimulus payments to individuals, and increased retail activity in early 2021.”
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