There have been some eye-watering economic growth numbers in recent weeks, but against this background, a number of institutions have highlighted how inequality has grown too, particularly in developed economies. 
While some degree of inequality is generally considered acceptable, a consensus has built up that considers current levels in many developed economies excessive.
A September bulletin from the US Federal Reserve highlighted the changing share in wealth. There is a diminishing proportion of wealth held by the bottom 90 per cent, by wealth percentile, of people in the US. In fact, it’s fallen from around 33 per cent in 1989 to 23 per cent in 2016.
The Fed is not alone, the International Monetary Fund recently highlighted the issue and how best to tackle it from a fiscal perspective, while central bankers such as Janet Yellen and Mario Draghi have frequently gone on record calling for action to tackle inequality.
The source of this inequality is contentious. Many point to quantitative easing and how the resultant rising asset prices have benefited the wealthy. Others note how jobs have been lost, especially in the lower income groups, through factors such as foreign trade, technology and automation.
What’s clear is that no one is taking responsibility for this worsening dynamic, partly because some of the underlying causes are difficult to identify, but also difficult to influence, with governments operating domestic policy levers in an environment dominated by global forces.
There’s a belief that this level of inequality is destabilising on a number of levels. Indeed, the World Economic Forum declared at the beginning of this year that inequality will be the number one trend determining global developments in the next ten years.
At a geopolitical level, we expect recent trends to continue, for example, reduced levels of cooperation globally (reflected in areas like trade and military tensions), as nation states withdraw and look to ‘protect’ their electorate. Additionally, we expect growing calls for independence and rising migration pressures.
At a country level, inequality has encouraged more extreme populist movements, often at the expense of traditional parties, as well as increased policy paralysis, for example in the UK and the US. Calls for concepts like universal basic income, as well as taxing robots, will no doubt grow louder.
Economically, over the long term, those studies that point to the relationship between higher inequality and less durable economic growth also seem sensible.
So, what does this mean for markets? Political risk will likely continue to rise, meaning increased volatility for currencies around political events, and an increase in the political events themselves, as electorates search for answers. Meanwhile, legislation like tax reform, will be analysed much more than usual for the degree of income redistribution it promotes.
Policymakers will want higher wages, the obvious solution to inequality, but not so much so that interest rates have to rise sharply, as economies remain so indebted. Some central banks’ more recent preference for focusing on asset price excesses, rather than weak consumer price inflation, can also be framed within this inequality dynamic.
Part of the impact on markets relates back to who is responsible for addressing the issue. Central banks were only ever meant to prop up growth temporarily, in order to give governments space to implement reform, much of which has been side-stepped. However, the baton is slowly being passed to governments.
Unfortunately, they look historically weak in developed democracies, largely because of the trends outlined above, plus, there has been an ideological consensus against Keynesian policies such as increased government spending.
So, a switch from monetary policy to fiscal policy is not yet obvious. Nevertheless, pressure remains for government policy, whether it is longer term infrastructure-based investment, or shorter-term populist giveaways aimed at specific income groups.
Our base case continues to be that economic growth will be strong and inflation and interest rates will remain close to current low levels. This is reflected in our exposure to economically sensitive businesses and shorter duration bonds.
In addition, our thematic exposures reflect some of the trends above, such as our robotics basket, which includes the more traditional robotic manufacturers, as well as the businesses that produce the sensors (the eyes and ears of the robots). As ever, we remain liquid and ready for action if the nature of the data flow changes.
Anthony Rayner is manager of Miton’s multi-asset fund range. The views expressed above are his own and should not be taken as investment advice.