A new round of stimulus checks could pump $170 billion into US stocks via retail investors, Deutsche Bank says

• Retail investors could pump around $170 billion of any upcoming stimulus checks into stocks, Deutsche Bank said.
• The lender found around half of retail investors who had received stimulus cash had bought stocks with it.
• Deutsche said a surge in amateur investing has been "a key factor in driving the equity market rally" since March 2020.

Another round of stimulus checks could pump $170 billion into the US stock market, according to a Deutsche Bank survey that showed amateur investors have been using stimulus money to invest in shares.

The survey of retail investors found that just over half of respondents who had received a stimulus check during the coronavirus crisis had used some of the money to buy stocks.

And respondents said they plan to put close to 40% of any upcoming stimulus money into stocks. That means that, if around $465 billion is given out as part of a $1.9 trillion package as planned, roughly $170bn would find its way into stocks, Deutsche Bank strategist Parag Thatte calculated.

Deutsche said it believes a surge in amateur investing has been "a key factor in driving the equity market rally" since stocks crashed when COVID-19 took hold last spring.

Amateur investors and day traders shook Wall Street at the end of January when they used their newfound power over markets to drive up shares in video-game store GameStop, hitting hedge funds who had bet against the stock.

In Deutsche's survey, 42% of retail investors said a good return on investments was driving them to buy stocks.

The other top reasons were having more cash to invest (35%); having more time to research and trade (38%); the ease of trading from home (35%); and commission-free trades (28%).

Although respondents said they plan to put a big chunk of any upcoming stimulus into stocks, the survey found only 8% of overall investments seem to have come from stimulus checks so far.

The vast majority of funds were sourced from existing cash savings (34%), rotating investments out of other asset classes (11%) or by reducing spending (20%), Deutsche said.

"A key question is if the surge in equity investment will sustain as the economy reopens," Thatte and fellow strategists Srineel Jalagani and Binky Chadha wrote.

"For their part, retail investors say they expect to maintain or add to their stock holdings even as the economy reopens, with younger respondents saying they are even more likely to do so."