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Global Wealth Hits Fresh Record, With US In Driving Seat - Credit Suisse Report

Tom Burroughes

9 October 2013

The total stock of global wealth has reached a record of $241 trillion, a gain of 4.9 per cent from 2012, with the US accounting for most of the gain, according to the Credit Suisse Global Wealth Report today.

Average wealth hit a new peak of $51,600 per adult, but inequality remains high, with the top 10 per cent of the world population owning 86 per cent of global wealth, compared to barely 1 per cent for the bottom half of all adults.

Such inequality – while it raises significant social and political issues – also highlights why some wealth management firms have increased their focus on ultra high net worth individuals in recent years.

The Swiss bank says its report aims to give the most comprehensive study of wealth trends of any of the major studies of such matters. “Unlike other studies, they measure and analyze trends in wealth across nations, from the very bottom of the “wealth pyramid” to ultra high net worth individuals,” it said in its report.

The report was produced in collaboration with Professors Anthony Shorrocks and Jim Davies, who are principal authors of “Personal Wealth from a Global Perspective,” Oxford University Press, 2008, as well as “recognized authorities” on wealth trends.

Rising in future

The report said it expects global wealth to rise by nearly 40 per cent over the next five years, reaching $334 trillion by 2018. Emerging markets are responsible for 29 per cent of that growth.

China will account for nearly 50 per cent of the increase in emerging economies’ wealth. Wealth growth will primarily be driven by growth in the middle segment, but the number of millionaires will also rise markedly over the next five years. Emerging country wealth growth has slowed, with some notable winners (Mexico) and decliners (Brazil and Russia, both hurt by weaker currencies).

“We also find that the distribution of wealth in China is very different, and apparently more balanced than that of India, and reflects China’s role as the vanguard of the emerging consumer,” the report said.

“In the 'old world' we so far fail to see a positive wealth effect in Japan, while there has been a resurgence in eurozone wealth, with our new estimates challenging the findings of the recent European Central Bank survey, as we find that the ECB understates the household wealth per adult in most eurozone countries, with the notable exceptions of Cyprus and Malta,” the report said.

Mobility

The report said a special focus this year is on wealth mobility, “which appears surprisingly high in the short run.”

For instance, fewer than two-thirds of the 2000–01 Forbes billionaires remained in the list by 2005, and barely half by the end of the decade. Across generations, the latest evidence points to more persistence, although continued high wealth growth in countries like China will ensure that many individuals rise rapidly in the wealth pyramid, it said.

“Taking a broader perspective, our analysis suggests that ten generations or more have to lapse before the wealth of an individual in North America is completely independent of the wealth of their ancestors. From a global point of view, individuals in China and India have a relatively high probability to be upwardly mobile as a result of the high economic growth in these countries,” it said.

Two countries

Credit Suisse said the story of 2013 was a “tale of two countries”. “The United States posted a fifth successive year of rises in personal wealth. Fueled by a recovery in house prices and a bull equity market which drove the Dow Jones to new highs, the United States added $8.1 trillion to the global wealth stock, increasing wealth ownership by 12.7 per cent to $72.1 trillion. This is 20 per cent more than the pre-crisis high in 2006 and 54 per cent above the recent low in 2008,” it said.

“Aggressive monetary policy by the Bank of Japan spurred an even greater rise in equity prices – up 52 per cent in the year to mid-2013. But equities in Japan are very low by international standards, accounting for less than 10 per cent of household financial wealth, and the same aggressive BOJ policies drove the yen-dollar exchange rate down by 22 per cent. As a consequence, total household wealth in Japan has fallen by $5.8 trillion this year, equivalent to 20 per cent of Japanese net worth.

The report noted that Japan suffered very little during the global financial crisis and in fact personal wealth grew by 21 per cent between 2007 and 2008. “However, in marked contrast to recent performance by the US, total wealth is now just 1 per cent above the 2008 level,” it said.

While the Japanese experience led to a net loss for the Asia-Pacific region (excluding China and India), gains were recorded in all other regions and were particularly evident in Europe and China, which together added a further $7 trillion.

Despite the gain in Europe, total wealth in North America overtook European holdings to become the leading region for the first time since 2005, the report said.