It might seem, well, bit rich to say the world’s ultrawealthy had a tough time in 2022. Considering that global wealth inequality has reached almost the same peak as during the early 20th century (the so-called Gilded Age, as Brookings points out), one rough year might seem like a drop in the bucket. And a difficult year for the rich still likely means you’re doing well, all things considered. That being said, the stats are in and the rich experienced a bit of a stumble from their great heights a year ago.
Wealth-X, a research firm that claims to have the world’s largest collection of records on wealthy individuals, has developed a proprietary Wealthy and Investable Assets Model to gauge the global population of ultra high net worth individuals (UHNW) and their combined wealth. To make it into the UHNW, you must have a personal net worth of more than $30 million, good for a population with collective wealth of over $45 trillion, per the new report.
Looking back at 2022, the authors of the World Ultra Wealth Report found the yacht set experienced an undeniable setback in their pandemic-era boost during a time of “extreme volatility,” fueled by Russia’s invasion of Ukraine, generationally high inflation, and China just emerging from lockdown. As a result, in 2022 the global UHNW population fell for the first time in four years—decreasing by 5.4%, representing the most drastic shrink since 2015.
Most of 2022 was bear season, as the bear market lasted a full 10 months by some metrics before 2023’s upswing. Riding the wave proved difficult as investors as the combined net worth of UNHW dropped by 4.3% in, ending up at $16.5 trillion, Wealth-X found,This is the third-worst regional performance after Europe, which Wealth-X found experienced a slump of 7.1%, Asia fared the worst by falling by 10.6% (almost whipping out 2021’s gains).
It was a year when most investors could not, as they almost always have for a generation, buy the dip. And despite escaping true threats of financial instability, the wealthy often find themselves more at the whims of a falling market, as Gallup finds that 84% of households earning over $100,000 report stock ownership, while just 29% do in households making up to $40,000.
And feelings of unease amongst the elite pervaded. George Walper, the president and CEO of Spectrem Group, a consulting firm specializing in affluent clients, told CNBC last December that its millionaire client base was down in the dumps. “This is the most pessimistic we’ve seen this group since the financial crisis in 2008 and 2009,” he said, adding that 28% said the stock market was the greatest threat to their wealth in the coming year. That being said, this year so far has been not all doom and gloom. While the S&P 500 is not at the heights of 2021, it hasn’t been far off. Still the ultrarich were shaken.
Maybe it’s because no one likes seeing their pandemic-era savings dwindle and this will they or won’t they recession talk, or a housing market that leaves even the wealthiest dependent on cash-only offers, but every class seems united in their lack of confidence in their own financial security. The rich are faring much better on absolute terms than the middle and lower class, by nature of being rich. But lower and middle-class households have had some historic years and
are slowly gaining traction in a time of high inequality. They’ve made strides forward in the economy of the 2020s, as shown by an increase in purchasing power, as measured by Primerica, pandemic-era wage gains, and some notable victories, such as the Teamsters winning an astounding raise for full-time UPS drivers, to an average $170,000 salary.
The ultrawealthy mainly live in North America, Asia, and Europe, and all of them took a hit in 2022, according to Wealth-X. North America’s population of ultrawealthy shrank by about 4%, but things took a turn for the (even) worse in Europe and Asia. Europe, dealing with the ongoing ramifications of war, saw a 7.1% decrease in its UHNW ranks. And in Asia, lockdown and supply chain problems resulted in an 11% decrease.
But the rich in the Middle East and Latin America and the Caribbean had a better year. The report notes that populations for these regions increased by 15.7% and 17.5%, respectively. This is not seen as a sea change, with the report authors saying that the combined share of wealth held by regions other than North America, Europe, and Asia will likely decrease by 1% by 2027 as the wealth in the Middle East corrects “following an uncharacteristically large jump in 2022 thanks to the surge in commodity prices.” In other words, the war made the price of oil go up, and that benefitted a certain segment disproportionately.
That being said, the losses of 2022 aren’t seen as permanent, by any means. The report authors explain that the decrease in wealth doesn’t wipe out the major gains of years prior, and 2022 “only partially reversed the dynamic gains recorded in 2021.” Despite a rough period, Asia’s ultra-rich are projected to continue to prosper and North America is slated to continue to hold the number one spot. The number of UHNW people in the world is estimated to continue to rise by 133,000 in five years (from 2022 to 2027), roughly a 33% increase.
Source: YAHOO FINANCE