The ongoing fallout of the US presidential election is indicant of a highly polarised society, says Premier Miton Investors’ Anthony Rayner. But this division isn’t unique to just the US, who points to widespread divisions in other countries and in markets.
The 2020 US presidential election has been called the most contentious vote ever.
Intense Democrat versus Republican divisions had already emerged in the lead up to 3 November election date against a backdrop of opposition to the government’s coronavirus policies and civil unrest during the summer.
Although no winner has been officially declared incumbent Donald Trump falsely declared himself the winner after polls closed and demanded that votes stopped being counted.
Nevertheless, the “media frenzy” around the election has highlighted the extent of this polarisation over recent weeks, according to Rayner (pictured).
But he these kinds of social divisions are not only prevalent in the US.
In the UK, for example, there has been ongoing debate on Covid-19 regulations, the multi-asset manager noted, and Brexit remains a “lightning rod for polarisation”.
As part of the Premier Miton macro thematic multi-asset team, Rayner said when attempting to understand these divisions people often make the mistake of treating the social, economic and environmental as separate contributors.
Rather, they are all interconnected. 
“Division across societies is driven by many things,” he explained.
“Unfortunately, there is a tendency to separate society from economics and politics, but there is significant overlap and we think a multi-dimensional approach to understanding complex issues is generally helpful.”
In terms of divisions within society Rayner said that social media is playing a major role in this (society and technology) as well as income and wealth inequality, since polarisation occurs throughout the socio-economic cross-section. This in turn is reflected in politics leading to increased populism, “further feeding division”.
This polarisation isn’t just reserved for public opinion but is also playing out in financial markets.
It’s often thought that social opinion has little impact markets, but this may no longer be the case as Rayner noted investors had moved away from the “old economy” sectors, such as oil and banks into the “new economy”, like technology and renewable energy.
Performance of sectors YTD
Source: FE Analytics
The latter reflects the changing attitudes to more environmental awareness socially and general reliance on technology.
Rayner said these “new economy” sectors have held up better before, during and after the Covid-19 sell-off.
By contrast the oil and banking sectors have been some of the worst performers this year, all exacerbated by the significant impact Covid-19 has had on markets.
Even the recovery from Covid-19 is a source of polarisation, the multi-asset manager noted.
“There is also increasing divergence regionally, particularly so more recently, as the east emerges in better economic shape from lockdown,” Rayner said, as western developed markets face the prospect of a “double dip” recession rather than the V-shaped recovery they had expected.
He added: “Whatever the precise letter-shaped outcome, it seems increasingly likely that we will see multi-speed economic recoveries, leaving behind the more synchronised experience of the highly globalised years.”
Having recoveries occurring at different rates compounds the economic polarisation even further Rayner said, since not only will the economic performance and recovery be different but also monetary policy regimes.
During the past few months’ economies have seen vast amounts of fiscal and monetary stimulus applied to help alleviate some of the financial impact of Covid-19.
The disjointed economic recoveries and stimulus could have an impact on asset classes, Rayner said.
“Asset classes will likely move in less of a lockstep manner, as correlations fall and diversification potential increases. Similarly, investors will likely be rewarded for being more discerning,” the Premier Miton manager explained.
“Going forward, a key question around polarisation from a multi-dimensional perspective is whether or not a material fiscal stimulus emerges from the US.
“The degree to which this will happen will become more apparent as the mists of uncertainty around the election clear.”
He continued: “Of course, it isn’t just quantity, it’s also quality, for example would a fiscal stimulus tackle inequality and improve productivity, or would it be very political and inefficient?”
But with many questions remaining, Rayner said the team won’t be positioning for material US fiscal stimulus just yet.