American Consumers Turn to Stock Market amid Pandemic Restrictions

The Conference Board

The Conference Board 

NEW YORK -- Record-high stock valuations—and fewer things to spend on as COVID-19 restrictions enter a second year—are enticing more US consumers to invest discretionary funds in the stock market. In Q4 2020, 20% of consumers surveyed invested in shares of stocks or mutual funds, up from 16% in Q2. By contrast, record-low interest rates have resulted in just 43% of consumers putting money into savings in Q4—down from 49% in Q2.

These findings and more are detailed in US Consumer Dynamics Report: Q4 2020. It is the first in a new quarterly series drawn from The Conference Board® Global Consumer Confidence Survey, fielded online in 67 markets worldwide. Overall, the Q4 survey confirmed that pandemic-related forces—including more time at home, reduced opportunities to spend, and enhanced fiscal support from the government—continue to be the chief factors shaping consumer behavior in the United States.

"The booms and busts of a few unlikely 'meme stocks' have grabbed recent headlines, but the rise of individual investors tells a broader story about spending habits during COVID-19," said Denise Dahlhoff, Senior Researcher at The Conference Board. "Trends like low interest rates and declining debt concerns—alongside below-normal spending on vacations and out-of-home entertainment due to pandemic restrictions—have left a portion of Americans with more disposable income and fewer ways to spend it. Stocks, which continue to yield strong returns, have become an increasingly attractive option for these consumers."

Additional insights from the inaugural US Consumer Dynamics Report are featured below.

The proportion of US consumers spending discretionary money on stocks and home improvements rose in Q4 2020—and shrank in every other category.

Consumers' share of spending on essentials fell in Q4, fueled by historic declines in the relative cost of housing:

  • In Q4 2020, the share of US consumers' budget devoted to housing costs fell to 18%, a record low and down −3.5 percentage points (ppts) compared to Q2 2020. Plummeting rental rates in city centers, rent abatements and cuts, temporary rent and mortgage non-payments, and historically low mortgage rates all drove this decline.
  • With these housing savings, total spending on essential goods and services (including food/beverage at home, routine transportation, education, and medical) fell −4.1 ppts in Q4 2020 compared to Q2.
  • Consumers shifted their spending, in large part, to discretionary products (+3.8 ppts)—including electronics and, especially, apparel.

Political stability and climate change climbed on the list of US consumers' top concerns over the next 6 months:

  • In the aftermath of a highly contentious election, 9% of consumers in Q4 2020 named political stability their top worry for the next 6 months, up from just 3% in Q2.
  • 5% of consumers in Q4 named global warming their top worry. Eclipsed as an immediate concern by economic and health concerns in the first half of 2020, the share of consumers focused on climate change is now back near the pre-pandemic average of 6%.
  • Unsurprisingly, more than half of US consumers continue to name the economy (26%), health (18%), or job security (9%) as their top concern for the months ahead. Notably, however, focus on all three areas was lower in Q4 compared to Q2, in the early months of the COVID-19 crisis.
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