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Global Wealth Hits $400 Trillion For First Time Ever, Despite Covid-19

Despite the pandemic plunging economies worldwide into their deepest slumps on record and tens of millions being made unemployed, global wealth has risen to its highest level ever.

Since the start of the year, total household wealth has grown by $1 trillion, or 0.25%, to top $400 trillion for the first time, according to Credit Suisse’s CS annual global wealth report.

Most of this increase has been due to the rapid rebound of stock markets from their March lows. This was driven by governments pumping billions into their economies to stave off collapse as the pandemic gathered pace.

On the face of it, the average global household’s wealth is little changed in 2020, despite the economic turmoil. But drilling deeper into the numbers reveals huge disparities, with the headline figures masking a vast gulf between the economic winners and losers this year.

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Average household wealth rose by 0.25% between the start of the year and the end of June. However, average wealth per adult actually fell slightly, by 0.4% to $76,984 because the number of adults rose quicker during the six months.  

Anthony Shorrocks, Credit Suisse’s economist and the report author, said: “Given the damage inflicted by Covid-19 on the global economy, it seems remarkable that household wealth has emerged relatively unscathed.”

The volatility this year has been a marked contrast to the upward trajectory of wealth growth seen in 2019. Last year, total global wealth rose by $36.3 trillion, or 8.5%, a record pace as global stock markets surged. In the first three months of this year, $17.5 trillion was wiped off household wealth worldwide as the onset of the Covid-19 pandemic sparked a savage equity crash. The subsequent recovery meant that total household wealth is slightly up on the year. 

Riding the stock market rebound

The gyrations in global wealth are strongly correlated with the stock markets and equity ownership is one of the key metrics that separates the haves and have nots. More than half of the shares owned by American investors are held by the richest 1%, according to research by Goldman Sachs GS earlier this year.

Many of the world’s wealthiest individuals have been the biggest beneficiaries of the pandemic. 

UBS’s annual global billionaires report earlier this month calculated that the wealth of the world’s billionaires surged by more than $2 trillion to an all-time high of $10.2 trillion between April and July.  

The fortunes of the super-rich grew by 27.5% between April and July, smashing the previous record of $8.9 trillion set at the end of 2017. The number of billionaires also increased from 2,158 in 2017 to 2,189. 

Credit Suisse believes the emerging picture among the wealthy is a bit more nuanced though. It says clearly many billionaires “benefited enormously”, citing Amazon AMZN boss Jeff Bezos, Elon Musk the Tesla TSLA founder, and Facebook’s Mark Zuckerberg, who each saw their wealth swell by over 50%. 

The bank’s data suggests that the top 1,000 billionaires saw a smaller 21% rise in their wealth between 18 March and 30 June, during the stock market recovery. But on average their wealth remained 15% below the level on 19 February, which Credit Suisse says was the 2020 peak, at the end of June.

Similarly, the research found that rather than universally making hay, the picture has been much for mixed for the next two wealth tiers.

After rising by 11% to 175,690 in 2019, the number of ultra-high net worth (UHNW) -those worth north of $50 million – has fallen by 120 in 2020. The 51.9 million-strong ranks of millionaires at the start of the year dipped by 56,000. 

Many households are now considerably worse off

But the real pain has of course been felt by those at the bottom of the wealth pyramid. 

“The low-skilled, women, minorities, the young and small businesses have all suffered,” the report said.

Focusing on the U.S., African-Americans have suffered the double blow of higher mortality rates from Covid-19 and higher job losses in the aftermath. Data from the Centers for Disease Control and Prevention (CDC) show 2.6 times more coronavirus cases were recorded among African-Americans than Caucasians. This figure rose to 2.8 times higher among Hispanics and the indigenous population.

At the same time, 7.5% of white workers lost their jobs between February and June, compared to 11.5% of African-Americans and 12.3% of Hispanics. New jobless claims peaked at 40 million in May.

“Ironically, wealth impacts per affected person may have been smaller for these minorities because they had little wealth to begin with and poor borrowing opportunities,” the report said. 

According to the 2016 U.S. survey of consumer finance, the median wealth of Hispanics was just 12.1% of that of Caucasians, and the African American median only 10.1%.

The report found that female workers have also suffered disproportionately, “partly because of their high representation in businesses and industries such as restaurants, hotels, personal service and retail that have been badly affected by the pandemic”.

Worldwide, the Organization for Economic Co-operation and Development (OECD) said in the second quarter, 7.5% of men lost their jobs compared to 9.5% of women.

Less-educated workers also saw higher job attrition rates. In Canada, for instance, unemployment rose by 17.1% among workers who did not graduate from high school versus 14.7% for high school graduates. Only 5.6% of university graduates lost their jobs.

“Since those losing their jobs are likely to run down their liquid assets or take on more debt, women, the young and the less educated likely saw a reduction in their relative wealth,” Credit Suisse added.

Source: Forbes – Money

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