Miton’s Anthony Rayner: Winners and losers

  • Globalisation and technology has led to a material change in power bases
  • Information overload can hypnotise investors into staring at the detail and missing the bigger picture
  • We’re staying away from the UK and looking to the US, China and India

Anthony Rayner, manager of Miton’s multi-asset fund range comments: “It’s common to look at how the world is changing through the lens of globalisation or technological innovation. But another way of looking at changing dynamics is to focus on power bases. In fact, the combination of globalisation and technology has led to material change in power bases and, as ever, there have been winners and losers.

“The new power bases are China, India and the technology disrupters themselves. Some of the losers are the US, an empire in decline, and the UK, an empire already declined and struggling to find its way post-Brexit. As a result of these dynamics, in the ‘loser’ nations we have seen the rise of economic nationalism.

“Many voters will assume that, in democracies, their vote is important and the people they elect have the power to impact the lives of the electorate. However, the reality is that the degree to which politicians have power, for example over economic sovereignty, is overestimated and has been moderated by globalisation and technological innovation in recent years.

“Ironically, at the time when ambition for political change is high, trust in politicians is low. The debate at a national level is narrow and often misdirected. In the UK, virtually all debate is dominated by Brexit, in the US it is by whether Trump is ‘good or bad’.

“These binary debates reflect the polarisation of politics and, while they’re rooted in genuine concerns, they divert energy from at least one of the real debates: how best to structure economies for the long term. Even in countries with different political systems, like China, the debate seems polarised between delivering enough economic growth, while also achieving reform.

“After one year in power, what chance does Theresa May have in covering herself in glory? After six months in power, the same question to Donald Trump? She is the weak leader of a not so large economy and he has achieved very little that he set out to.

“Compare this to, say, the head of Tesla or Facebook, or how cyber warfare is increasingly used by governments to drive geopolitical change and it soon becomes clear as to how much things are changing.

“Politicians have a tendency to ignore the negative impact of change. Free movement of labour is in many ways the small print of globalisation; it was never just about the free movement of capital. Technological advances, like robotics and artificial intelligence, are heralded as great steps forward but politicians rarely talk about their threats. The reality is that these dynamics put certain sectors of the job market under increasing pressure.

“Politicians have less and less control over the domestic economy, but somehow the gap between what voters want and what politicians can deliver needs to narrow. The pressure is growing and, encouragingly, the start of the earnings season saw the CEO of the largest US bank decry policy gridlock, stating that “we have become one of the most bureaucratic, confusing, litigious societies on the planet”. He went on to suggest that the media focus less on the quarterly performance of JP Morgan’s business and instead focus on infrastructure, taxation and jobs.

“From an investment perspective, a world of information overload can easily hypnotise investors into staring at the detail and missing the bigger picture. There’s a place for detail but we frequently remind ourselves to stand back, so that we can see the wood for the trees.

“Whether this period becomes known as ‘peak globalisation’ will not be clear for many years but, in the meantime, we have to focus on what we know. We have aligned ourselves behind the power bases, with minimal exposure to the UK economy and those sectors globally that are easily disrupted by technology, such as bricks and mortar, retail and traditional autos. At the same time, we have important exposure to countries like the US (where many global tech companies are listed), China and India.”