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Miton’s Rayner: Fragmentation challenging the march of globalisation

Multi-asset manager Anthony Rayner urges investors to take a broader view of the economy, politics and social trends.

Rob Langston

By Rob Langston, News editor, FE Trustnet
Monday March 20, 2017

Greater fragmentation is having a big impact on existing economic, political and social structures, according to Miton multi-asset manager Anthony Rayner (pictured).

Rayner – who oversees Miton’s £238.1m Cautious Monthly Income, £390.5m Cautious Multi Asset and £78.7m Defensive Multi Asset funds with David Jane – says fragmentation has threatened the dominant globalisation trend in recent years.

He said: “There’s a temptation to separate politics, economics and sociology but we don’t think this makes much sense.

“They’re inextricably linked, well evidenced recently with ‘fragmentation’ slicing through all three, challenging the march of globalisation.”

The emergence of populist parties and politicians at both ends of the political spectrum have challenged the liberal political consensus.

Rayner explained: “Extremist parties, or extreme views within established parties, have seen a much more fragmented political landscape.”

While greater numbers of people worldwide have exited poverty, levels of inequality within individual countries has been a “powerful driver of wellbeing, or voter satisfaction”, says Rayner.

The manager says previous backers of free trade, such as the US where president Donald Trump has promoted an ‘America first’ narrative, have changed tack.

Elsewhere, trading blocs such as the EU have come under pressure over growing support for anti-immigration politicians in opposition to freedom of movement policies.

“Concerns about immigration (free movement of labour) have risen materially, no doubt compounded by concerns over future economic welfare,” he said.

“Populism is pushing against the globalisation manifesto: free trade, limited government and free movement of people. Many of these dynamics have been in play for some time but have been energised through Brexit and on a global scale by Trump’s election.”

Indeed, changing attitudes towards areas such as free trade and immigration have shaped many of the political debates in developed markets over the past year or so.

National debates have had the effect of causing the international geopolitical landscape continuing to shift as politicians question existing alliances.

Rayner said: “Geopolitically, there has been a trend towards ‘G zero’, with the superpower model fragmenting as Western influence declines, putting decade-long alliances under pressure.”

He added: “The previous economic and political narrative led by the West is giving way to nationalism, protectionism and anti-immigration pressures. This will no doubt lead to conflict, though whether it is out and out large-scale conflict is a different matter.

“The degree to which the core values of globalisation will be successfully challenged is currently unclear,” he said.

The US presidential election highlighted growing dissatisfaction with global trade deals as partners such as Mexico and China were deemed to be profiting from perceived declines in the domestic manufacturing and industrial sectors.

In Europe, there have been further concerns raised over stability in the eurozone as anti-EU movements and politicians continue to grab headlines.

“The political landscape in the eurozone provides opportunities to gauge the momentum for change, and if the US administration implements some of its proposals and is perceived successful, we should expect copycat policies elsewhere,” said Rayner.

The threat of trade wars could have a significant impact on markets and some sectors in particular, the manager says.

The car manufacturing sector was among the sectors singled out for greater protection by Donald Trump, who has criticised firms producing vehicles across the border in Mexico for export to the US.

Another area that has come under scrutiny is steel production, where cheaper Chinese steel has driven some firms to close.

Rayner said: “What does it mean for markets? We’re not in the business of forecasting, especially when it comes to political policy, but we’ve become increasingly cautious about the potential for trade wars.

“We have purposefully limited our exposure to high profile potential targets, such as the car and steel industries. More specifically, we have very little exposure to those exporting easily substituted products, with low margins and no production in the US.”

However, there may also be some sectors that could benefit from an increased focus on repatriating some sectors to the US domestic market.

Rayner added: “Elsewhere, our long held onshoring theme should benefit. This reflects the trend for returning production to domestic markets, as wage differentials have narrowed and companies look to secure supply chains and protect intellectual property. This theme, along with our cyber security theme, should benefit from a more fragmented world.”

Performance of funds over 1yr


Source: FE Analytics

The Miton Cautious Monthly Income fund has risen by 15.44 per cent over the past year, while the Cautious Multi Asset fund has risen by 14.57 per cent. The Miton Defensive Multi Asset fund is up by 7.96 per cent over the same period.


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Data provided by FE. Care has been taken to ensure that the information is correct, but FE neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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