It’s not the EU

In that sense, the EU is the accessory after the fact. It's the factor that gets the attention - as does Islam - but it's not the cause of the fear; not the reason that 51.9 per cent of those who went to the polls voted to leave. So what is the cause? And don't worry, Dear Reader, the discussion will be relevant to investment strategies. But first, in simplified mode, let's understand what's really happening. Basically there are three things, all of which are connected:

■ Freedom versus equality;

■ Elites versus the rest;

■ Globalisation versus the nation state.

Arguably, the struggle between freedom and equality starts the process, and this is a theme I've written about before (see Bearbull, 4 November 2011 and 29 June 2012). People often have the confused notion that the two go together, that somehow freedom and equality are complementary, inter-dependant even. It might start like that, but it doesn't last. In order to have the freedom to do whatever - to start a business, for example - there must be an equality of opportunity; clearly it's not proper freedom if just a few get the opportunity. This is not a trivial point, After all, the catalyst for 2011's Arab Spring was the self-immolation of Mohamed Bouazizi, who felt humiliated by the continual refusal of local government officials to give him the opportunity to run his business.

Anyway, if the juxtaposition of freedom and equality is a starting point for progress, including wealth creation, these two soon diverge as results produce winners and losers. That's fine; it has to be that way. But the trouble is that winners and losers don't balance out. Winners keep on winning and losers keep losing out. So, before long, returns are shaped by a power law distribution that is both self-reinforcing and causes rewards to be horribly skewed towards a favoured few. In effect, freedom undermines equality and then it undermines opportunity.

Naturally enough, the favoured ones justify their good fortune as, really, the returns for hard work, grit, determination and so. That comes into it, but it’s a selective dialogue. This process becomes worrying when the success of the elite is such that they crowd out would-be competition. It gets worse - sinister, even - when the elite start changing the rules to suit themselves, which is largely what western democracy's lobbying industry is designed to do.

So what, theoretically at least, starts out as a balance between freedom and equality becomes lop-sided. Freedom to accrue wealth shades into freedom to distort and even into freedom to cheat. Naturally enough, everyone excepts the winners and their cohorts dislike this. It offends their notion of what's fair because, even if fairness does not mean equality, it does imply some sort of proportionality. To take a topical example, the rewards that Sir Philip Green was able to extract from the nearly-defunct BHS now, more than ever, appear disproportionate to anything - capital, ability, whatever - that he put into the business. And when Sir Philip's wife says that envy is at the root of the public's attacks on her husband, she is right - envy is a natural response to any reward that is both outsize and intrinsically unfair.

Aiding and abetting this process of undermining equality with barely restrained freedom - and, in the process, creating a self-sustaining elite - has been globalisation. If you like, globalisation has been the unexpected factor. After all, contests between freedom and equality and between elites and the rest are as old as history. However, without a couple of historical contingencies - the collapse of the Soviet empire and, more important, China's transformation from 1980 onwards - we might still be waiting for globalisation.

But we got it and, at first, its effects were welcomed in the developed world. For starters, globalisation helped to squeeze out the persistent inflation that had dogged the developed world's economies since the 1960s. True, the world's central bankers thought this was their achievement, but hindsight shows that the substitution of cheap - and mostly - Asian labour for expensive western labour plus a cyclical decline in commodity prices were more influential.

To the extent that falling inflation meant rising real incomes in the west, globalisation was popular - for a while, anyway. Before too long, however, the shift eastwards in the world's workshops meant real wages in the west fell and then stagnated. As the table shows, average weekly earnings in the UK rose from £318 in 2000 to £491 in 2015, but all that achieved was to keep pace with inflation as measured by the familiar, yet flawed, RPI method, though it did beat the more realistic CPI measure by a smarter clip.

Equally telling is the proportion of 'value added' - in effect, economic output - absorbed by the UK's labour costs which fell from 71.4 per cent in 2000 to 69 per cent in 2015. In the USA, the drop was even more pronounced - from 75.5 per cent to 68.2 per cent. The concomitant was a rising proportion of value added left over for profits, which, in effect, accrued to companies. In the UK, between 2000 and 2015, this fraction rose from 25.6 per cent to 28.2 per cent. In the US, the rise was more dramatic - from 15.3 per cent to 21.8 per cent.

In that sense, the period when globalisation's effects have been most marked has been especially good to those companies that adapted or whose markets and outlook meant they were likely to benefit from rising incomes in the developing world. Taking Unilever (ULVR) and Colgate-Palmolive (US:CL) as proxies, it is clear that their earnings per share have risen far more than wages or inflation. True, corporate earnings are a residual figure, so they are likely to swing more wildly than changes in wages or inflation. But in the period 2000-2015, the overshoot has been consistent with extra income left over as profits.

What globalisation has brought

Notes: Data for Unilever in pence; for Colgate Palmolve in US $; data for wages & profits/value added is for non-financial companies (source: OECD); UK employee productivity index - output per hour worked; Gini index: data for 1986 and 2014; no comparative data available for UK (source: World Bank)

Still, the point of the table is not to show how globalisation has been good for companies as to indicate that it has left too many workers behind, especially those in low-skilled jobs. The final indicator of that is the bottom row. This shows the Gini index - a measure of how a country's wealth is divvied up - for the US. The higher the value, the more unequal the wealth distribution and the US's Gini index has risen noticeably in the generation from the mid-1980s to now. Had data for the UK been available it is likely to have shown a similar swing, albeit with a less unequal distribution.

Thus the picture of diminishing equality, the rising influence of elites and the forces of globalisation produces the right sort of backdrop for resentment. The fact that the EU was the target is almost incidental. It happened to be there. For what it's worth, it may be more plausible to see the EU as a bulwark of the nation state than a force for federalisation and certainly not for globalisation; more an attempt by the 28 member states - perhaps to be 27 - to defend their own interests by trading some sovereignty than to undermine sovereignty.

If this helps explain how we got here, it also indicates - as I wrote two weeks ago (Bearbull, 17 June) - that political solutions are likely to intrude increasingly on economic matters. Put simply, that's because momentum in the developed world is turning away from freedom and back towards equality.

So what's a poor investor to do? I offer six thoughts with a long-term perspective in mind:

■ Give more consideration to how your total wealth is distributed. This is a way of saying that the biggest slug of equity is likely to be tied up in your home and in the years of uncertainty the greatest risk may be to property wealth (especially in south-east England). Of course, hedging that exposure is difficult, but it’s important not to exacerbate it. This means shunning property investments in your portfolio - not just real estate, but housebuilders, too. Granted, shares in some of these have been so savaged that they are tempting to buy for the bounce back. That might be okay, but don't allow a short-term bet to become a long-term holding. Even if it works, that'll be more to do with luck than sound reasoning.

■ Diversify more. The risk of holding assets with a big UK exposure and/or with sterling denomination has just worsened. That must be countered. An obvious way is to hold shares in UK companies with a big overseas presence. Not for nothing has Unilever's share price risen 6 per cent to £33.80 since the close on referendum day. In addition, shares in overseas companies start to make more sense, though easy receipt of dividends and the taxation thereon can be an issue. No such problem with exchange-traded funds, which offer a wonderful range of assets, almost all of which are eligible for an Isa.

■ Be flexible. For an investor, this should be a given; after all, investment is one practice where it's not just okay but it's a requirement to make it up as you go along. The world is a fast-changing place that's hard to understand at the best of times, and these times are not the best. To learn more about this, dig out Bearbull of 13 March 2015 where I discuss what it takes to be a better forecaster.

■ The rules of investment have not changed. Whichever way you practice the craft - value investing, momentum, fundamental analysis, whatever - will still hold good in the future. Good companies will remain good companies, usually low share ratings and high interest rates will be there for a reason, cash profits will still beat accounting profits.

■ One specific thought - in your dash to reduce sterling exposure, be wary of the euro. Its existential threat has not passed; the banking union does not exist, the currency union is illusory, the European Central Bank isn't really independent and Greece remains a disaster area. Meanwhile, anything that cranks up pressure on the EU does the same on the euro.

■ Yet the world isn't going to end. The UK's electorate may have voted to make themselves poorer both in the short and long term, but it could be worse - we're not going back to the 1970s. That was the decade we joined, wasn't it?