The world’s wealthiest saw their assets shrink by an estimated $10 trillion last year. This was the most significant decline in global wealth since the financial crisis of 2008, revealed the UBS annual wealth report released on Tuesday. According to the Swiss Bank, the number of adults who own assets worth $1 million or more fell from 62.9 million at the end of 2021 to 59.4 million by the end of last year. This was due to high inflation and the decline in various currencies worldwide. Keeping exchange rates constant, the wealth of the average adult declined by $2.1 trillion in real terms.
However, despite the drop in millionaires, UBS economists said that global median wealth, more reflective of the typical household’s finances, rose by about 3%. This means that the wealthy in many countries did not suffer as severely as expected, as most of their investments are held in non-financial assets such as real estate and property, which are less affected by inflation.
In the US, the loss of millionaires was mainly caused by a sharp fall in stock and bond prices. Last year, the S&P 500 stock index fell by about 9%, and the bond market suffered from rising interest rates. The result was that investors with substantial amounts of wealth in the stock and bond markets saw their portfolios shrink by about $1 trillion. As a result, the number of Americans who are millionaires dipped by about 1.7 million in 2022. This was also the first year since 2008 that the nation’s wealthiest individuals saw their net worth decrease.
It’s a phenomenon known as the “rich recession,” and it is thought to continue to happen throughout this decade and into the next. This is because the gains made by the super-rich in previous years have largely been erased as stocks and bonds tumbled.
In addition, the US suffered from high levels of terrorism and cyber-attacks in 2022 that cost billions of dollars to combat. While this will likely improve in the future, these events are still impacting the ability of the wealthy to invest and grow their wealth.
The loss of wealth among the rich was more pronounced in some regions than others, with the Asia Pacific and Latin America seeing wealth declines of $2.1 trillion and $2.4 trillion, respectively. Those who did see gains in wealth included Russia, Mexico, India, and Brazil, with each region benefiting from the appreciation of their currencies against the US dollar. These countries also have a more stable political and economic environment than some major economies experiencing wealth losses, such as Japan, China, Canada, and Australia.
