It looks like we could have another short-squeeze scenario incoming as young people pledge to invest their stimulus money.
Investing is no longer an old man’s game. It has become far more readily available to younger, more diverse investors, thanks largely to mobile brokerages.
This is exactly why President Biden’s $1.9 trillion stimulus relief plan could be about to shake up Wall Street.
What’s the correlation?
Well, a recent survey by Deutsche Bank has given us some insight into just how people will be spending their ‘stimmies’, and in particular, young investors:
- Roughly 50% of 25- to 34-year-olds plan to spend 50% of their stimulus payments on stocks.
- Roughly 50% of 18 to 24-year-olds planned to use 40% of any stimulus checks on stocks.
On average, 37% of those across all ages surveyed planned on investing, which when applied to the total population receiving stimulus checks, would amount to a sizable inflow into the market of $170 billion.
This shouldn’t be a surprise though as we saw this exact scenario happen last April when younger retail investors pumped declining stocks, helping with the market’s recovery and subsequent rally.
Investors today should be aware that once the checks start rolling in, they can expect continued volatility. There’s no hiding from the fact that more than a quarter of all money changing hands on U.S. exchanges is now coming from retail investors, 45% of whom — according to Deutsche’s survey — only invested for the first time within the past year.
If you’re a young retail investor and want to understand the secrets to true wealth generation, you can check out our free How To Start Investing In Your 20s series.
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