A sizeable number of young investors are planning to invest some of the $1,400 stimulus check in traditional assets like stock and cryptocurrencies like Bitcoin. President Joe Biden signed the stimulus package that is worth $1.9 billion into law last week.
The stock market has been performing well lately due to a number of factors like the hope of the broader reopening of the economy, the up to speed rollout of the COVID-19 vaccine across the globe, and the stimulus package recently passed that is expected to boost consumer spending.
On the other side, Bitcoin, which surpassed the $50,000 mark last month but dipped shortly after, has shot up again due to increased demand and trust by institutional investors, and it is currently trading at $58,034.50 per one Bitcoin.
It is no surprise that young investors look at the stock market and Bitcoin as viable and lucrative forms of investment.
These findings are backed by a poll conducted by Yahoo Finance and Harry Investment which finds that 9% of people expecting to get the $1,400 stimulus check plan to invest some of the money in stocks, while 7% plan to buy cryptocurrencies such as bitcoin.
In particular, young investors are more willing to bet on these two investment vehicles that the older folk. Among 18 to 24-year-olds, 19% plan to put stimulus money into traditional investments, and 10% plan to buy cryptocurrencies with the money.
Millennials aged 25 to 40 that have this kind of plan are even higher as 20% of them The number drops to single digits for those above 40 who are planning to take on this investment plan. A total of 1,052 U.S. adults participated in this Yahoo Finance-Harris poll conducted between March 12 – 15, 2021.
Stocks and Bitcoin aside, many Americans still need stimulus money to pay for basics such as food and rent. Overall, the poll found that 41% of respondents in the survey plan to use their stimulus checks to cover every-day necessities.
Another 40% plan to save the money, with 36% planning to pay down debt and 16% spending the money on non-essential things like gadgets and entertainment. The survey allowed multiple responses, and some people will split what they do with the money.
In the recently passed stimulus package of $1.9 trillion, stimulus checks will take $400 billion of that and if 10% of it goes to the stock market, that would be $40 billion in extra demand for financial assets. That could not be enough to move the overall market, but its effect could be felt in lightly capitalized assets.
Some traders on social-media sites such as Reddit say they have used some of the stimulus money to buy trendy “meme stocks” such as GameStop and AMC. Other surveys by Germany investment bank Deutsche Bank, and Japanese investment banking and securities firm Mizuho Securities also found that some stimulus recipients are putting the money into speculative investments.
This is not the first time people have spent part of their stimulus checks in the financial markets. The same survey found that a similar portion of respondents spent the $1,200 checks received last spring and the $600 checks passed by the Trump administration in January on stocks, cryptocurrencies and other investments. Similar portions also said they needed the money for necessities like food, rent, and financing their debts.
The findings of this poll should not make you think that young Millenials and Gen Zers are betting money in stocks and crypto because they feel they can afford to lose it. No. Actually, 29% of respondents say they are financially worse off than before the pandemic crisis hit last year.
40% of 18 to 24-year-olds say they are in a worse financial position, and 32% of 24- to 40-year-olds feel the same and rightly so. Business shutdowns and job losses that happened due to the COVID-19 pandemic surely hit younger workers harder, since they are less likely to have assets such as a house or savings to fall back on.
Some critics feel the latest stimulus plan, which Democrats passed without any Republican support, is too expensive and spends too much money on non-emergency measures. The Yahoo Finance–Harris poll supports that, to some extent.
62% of those expecting a fresh stimulus payment say they need it to pay for necessities, but 31% say they do not need it at all and 7% are unsure. Some economists think it is better to target relief during a downturn at the unemployed and others with an acute need, instead of covering most of the population whether they need it or not.
Democrats who drafted and voted for the latest $1.9 trillion stimulus bill intended to provide funds Americans can use in a variety of ways. But speculating on stocks and cryptocurrencies wasn’t one of them.
Some of those speculators will turn a profit, but others will end up blowing the money, as happens with all short-term gambling. Those stimulus checks will end up in somebody else’s pocket, someone who would not even need it per se.