US stimulus cheques could end up in stock markets, Bitcoin

WASHINGTON (AFP) – United States (US) President Joe Biden’s USD1.9 trillion stimulus will start flooding into the US economy soon, and some analysts say much of that money could end up invested in stocks or even Bitcoin.

Over the weekend, the government began sending the USD1,400 direct payments that will go to nearly everyone in the US.

About USD400 billion in payments will flow directly to households, going to individuals earning less than USD75,000 a year or married couples making up to USD150,000, as well as their children.

And that does not count child tax credits or unemployment benefits in the massive package, which also includes funds to contain COVID-19, accelerate vaccinations, help reopen schools and aid businesses and state and local governments.

The direct payments amount to USD5,600 – tax free – for a typical family of four, funds officials hope will boost the US economy.

But the majority of Americans say that rather than spend, they will use the money to pay off debts, add to savings or to invest, according to one survey by Bank of America, which interviewed 3,000 people.

Blank cheque at the Philadelphia Regional Financial Center. PHOTO: AP

The bank found that 30 per cent will use the money to repay their debt, 25 per cent will save it and nine per cent will invest.

Those funds will “stay within the financial system and don’t create demand for goods and services in the real economy,” the report found.

With only 36 per cent saying they intend to spend these cheques, “it’s not clear who will be doing all the sustained, voracious consumption markets now are pricing in”.

Major stock indices have hit new records two days in a row after Biden signed the stimulus measure into law last week, as investors are betting the rush of funds will spur a rapid recovery of the world’s largest economy.

Mizuho Securities found that about 10 per cent of the stimulus, or about USD40 billion, will be invested in equities or in cryptocurrency such as Bitcoin.

A survey of 235 people making less than USD150,000 found that 35 to 40 per cent of respondents said they would invest part of their stimulus cheques in stocks and cryptocurrency.

And 61 per cent of these investors intend to buy Bitcoin, said Dan Dolev, one of the leaders of the Mizuho study.

“We were very surprised” that Bitcoin “is a bigger investment vehicle than stocks”, he said on CNBC.

The cryptocurrency hit an all-time high on Saturday at USD60,000.

Another survey of 430 people by Deutsche Bank found that “survey respondents plan to put a large chunk (37 per cent) of any forthcoming stimulus directly into equities”, which it called “a sizable inflow” into the stock market.

In two prior rounds of stimulus cheques in 2020 as the coronavirus pandemic brought the economy to a screeching halt, only about eight per cent of the funds went into stocks, the bank said.