Could Wall Street Get a Boost from Stimulus Checks on the Way?
When President Joe Biden signed the $1.9 trillion American Rescue Plan into law on Thursday, the Dow Jones Industrial Average, S&P 500 and Nasdaq all saw substantial gains. Wall Street remains optimistic, with the Dow hovering near an all-time high 32,637 Friday morning. The S&P 500 index also rose to a record high Thursday.
Analysts say that we could be looking at an extended market rally when $1,400 stimulus checks start reaching the bank accounts of many Americans, potentially as soon as this weekend. CNN Business notes several factors that could drive a bullish market through 2021.
Vaccine + Stimulus Money = Increased Demand for Goods and Services
As Biden’s plan to maintain the pace of delivering two million shots per day unfolds, travel and consumer spending will start to increase as states begin easing restrictions on gatherings and public events. Biden announced intentions to be able to allow “small gatherings” safely by July 4.
CNN Business announced that the added spending for goods and services would “pad corporate earnings,” justifying the high valuations for stocks.
Stimulus Money Could Encourage Retail Investors
Additionally, the market could grow in a more direct way, CNN Business reports. As Americans with adjusted gross income of $75,000 ($150,000 for couples filing jointly) or less receive $1,400 for each person in their household, retail investing could further bolster stocks, CNN Business says.
A Deutsche Bank survey of U.S. users of online broker platforms such as Robinhood intend to spend portions of their stimulus money investing in stocks. Respondents between 25 and 34 years old said they plan to spend 50% of their payment on stocks, while adults under 24 said they plan to invest 40%. Retail investors in the millennial and Gen-X demographic (35 to 54 year olds) plan to put 37% of their stimulus funds into the stock market, CNBC reports.
More from GOBankingRates