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State of wealth: 10 insights from Credit Suisse's 2017 report

Global private wealth climbed 6.4% last year outstripping both the birth rate and the underlying rate of economic expansion

Global wealth has climbed 27% over the decade since the beginning of the Credit Crunch to reach $280 trillion (£210 trillion), according to Credit Suisse’s Global Wealth Report 2017.

That followed a 6.4% increase in privately held wealth over the prior 12 months, the fastest gain since 2012, growing faster than both the population and underlying economic output. 

Globally, mean wealth per adult reached $56,540, although this is obviously heavily skewed

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Global wealth has climbed 27% over the decade since the beginning of the Credit Crunch to reach $280 trillion (£210 trillion), according to Credit Suisse’s Global Wealth Report 2017.

That followed a 6.4% increase in privately held wealth over the prior 12 months, the fastest gain since 2012, growing faster than both the population and underlying economic output. 

Globally, mean wealth per adult reached $56,540, although this is obviously heavily skewed

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The relatively rapid pace of wealth growth handily beat the post-crisis average of 3.8% but remained well short of the 2000-2007 average 9.5%.

Credit Suisse emphasised that it did not consider the 2017 expansion sustainable however, forecasting average annual growth of 4.9% over the next five years.

This reflected an increasing tightening of the outsize supply of dollars, euros and yens thrown at asset markets in recent years. ‘The modest rise in risk-free rates over a five year horizon leads us to expect earnings multiple compression,’ says Credit Suisse.

‘This is likely to be accompanied by lower annualized equity returns and consequently lower market cap growth forecasts for most of the major equity market indices, impacting growth in financial assets.’

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Globally the rate of wealth appreciation attributable to financial assets continued its post-2009 trend of outperforming real assets. Factoring in the pre-2009 housing bubble, real assets have maintained a record of net outperformance since 2000, however.   

Real assets would reverse this with a rate of return 1% higher than financial assets over the next five years, suggested Credit Suisse. ‘While the level of financial assets was hit harder by the financial crisis than non-financial assets, it has recovered faster than real assets since then, said Credit Suisse.

This would match a relatively rapid increase in household debt, following a period of relative stability, expected to expand 37% over the next five years.

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The number of USD millionaires is expected to rise 22% over the next five years from a global total of 46 million to a total 44 million. While this is lower in absolute terms, emerging markets are likely to see an accelerating pace of newly minted millionaires.

China is forecast to see its number of dollar millionaires climb 41% to 2.7 million, third placed behind the US and Japan, while the ranks of Indian millionaires are expected to climb 50% to 370,000.

The number of internationally-denominated UK millionaires is likely to decline slightly however, ‘given the expected poor performance of the United Kingdom after Brexit’.   

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Assuming wealth distribution remains stable, the bank estimated that the global ranks of billionaires were likely to expand by 719 over the next five years to a total of 3,000. A total 230 of these are likely to be American and 205 Chinese. Of the remaining 235 Europeans, 33 are likely to be Russian.

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The US remained indisputably on top of the wealth distribution, with almost half the world’s total, or more than $101 trillion, in comparison with $79 trillion in Europe. The country equally claimed more than half of the year’s growth, adding $8.5 trillion of the overall world gain of $16.7 trillion.

‘Looking ahead, however, high [US] market valuations and property prices may curb the pace of growth in future years,’ said Credit Suisse global wealth management CIO Michael O’Sullivan.     

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Following rollercoaster asset market moves around Brexit in 2016, UK wealth per adult climbed 2% per adult in local currency terms, but fell 1% when denominated in globally comparative USD.

In USD terms, wealth per adult is still 14% lower than it was a decade ago. At the peak of the credit boom house prices had inflated the UK’s wealth-to-income to a near historically unprecedented ratio of nine to one however, setting it up for a sharp reversion.

‘The pattern of wealth distribution in the United Kingdom is fairly typical for a developed economy,’ said Credit Suisse. ‘A little more than half of the adult population has wealth exceeding $100,000, and there are 2.2 million US dollar millionaires, representing 6.1% of all millionaires globally.’     

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While Europe and the US still heavily dominate the global wealth distribution, emerging nations continued to steadily eat away at the gap. After the US, China contributed the second largest share of wealth growth last year, or $1.7 trillion, as policymakers carefully reflated the domestic economy.

This continued an above-trend rate of wealth growth experienced over much of the last decade, following a 20% retrenchment during the credit crunch. In absolute terms China has a lot of ground to cover however, with $23 trillion in domestic wealth, while India claims just $3 trillion.

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Across EM more broadly, the annual rate of wealth growth is likely to stand at 6.5% over the next five years versus a developed average of 3.3%. This would increase their share of global wealth by 0.4% over each of those 12 month periods, reaching a total 22% share by the end of the period.

Between 2000/2017 emerging markets nearly doubled their share of global wealth from 11% to 19%.

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While intra-nation wealth disparities have fallen, internal national wealth inequalities continued to uniformly widen across all regions. At the turn of the century 45% of global wealth was held by the top 1% richest; today the comparable figure stands at 50%

‘The outlook for the millionaire segment [over the next five years] is more optimistic than for the bottom of the wealth pyramid (less than 10,000 dollars per adult),’ said Credit Suisse,  

‘The former is expected to rise by 22%, from 36 million people today to 44 million in 2022, while the group occupying the lowest tier of the pyramid is expected to shrink by only 4%.’

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