Beware of the “Marie Antoinette” market.
The infamous Queen of France is often remembered—perhaps unfairly—for suggesting that if the masses couldn’t have bread, they should simply eat cake. It’s likely she never actually said that. Still, it reflects a critical point: sometimes what lands you in hot water isn’t exactly what you say, but how others perceive it.
As we kick off a new year, it’s worth noting how ready U.S. investors seem to embrace more risk in their retirement funds. This feels very much like the settings of a “Marie Antoinette Market.”
Last April, President Trump’s “Emancipation Day” tariffs rattled the stock market. He even labeled panicked American investors as “weak” and “stupid” for exiting the market.
And let’s not forget Marjorie Taylor Greene, who directly called those in distress “losers” and “failures.”
Treasury Secretary Scott Bessent commented that those thinking about retirement weren’t overly concerned, even amid a sharp dip of 4,000 points in the Dow Jones Industrial Average.
It’s easy to see why they might feel that way. With net worths in the millions or billions, these financial fluctuations don’t hit as hard. For the wealthy, market volatility can actually be advantageous, facilitating the purchase of additional stocks at lower prices. Taylor Greene capitalized on this, buying stocks just before Trump unexpectedly changed his trade policy.
This kind of rhetoric isn’t new. Think back to Secretary of Commerce Howard Lutnick claiming that a one-month delay in Social Security checks isn’t a problem for “honest retirees.” His proof? His mother-in-law’s experience, who had a son-in-law that was a billionaire hedge fund manager. If she could handle the delay, who can’t?
So, while wealthy individuals bask in market dips as opportunities, the challenges faced by average Americans are quite different. Those at the helm of economic and political spheres don’t share the same stakes as the rest of us. It raises questions about their understanding of everyday financial distress.
Samantha Prince, a professor, highlights this in the Corporate and Business Law Journal, pointing out that for most regular investors, volatility is a foe. A 401(k) may not just be an investment account; it could be a crucial safety net, allowing penalty-free withdrawals in tough times.
Even in the face of significant market drops, people often don’t just sell out of fear; there’s a rational concern about prices declining further.
So, when ordinary investors face turmoil, unexpected expenses come into play. These scenarios rarely affect those who possess substantial wealth.
During last April’s market upheaval, countless regular Americans chose to withdraw from stock and bond funds. Were they all merely “weak,” or “failures”?
Peter Bernstein, a legendary investment guru, once advised that the focus of investing should be the so-called 60/40 portfolio, a balance of 60% stocks and 40% bonds. This wasn’t due to pessimism; rather, it acknowledged that volatility often disadvantage regular investors.
There’s really no sound reason to ignore readily accessible, diversified investment options. A reasonable 60/40 split should include global stocks and bonds, not just U.S. ones. This diversification is pretty straightforward and inexpensive, as the Vanguard Total World Stock ETF and Total World Bond ETF have low annual fees.
Interestingly, both these global funds performed significantly better than their U.S.-only alternatives last year.
