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Election-Rattled Investors Should Take Heart

No matter who wins the presidential election, odds are you will be unhappy with the results one way or another, given that many are voting for the candidate they see as the lesser of two evils.

People will deal with their dissatisfaction differently. Some will threaten to move to Canada; others will propose selling all their investments. Many will discuss the dismal outlook for our country and its economy loudly and often.

Cheer up! The president’s influence on the economy is often overstated. And no matter how the election turns out, there is a lot to be excited about.

My optimism is undoubtedly influenced by my move to Austin, Texas last year. I did my small part to help the area population grow by 157.2 people per day from 2014 to 2015, making Austin one of the country’s fastest growing regions. One of the popular hobbies at my building is to count the cranes that are transforming the skyline to help accommodate this influx of new residents. People are moving to the Austin area for reasons including its unique culture, abundant recreational options, lower cost of living compared to some cities – though we still like to complain about how expensive it is – and lack of a state income tax. Many of us moved here, too, because of the city’s concentration of high-paying jobs.

When I lived in New York City, I was surrounded by people pursuing an incredibly diverse group of careers. If you can imagine a job, it probably exists in New York City. Meanwhile, living in Austin, I’ve been struck by how many people I run into who work in the tech industry. The Austin Chamber of Commerce lists the key industries here as: creative and digital media technology; data management; clean energy and power technology; life sciences; advanced manufacturing; and corporate headquarters and regional offices. Technology is reshaping the workforce nationwide, but the concentration of technology-based jobs in Austin makes it easier to notice here.

At times, I am lost when my tech friends discuss the details of their jobs. A programmer is streamlining the Department of Veterans Affairs’ systems to get help to veterans more quickly. A data scientist is helping organizations save money and increase sales by better understanding trends in their industry and customer behavior. A recent immigrant is introducing Germany’s world-class “internet of things” technology to U.S. companies to help connect an assortment of devices to the internet. A medical researcher is working to understand how certain genes can suppress the growth of cancerous tumors.

My friends’ stories all piqued my interest and further opened my eyes to the speed with which technology is progressing. To learn more about the state of the tech industry, I visited the Austin Public Library and borrowed “The Industries of The Future” by Alec Ross. Ross was the Senior Advisor for Innovation to Secretary of State Hillary Clinton, and his role was to modernize how we practice diplomacy by incorporating new technology. He published this book in early 2016 to help people understand the advances in technology and our economy that we can expect in the next 10 years.

The book highlights how the internet of things, big data, coding, artificial intelligence, smarter and cheaper robots, and a greater understanding of the human genome will change society. These trends are not science fiction, but are already impacting us today. What I read was remarkably consistent with the stories I regularly hear from my friends in Austin. Ross’ view, which I largely find convincing, is that these technologies will collectively improve our standard of living, but will also create negative disruptions for some individuals along the way.

YouTube creator CGP Grey’s video “Humans Need Not Apply” discusses some of these same opportunities and challenges. While we can all name several simple jobs that robots can replace – and already have – technology is now replacing some functions of more advanced professions too, including financial advisers, attorneys and doctors. These changes will necessitate forward-looking thought from our government to help address the difficulties of people who are not prepared to compete in the industries of the future. While there is plenty to dislike about Hillary Clinton, based on Ross’ experience she appears to be willing to confront these challenges and is eager to incorporate new technologies (though hopefully not on a personal server).

Technology is increasing our ability to solve problems and create more efficient ways of working every day. This change impacts markets because long-term growth is dependent on increasing productivity. Technology has driven much of the stock market’s growth, while at the same time disrupting it by the increasing number of formerly human tasks replaced with software. Code will continue to transform the way we think about and handle money in some ways we can foresee, and probably in some we can’t.

Given the slow economic growth since the global financial crisis and this year’s remarkably vitriolic presidential campaign, some investors may be tempted to decide that owning stocks is not worth the risk. But this view ignores the power technological advances have to greatly enrich those who create, implement or invest in them. Technological progression will continue regardless of which administration takes over next year. Personally, I’d rather share in the profits of our rapidly changing world by investing for the long term in a broadly diversified stock portfolio than bet the election of an unappealing president will throw global markets into a long-term downward spiral.

For one thing, as my colleague Paul Jacobs recently explained, recessions are natural and inevitable. But historically, which party wins the White House does not really matter from an investing point of view. Of course different administrations’ policies can affect the state of the economy. But the economy is also complicated, and the pace of technological change is not going to make it any simpler. No particular candidate’s victory – or loss – makes it worthwhile to just give up on the fundamentals of long-term investing.

If your portfolio’s asset allocation was appropriate for your risk tolerance and goals under the Obama administration, there’s a good chance that it will still be appropriate during the next administration’s tenure. Short-term pullbacks in the market are inevitable, but investing for the long term should be your best chance of benefiting from the technological advances that are reshaping the world around us.

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