(Bloomberg Opinion) — The big divide in America is not so much between Republicans and Democrats as between people who invest and people who don’t. For a man of his means who is running for America’s second-highest office, Tim Walz is on the wrong side.
In 2022, 58% of Americans owned stock, either directly or indirectly through mutual funds. Based on his 2019 financial disclosures and his 2022 tax filings, the Democratic vice presidential nominee is not one of them. His files offer no evidence of any asset ownership — no stocks, no bonds, no mutual funds, not even his house (he sold it a few years ago, after he became governor of Minnesota) — except for a small college savings plan whose investment allocation is unknown.
This might bolster his regular-guy image. But more Americans than ever are now in the market — that 58% is up from 32% in 1989 — and not being in the market is no longer a common virtue, or any virtue at all. Investing in the stock market should be a basic part of any balanced portfolio and retirement strategy, and not investing can suggest a lack of understanding of risk management and of financial literacy — especially if you have some money to invest, which Walz does.
Neither the vice president nor the president needs to be Warren Buffett. In fact, it would better if politicians didn’t own individual stocks at all, because of the conflicts of interest that may arise. But someone who just sticks with index funds is still an investor, and being an investor signals some important qualities the US should expect from its leaders.
The main reason for Walz’s lack of a portfolio is that he is less wealthy than the average politician. His family is estimated to be worth between $119,000 and $330,000. A life in public service and politics does not pay well unless you can supplement it with lobbying, speaking and lucrative book deals — none of which he partook in.
That’s admirable. But Walz is not poor; median net worth in America in 2022 was $190,000, and among households with a net worth of between $100,000 and $300,000, 59% owned some stock — 25% of them outside of their retirement accounts. Walz does have a 529 college savings plan worth between $1,000 and $15,000. He also at least had access to 401(k)-type account, but it is unclear if he participated; his tax filings don’t reflect what’s in these accounts, and there could be some stock holdings there.
Still, it is a little strange that he does not have any asset holdings in any other accounts. After all, in many ways he is well positioned to invest in markets.
Walz and his wife have accumulated a defined pension benefit that is valued at about $800,000. It could be argued that, since Minnesota public pensions are invested in stocks (and a curiously high amount in private equity), he has some stock exposure. But it is not stock exposure in any meaningful way, because the state of Minnesota guarantees the pension for life. His net worth does not vary with the stock market, except for perhaps the few thousand dollars in that 529 plan. He is actually much wealthier than he looks on paper, because that $800,000 is risk-free.
This would be another good reason, from a financial perspective, to invest in the market — he has a very large income floor that is government-guaranteed. He also claims to have a life insurance policy as an asset, which suggests more downside protection and a willingness to pay high fees to avoid risk.
Everyone is entitled to their own investment preferences. Perhaps Walz is just extremely risk-averse. Or maybe, like a lot of Americans, he’s not as financially literate as he’d like to be, and doesn’t realize the benefits of investing in the stock market: diversification and the opportunity to benefit from the growth of the US economy.
Either way, it raises the question: Is this what America wants from its leaders? They should be able to tolerate some risk. And taking a long position in the stock market is making an optimistic bet on the future of the US economy.
Walz’s investment strategy is in sharp contrast with that of his Republican rival JD Vance, who is worth millions but has also made some curious choices. He has as much as $250,000, a non-trivial share of his $4.2 million wealth, in Bitcoin. This investment could be interpreted as a bet against the viability of dollar, which also suggests something less than full confidence in the US economy.
The willingness to take balanced risk is an admirable quality in a leader. So is a sophisticated understanding of global markets. Avoiding the stock market could be seen as a normie credential, but it could also be a sign of excess caution. America’s leaders certainly don’t need to be rich or great investors, but they should have some engagement with markets. Not having any investments is not in itself a reason not to vote for someone — there are far more important issues, and all candidates have their idiosyncrasies. But it is sort of weird.
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