It’s an election year, and we’re not naïve—but it would be nice if just once (once!) politicians didn’t pander for political points at the public’s expense.
Buy now you’ve most likely heard that Hillary Clinton estimated American workers lost about $100 billion in 401ks as a result of the oh-so British Brexit. Fact-check website PolitiFact rated it as “mostly true,” which is all well and good.
Of course, the comment wasn’t made for educational or general-knowledge purposes; it was part of a campaign-trail salvo fired at Donald Trump. The latter earlier remarked that England’s exit would weaken the pound and encourage tourism. Clinton took him to task for the flip nature in which he characterized the tragic Brexit fallout and its devastating results.
Except it wasn’t tragic or devastating, at least for American workers and their 401ks. In a classic case of manufactured crisis, Clinton failed context. The $100 billion loss was on paper, was 2 percent of the $4.8 trillion currently held in 401ks, and 5 percent of the estimated $2 trillion in global assets lost overall. The biggest surprise of the Brexit fallout was the measured response for mom and pop investors, with media outlet after media outlet actually giving the public good advice—which was to do nothing. The numbers, unsurprisingly, soon began to recover.
[Editor’s note: A reader rightly noted our “very bad math,” which has since been corrected. The original text is in the comment section below. Our point, that certain (majority of ?) politicians are vainglorious hacks concerned with neither people nor policy, still stands.]
Compare it with investor reactions in 2000 and 2008, and it appears the lessons of behavioral economics are beginning to seep through. But rather than celebrate that mature reaction, Clinton chose to exploit a non-crisis for cheap political points, potentially causing Main Street to think twice about the good decisions it made.
Brexit was beyond the average investor’s control, as are all market events. How they react determines the damage done. They reacted right and contained the ruble, but hey, never let a good crisis—real or manufactured—go to waste.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
Other points aside, “the $100 billion loss was on paper, was an infinitesimal percent of the $4.8 trillion currently held in 401ks, and a fraction of a percent of the estimated $2 trillion in global assets lost overall” is very bad math.
The $100 billion she claims is back to even a few days after Brexit.
Don’t let cynicism about politics overcome intelligence about context and perspective. Brexit was a disastrous lashing-out of people bearing the brunt of global forces indeed beyond their control or understanding. The Trump phenomenon in that respect is similar, and potentially an even bigger disaster. Don’t be trashing Hillary as if there were no important differences among politicians.
Sure, but it’s all in degree. Differences between say, Winston Churchill and Donald Trump, absolutely. But there’s not quite as much daylight between Trump and Clinton.