Lewis believes central bankers’ hands are tied to some extent, and that monetary policy is increasingly creating inequitable distribution of wealth.
“It has driven up asset prices and wage growth has not taken off at all,” he says. “Many people are worse-off today than in 2008. It is an unsustainable situation. The wider electorate is fed up with the political elite and central bankers. They are angry, even if they’re not sure what they are angry about. The ECB, the Fed and the Bank of England could all come under attack.
“The asset owner is proportionately wealthier than the non-asset owner. In the UK, the government is well aware that home ownership is becoming very divisive. A whole generation will soon be priced out of the housing market and the government has been trying to support house prices for too long.”
He believes Brexit is the first manifestation of a rebellion likely to be seen more widely across the globe as inequalities grow. This is likely to force a change in policy from governments from monetary to fiscal policy.
Lewis says: “We are seeing a change in the way policy is set, from central banks to fiscal policy. Brexit was the first sign that policy was changing – moving from Wall Street to Main Street – this will be a headwind for risk assets.”
For Tilney Bestinvest, this environment has seen a reduction in risk across the group’s portfolios. Equity weightings have come down in favour of cash. The group is overweight in areas such as Japan and Europe, where monetary policy continues to be supportive, while, at the same time, it is underweight emerging markets, Asia and the US.
