Many Americans used part of their coronavirus stimulus check to trade stocks
The U.S. government passed the biggest stimulus bill in our country’s history to allow people to continue paying their bills during forced economic shutdowns due to the coronavirus.
Consumers, in turn, have used much of this money to speculate in the stock market.
According to software and data aggregation company Envestnet Yodlee, trading in securities was one of the most common uses of government stimulus checks in almost every income bracket. For many consumers, commerce was the second or third most common use of funds, behind increased savings and cash withdrawals, the data showed.
Yodlee followed the spending habits of Americans from early March and found that behaviors diverged around mid-April – when the checks were sent – between those who received the stimulus and those who did not. . People who received a check increased their spending by 81% from the previous week, and data shows some of the spending was spent on buying stocks.
People earning between $ 35,000 and $ 75,000 a year increased stock transactions 90% more than the week before after receiving their stimulus check, the data showed. Americans earning $ 100,000 to $ 150,000 per year increased their trading by 82%, and those earnings above $ 150,000 were traded about 50% more often. “Securities trading” includes buying and selling stocks, ETFs or moving a 401k.
Yodlee’s data is based on wire transfers from 2.5 million Americans who received checks.
“There is clearly a correlation between Covid and re-engaging people with their money,” Bill Parsons, group president, Data Analytics at Envestnet Yodlee, told CNBC.
“Securities trading has seen a significant increase on a week-to-week basis and I suspect that this is in part due to the big changes in the market,” Parsons added.
Under the Trump administration’s $ 2.2 trillion CARES Act in response to the economic fallout from the coronavirus, the government sent $ 1,200 to people with annual incomes below $ 75,000 and $ 2,400 to couples married couples jointly filing taxes and earning less than $ 150,000, according to the IRS.
“There is no doubt that Covid has made people engage much more actively with their money, whether they are saving more actively or actively swapping positions to new positions or engaging with their advisor,” Parsons said. “It created all kinds of dialogues about managing your money.”
Consumers also spent the money on bills, rent and home improvement. Overall, the increase in spending shows stimulus controls were needed and used, Parsons said.
Brokerage accounts explode
The coronavirus rout brought a plentiful supply of new accounts to online brokers in the first quarter, especially young investors. The exact reasons for this surge in interest are unclear. Most analysts attribute this to the lure of the market’s comeback, but it seems that stimulus money at least played a role.
New accounts at most of the major online brokers – Charles Schwab, TD Ameritrade, Etrade, Interactive Brokers and Robinhood – have also likely been bolstered by a recent move to zero commission and split trading.
Schwab posted “monumental volumes” with a record 609,000 new accounts in the first quarter, and millennial-favorite stock trading app Robinhood saw its daily trades increase 300% in March from year to year. other. Robinhood also told CNBC that “more than half” of its clients are first-time investors.
Covid provokes conversations between family members and family members with their advisers about what to do with their money and saw it in the data. As Covid has landed across the country, these discussions become very real and people are taking action, ”Parsons added.
Return to the market
The large influx of new market participants demonstrates that Americans were and are hoping to buy the downside and participate in the comeback.
The longest bull market in history has ended due to the economic calamity of the Covid-19 pandemic. Stocks turned into a bear market as the government ordered the economy shut down, leaving more than 38 million Americans unemployed.
However, the markets rose in hopes of a vaccine and the reopening of the economy.
The Dow Jones Industrial Average and S&P 500 are up nearly 35% from their 52-week low in March. The highly technological Nasdaq Composite has grown by over 40% since then.
“This will persist as long as the covid makes the headlines,” Parsons said.
– with reports from CNBC Nate rattner.
To subscribe to CNBC PRO for exclusive news and analysis, and live business day programming from around the world.