A pedestrian wearing a protective mask walks past the flagship store of Macy’s Inc. on Tuesday, November 17, 2020. in the Herald Square neighborhood of New York, USA.
Victor J. Blue | Bloomberg | Getty Images
On any given day, the line outside the Gucci boutique at the Mall in Short Hills, NJ, winds around the second floor almost to the escalator.
Customers waiting to enter include the typical Gucci clientele and new customers who have just gotten $ 1,400 richer.
“Stimulus has certainly been beneficial,” said Oliver Chen, retail analyst at Cowen & Co.
As the economy picks up and the market hits new highs, ambitious purchases like handbags, belts and shoes – especially those with large, recognizable logos – are gaining momentum, Chen said, fueled by the latest round of direct payments by Congress and President. Joe Biden through the American bailout.
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Like the first two direct controls, this incentive is intended as a stopgap solution for those hard hit by the coronavirus crisis.
For the most part, checks are still used that way.
According to the Federal Reserve Bank of New York, about 25% of households spend this third round of payments. Specifically, 13% of the last stimulus check is expected to go to food and other essential items and only 8% to non-essential items. The remainder will be spent on debt repayment and savings.
But for many who have already been able to pay off debt and save more during the pandemic, “the stimulus check feels like free money,” said Andrea Woroch, consumer savings expert.
“People tend to go out and pass themselves off, almost as a reward for being locked up for the past year,” she said.
What Woroch calls “ revenge spending ” is perfectly okay, as long as there’s room for it in your budget (which could mean scrapping something else).
However, Woroch generally does not recommend saving for one big ticket item. She says building wealth is a better option.
CNBC’s Jim Cramer advised that after people pay their bills, put most of the money into an S&P 500 index fund. In fact, many young retail investors are already planning to spend some of their stimulus payments on stocks.
Here are some numbers that show why you should consider this too.
Now hovering around an all-time high, the S&P 500 has delivered an average annual return of about 14% over the past 10 years.
Suppose you invested $ 1,400 in the S&P 500 in 2010, your investment would have grown to more than $ 6,200 by the end of March 2021, according to Morningstar Direct data.
Go back even further and the increase is astounding: A $ 1,400 investment in the S&P in 1980 would now be worth more than $ 150,000, Morningstar discovered.