I’ll start by saying that I am going to try and keep my own politics out of this post. I maintain that news outlets, pundits, entertainers, professional politicians, and others that thrive on outrage and wedge issues, all contribute to the deterioration of political discourse and inspire dangerous tribalism. There are more issues on which Americans agree than disagree, but who would ever have guessed if they watch the news?*
With that aside, Trump’s unlikely rise in 2016 caught many people off-guard. Mirroring what had become popular on TV news, I would argue most of his platform was grievance-based. Enough so that he won enough voters who agreed with him, many of whom had voted for *gasp* Obama in the previous election.**
Weird, huh? Candidates Obama and Trump could not have been more starkly different, yet there was a group of Americans who voted for both. I think both candidates were considered to be change-makers compared to their political opponents, so maybe this could be a reason for this voter alignment. If being a change-maker is the common thread linking voters to both Obama and Trump, it’s clear that there is a subset of Americans who feel left out of what was, by many measures, a massive American success story over the last few decades.
Theories abound, I’m sure, of what pushed these voters to both Trump and Obama. I would like to highlight one particular (potentially just small) factor that might be overlooked. It’s a subset of personal finance that I’ll call asset diversification.
Understanding The Finances Of Rural vs. Urban Americans
This section heading is the title of a March 2022 report by Dr. Craig Copeland from the Employee Benefit Research Institute (EBRI). In it, Copeland found that rural Americans had (1) a higher percentage of their assets in businesses, and (2) a lower percentage of their assets in retirement accounts/stocks, than their urban counterparts.
This chart from page 9 of the report offers a good snapshot of the data presented:
For those who haven’t been paying attention over the last 13 years, US stocks have experienced a historic bull market. As a result, rural Americans with fewer assets invested in stocks (and retirement accounts that hold stocks) might not have done as well financially as urban Americans.
I think some of these data can be explained by the current economic cycle in which we find ourselves (i.e., maybe it’s a rebalancing issue). By way of example, if an 80/20 stock to bond ratio is your goal in your retirement account, then you would sell stocks and buy bonds if your stocks went on a tear over a few years and skewed your asset mix toward stocks to 90/10. Maybe households have not done this. Maybe the author controlled for it. Don’t nobody really know…
Does It All Come Back to Keeping Up With The Joneses!?
So a key question from this might be: Are people fed up with our system of government enough to overturn the table, in part because others experienced greater financial asset appreciation than them? I would say the answer is… maybe.
If you’ve ever missed out on a meteoric rise in an asset (unicorn stocks, crypto-currencies, etc) because you judged them to be silly investments, you might then understand that you also often harbor some disdain for those who chose to roll the dice and were wildly successful as a result. It wasn’t so much that they were right, it was just that they were lucky. Maybe you then view yourself as unlucky. Or maybe the system is rewarding these people for constantly taking outsized risk with their money, instead of doing a noble thing like investing in and growing a business.
Doesn’t it seem like a system that provides advantages to these people who are making money hand over fist for doing very little should be changed? And even though you voted for a Democrat last time around, might you now vote for another candidate who is promising to drastically change the status quo to even the playing field?
Maybe this is a simplification, but I think it might also be part of the explanation.
When the market rebalances itself (pronounced: “correction,” or “recession”), the same people who have invested more conservatively in their rural businesses over the last decade will hopefully be rewarded for their consistent efforts while those who have gambled on cryptocurrencies lose their shirts. Rural business owners probably will be less likely to want to overturn the table at that point, right?
*Solution: Stop watching the news. It makes you stupid and angry.
**These voters accounted for an estimated 11-15 percent of Trump voters, according to Geoffrey Kelly from the University of Virginia’s Center for Politics.
We should be so lucky.