POLAND – 2021/02/19: In this photo illustration a Reddit logo seen displayed on a smartphone with … [+]
President Biden signed the third stimulus package amounting to $1.9 trillion yesterday. Many Americans will get their $1,400 stimulus checks in the coming weeks, and the U.S. stock market could be a lucrative (but risky) place for them to invest, given the wild swings we have seen in meme stocks.
(Photo by Alex Wong/Getty Images)
There is no doubt that retail traders have been enormously active since the coronavirus pandemic. If the stimulus check money finds its way to the stock market, one thing is quite certain: The S&P 500 stock index, the Dow Jones Industrial Average and the Nasdaq Composite Index may post new record highs. The stock market will not worry about inflation or rising bond yields as this new money is going to bring a fighting spirit to retail traders.
There are speculations that the third round of stimulus checks is going to find its way into the stock market. Banks have already started to estimate how much of that money could be going towards the stock market. The speculations are that we could see approximately 9% to 10% of the total stimulus money going towards stocks. To put this into perspective, we could see anywhere between $150 billion to $190 billion cash pumped into the U.S. stock market.
According to a Deutsche Bank survey of more than 400 investors, retail investors aged between 25 and 34 could be putting 50% off their stimulus check payments into the stock market, Bloomberg reported. The bank forecasts that the total amount of money that could be going to the stock market is $150 billion.
One of the Wall Street giants, JP Morgan, echoes that forecast. It believes social platforms such as Reddit’s forum Wallstreetbets and Stockwits can again light up the stock market over the coming weeks.
Retail investors are likely to flock towards meme stocks with their stimulus money, as they are more likely to take on risk for a potentially big reward.
Meme stock and movie theater operator AMC is trending heavily on Reddit’s forum Wallstreetbets. AMC shares surged yesterday by over 9%, mainly due to strong earnings and positive vaccination updates; it is likely that retail stock traders may continue to bet heavily on this stock with stimulus checks in hand.
Reddit traders are also paying close attention to Cathie Wood, CEO and CIO of ARK Investment Management LLC PZN -1.1%, ETFs (ARKK & ARKW). RBLX, Roblox Corp, listed their stock yesterday, with an IPO price of $45. Cathie Wood, whom many retail traders are now following, has bought this stock. Since Roblox’s IPO, the stock price has been rising, and yesterday, it hit a high of $76.
Some of the stocks that are mentioned on the WallStreetbets are part of the ARK Investment’s portfolios. Here is a list of the top 10 stocks that are trending on Wallstreetbets:
For the last few weeks, concerns over soaring inflation and rising bond yields have been surfacing among traders. But President Joe Biden’s signature on the $1.9 trillion stimulus package yesterday means that many Americans will soon get their $1,400 stimulus checks—pumping up to $190 billion into the market.
Retail traders are likely to invest into the U.S. stock market with their fresh capital, and this could fade all the qualms around inflation and bond yields. Thus, stock indices may reach their new all-time highs in the coming weeks.
I was awarded a national award (Young Irish Broker) in 2010. I have worked with Bank of America in equity trading and with Bank of New York in hedge fund trading, I have