How Are You Spending Your Stimulus?

Written by Jennifer Clark
Posted March 24, 2021

The Internal Revenue Service (IRS) says more stimulus payments are expected to hit bank accounts by Wednesday, March 24. There were more than 90 million stimulus payments in the first batch that was sent out. The U.S. Treasury Department said in a press release on Monday:

Today marks the second batch of payments, with additional payments anticipated on a weekly basis going forward. The vast majority of taxpayers receiving EIPs will receive it by direct deposit.

Anyone who doesn’t receive their stimulus payment through direct deposit by March 24 may get their payment as a paper check or a prepaid debit card in the mail. This is the third round of federal stimulus for COVID-19 relief. This round is $1,400 per eligible person plus a $1,400 bonus per dependent. 

Some people truly need the stimulus to pay some of their bills that have been put off or to put food on the table. Others don’t need it as much but it's still a welcome extra income to spend on something they haven’t been able to buy because they don’t tend to have any extra income.

Either way, the $1,400 stimulus payment is expected to boost consumer spending and prevent people from struggling further. Richard Stock, Business Research Group director at the University of Dayton, expects most low- and middle-income households will be spending the stimulus money because they are living paycheck to paycheck. Stock said:

They may spend to get themselves caught back up on their mortgage or rent, they may purchase more food staples, they will start to deal with health care issues they had put off. The bottom line is that all these expenditures that are designed to make the household more economically secure will wind up helping all of us over the long term because of the positive external benefits of the families spending to improve their economic security. 

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Some people are using their stimulus check to buy stocks — something they would have hesitated to do if they didn’t have some kind of extra income. Not to mention a lot of people who were interested in the stock market but were a little intimidated by it have had a little more than a year to learn and watch the stock market and gain more confidence in trading. It was the time to dabble in the stock market, especially if you have ever been intrigued by it. 

While it isn’t advisable to use all of your stimulus money this way, if you have a few hundred to spare, it might not be the worse thing you could do.

According to The New York Times:

Analysts at Deutsche Bank recently estimated that as much as $170 billion from the latest round of stimulus payments could flow into the stock market. They conducted a survey of retail traders in which respondents said they planned to put roughly 40% of any payment they received — or $2 of every $5 — into the stock market. Traders between the ages of 25 and 34 said they expected to put half of their stimulus check into stocks. 

According to Goldman Sachs analysts, a decade before the pandemic, small investors only accounted for about one-tenth of trading activity in the stock market. However, in the past year, they have become responsible for close to one-quarter.

This is an amazing increase because it shows that people are interested in the stock market and trading. This could easily reshape the stock market into an environment where retail investors can thrive — and it’s about time!

Until next time, 

Jennifer Clark
Pro Trader Today
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