- The collective wealth of high net worth individuals — those valued at more than $1 million excluding their primary residence — has declined for the first time since 2011, decreasing in 2018 by 3% globally, according to a report by consultancy Capgemini.
- The ongoing US-China trade war wrought much of that damage, according to Capgemini analysis, as global stock markets tumbled and geopolitical unrest reared its head.
- Nowhere were those losses more pronounced than in Asia, where an astounding $1 trillion of wealth was lost last year. China alone was responsible for half of that, with China’s elite losing $500 billion.
- While Australia suffered a modest decline, analysis by Roy Morgan shows that Australians have grown steadily wealthier over the last decade and are 28% better off in real terms than in 2007.
You might want to spare a thought today for the world’s richest people who managed to lose an ungodly amount of money last year, $US2 trillion to be exact.
The US-China trade war and rising global tensions played no small part in that, according to French consultancy Capgemini which publishes the World Wealth Report.
“Geopolitical unrest and trade wars forced countries to adopt a loose monetary policy to encourage economic growth. Another blow to the global economy was the decline in world trade, which shrank from 5% at the start of 2018 to almost zero toward the end of the year. Trade wars may drag the global economy down further, coupled with higher rates and market volatility,” the report said.
Given that, it’s perhaps no surprise that China’s super wealthy lost $500 billion, equivalent to the whole of Europe’s collective losses. North and South America meanwhile only experienced relatively small declines in comparison — due perhaps to the US’ upper hand in trade negotiations. The Middle East was the only region where the rich actually got richer last year.
The report concluded the Middle East performance was due to “improving oil prices combined with significant fiscal and structural reforms to combat the impact of declining oil prices, stabilized the region’s economic platform”. Kuwait and Saudi Arabia both benefited the most from that, with their rich increasing their wealth by 8% and 7% respectively.
The biggest losers, however, were just as clear. Due to the concentration of wealth at the top, it was those who had the most to lose — the top 1% of all high net-worth individuals — that got hit the hardest. Collectively they managed to lose 6% of their wealth, an eye-watering $US1.5 trillion.
It’s the first time in seven years that the wealthy have experienced a downturn, according to Capgemini, as global sharemarkets declined in the second half of 2018 eroding the net worth of many individuals.
That’s in stark contrast with relatively small declines here in Australia, according to Australia market research company Roy Morgan’s latest wealth report.
“Although the last 12 months has seen a marginal decline in household net worth, it is important to understand it in the context of the long term trend. What we have seen here is a very positive long term trend,” Roy Morgan CEO Michele Levine said in the report.
Indeed, Australians between 2007 and 2019 have seen the values of their assets almost double, outpacing household debt growth.
On average Australians are 28% better off in real terms since the period just before the global financial crisis (GFC).
Despite the declines worldwide last year, Phillip Gomm, Capgemini head of banking, said Australia in 2019 still presents plenty of local investment opportunities.
“With property markets now seeming to have bottomed, a reduction in the cash rate, relaxation on APRA lending affordability guidelines, investor-friendly government policy reassured and tax incentives in place to encourage consumer spending, now may be the right time to re-enter local equities and property markets,” Gomm said in a statement issued to Business Insider Australia.