A large number of Americans used coronavirus stimulus checks to trade stocks, a new study has revealed.
The study by Envestnet Yodlee tracked how 2.5 million Americans were spending money since the start of the pandemic. During the week in mid-April when most stimulus checks were issued, more than 80% of people who received money increased their spending.
Notably, much of that spending went towards stock trades. Americans earning between $35,000 and $75,000 per year, who were eligible for $1,200 in stimulus payments, increased stock trading activity by 90% compared to early April.
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Those receiving the full stimulus amount weren’t the only ones buying stocks that week. Americans earning between $100,000 and $150,000 annually traded stocks 82% more value in stocks compared to the prior week, while those earning more than $150,000 annually increased trading by 50%.
The increase in trading activity coincided with a boost in the number of brokerage accounts being opened, especially among young Americans. Charles Schwab reported that a record 609,000 new trading accounts were opened in the first quarter of 2020, while Robinhood experienced a 300% year-over-year increase in trading activity in March.
Bill Parsons, chief of data analytics at Envestnet Yodlee, believes the spike in trading is a sign that the pandemic is forcing people to refocus on their finances. “Covid is causing conversations among family members...about what to do with their money,” says Parsons. “These discussions are becoming very real and people are taking action.”
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