After President Joe Biden’s stimulus was signed into law late last week, $1,400 stimulus payments began being sent out almost immediately. And just as quick as it comes, people are spending it on wants, needs, and desires--injecting it back into the economy.
And while these payments are not available for everyone yet, particularly those receiving checks through the mail, the benefits are already on full display.
How Are People Spending Their Stimmy?
Looking back at the previous stimulus payments - 52% of people used their stimulus checks to pay off debt, while 28% said they mostly spent it, and 19% said that they mostly saved it. Given that people with higher incomes had a higher propensity to save their checks during the last round of stimulus, we can assume that a larger portion of the payments will be spent this time around due to the income cutoff being lowered.
Breaking down spending further into various categories of spending shows a slightly different story though. A whopping 57.6% of people spent at least part of their stimulus money on food, while utilities and household supplies followed with 44.2% and 35.7%. From there, the debtors took over with paying down debt, rent, vehicle payments, and mortgage all finishing from fourth to seventh.
Where Should I Invest to Profit From the Stimulus Checks?
Markets are forward looking, which means that tomorrow’s events are oftentimes priced into today’s trades. For this reason, a lot of the benefits that are expected to be passed onto the markets in the shape of a price boost have already occurred, and could have occurred weeks ago. But this does not mean that the market has them all covered, for those were the expected spending patterns.
During the budget resolution process, key aspects of the bill changed in order to keep moderate Democrats on-board, and these changes will certainly change the breakdown of the spending.
This means that investors looking to profit from the stimulus boom at this stage in the game are looking for something slightly different than they were a few weeks ago when they were "betting on stimulus."
At this stage, with the expected benefits priced in, investors are looking for two things. First, investors want to identify changes in the Covid outlook that weren’t there before and thus, couldn’t have been priced in. An example of this is increased capacity in Las Vegas.
The second thing that investors will want to look for is stocks that appear to have been underrated by investors leading into the stimulus, or were missed to begin with. These stocks were overlooked once and there is no telling how long it may take for investors to realize that the stock should have been a Stimmy Pick. But the company’s earnings will come and their numbers won’t lie, so if you’re confident in a missed winner, then you can beat the stimulus pricing yet (though it’ll technically be attributed to earnings). An example of this could be a streaming service that everyone thought was dusted after a year of dominating the market. But due to some well-timed content drops and a new show going viral, the stock becomes a winner as more people than expected sign up for the service.
With spending breakdown and a recognition of what to look for at this point in time in mind, investors can look to these areas to find their overlooked stimulus stocks.
The Big-Tippers
With more than half of people spending some amount of their stimulus money on food, there is no question that, come next earnings, that CEOs and upper management alike will be pointing to a boost in spending that came in the middle of March.
Restaurants tend to have pretty low profit margins, which is why it’s possible for them to make this list, but really, it’ll take a lot of surprise for one of them to truly stand out. With that said, restaurant suppliers, like Sysco (SYY) will certainly be in high demand, as well as potentially staffing agencies, like Kelly Services (KELYA) if the stimulus coincides with a lasting increase in people’s willingness to go out during the waning months of the pandemic.
The Weekend Trip
One place that may see an unexpected amount of spending is companies related to travel. Despite TSA travel numbers remaining lower than they were pre-pandemic, they are steadily rising. With Covid cases falling, vaccination rates rising and the weather getting nicer, people may choose to make a trip out of their stimulus either now or in the future.
Because of the planning that typically has to go into trips, this means a lot of companies in these industries may get a small boost right away as people book, but then get an even bigger boost once people actually leave and do their travel. Casinos can be a great example of this because, despite perhaps also acting as your hotel during the trip, the company makes the majority of their money from the casino.
Despite Las Vegas increasing capacity to 50% from 35% - and it being met with swarms of people - perhaps the majority of the stimulus boost will not be found until things are still a bit more normal. Even at the vastly increased demand for Vegas, not everyone can just up and visit on short notice, and even fewer can afford to book an expensive trip before they have the money in hand. This points to a more delayed impact than you’ll see elsewhere in the economy.
The Impulse Buys
Other categories that could do well, especially given the size of the checks is more than double the $600 received from the last round of payments, is impulse spending. This can be new TVs, laptops and other electronics, as well as online gambling, and even increased amounts of in-game purchases in video games.
