Sliding Markets Sink Global Wealth by 2.4% in 2022, Cutting Number of Millionaires by 3.5 million

A silver lining is that wealth inequality also declined. The share of wealth of the top 1% globally fell to 44.5% from 45.6% as the richest people lost money in tumbling stock and bond markets. Global median wealth, which Credit Suisse and UBS said offers a more accurate indicator of a typical person’s situation, actually rose 3% last year to US$9,167 per adult. 

The number of millionaires (in U.S. dollar terms) fell by 3.5 million to 59.4 million, according to the report. These figures don’t account for 4.4 million individuals whose wealth rose above US$1 million due to inflation, Credit Suisse and UBS said. 

The 2023 edition of the Global Wealth Report estimates the wealth of about 5.4 billion adults in about 200 countries, from blue-collar workers to billionaires. The report has been done each year until now by Credit Suisse, which was officially acquired by UBS in June.

The purpose of the research, considered the most comprehensive of its kind, is to provide insights into global private wealth, said Paul Donovan, chief economist of UBS Global Wealth Management, in a news conference after the report was released. Those insights are critical because of the role private capital will play as the world grapples with a new kind of economics that considers “sustainability and equity alongside humanity’s material wants,” Donovan said. 

“We’re at the start of a truly astounding period of structural change in the global economy,” he said. 

The Role of Sliding Markets

Overall, global wealth—defined as financial and nonfinancial assets (such as real estate) minus debt—is affected by price changes, currency fluctuations, inflation, and interest rates, the report’s authors said. 

Appreciation in the value of the U.S. dollar and inflation had their own impacts in the shifting wealth picture last year, but a 6.8% drop in global stock and bond markets—a loss of US$19 trillion—had the most profound effect, particularly for wealthy countries.

The biggest impact was in North America and Europe, which together lost US$10.9 trillion, the report said. The U.S.—home to more ultra-rich individuals than any other nation—led the world in wealth losses in 2022, followed by Japan, China, Canada, and Australia. 

In the U.S., financial assets fell 9.1% overall, led by a 20.5% drop in stocks and mutual funds. The decline was offset by rising real estate prices, which contributed to a 12.7% gain in nonfinancial assets. Canadians lost out on both financial assets, which fell 6.5%, and nonfinancial assets, which fell 10.4%, as short-term mortgages in the country tend to make house prices fluctuate more along with interest rates, the report said. 

Among the winners last year was Latin America, which saw a 2.4% increase as the region’s currencies gained 6% on average against the U.S. dollar. But James Davies, an emeritus professor of economics at the University of Western Ontario, said the region’s countries also benefited from economic growth and a demand for housing. 

Financial assets may have played the most important role in global wealth trends last year, but the rise in the value of the dollar was another factor. If exchange rates had held steady from 2021 to 2022, total wealth would have risen by 3.4%, while wealth per adult would have increased by 2.2%. 

Still, inflation would have undermined much of those gains, bringing global wealth down by 2.6%. 

Wealth Inequality Narrows

Since the year 2000, global median wealth levels have been rising. The segment of the wealth pyramid representing those with wealth ranging from US$10,000 to US$100,000 more than tripled in size to 1.8 billion by the middle of last year from 503 million in 2000, the report said. 

Emerging economies have dominated this segment of the global population, particularly China, which grew rapidly in this century’s first two decades. Today, China has moved to the “upper-middle” of global wealth distribution, “so it’s other countries, like India to some extent and other emerging markets, where there is quite rapid growth in wealth,” Davies said. “That’s the engine for the growth and the equity of wealth in more recent years.”

In the U.S., the Distribution of Financial Accounts published by the Federal Reserve—which the report said is the best source of information on wealth distribution—suggests the pandemic created a “clear shift” toward inequality in 2020, and then a move toward equality last year, while in 2021, wealth was distributed to those in the top 1% and the bottom 50%, and away from those in percentiles 51-99, the report said.

The bottom 50%, the report continued, benefited mostly from a rise in nonfinancial assets, since they make up a bigger portion of their wealth. 

Report author Anthony Shorrocks cautioned anyone from drawing too many conclusions from 2022 data showing a downtick in inequality. 

“We are in years in which there are a lot of changes and it’s not quite clear now these things are going to settle in the future,” Shorrocks said. 

Fewer Ultra-Wealthy—for Now

The number of individuals with US$50 million or more in assets dropped by 22,490 to an estimated 243,062, by UBS and Credit Suisse’s calculations. 

Most of those who dropped out of this category—81%—live in the U.S., which is unsurprising considering that the U.S. is home to 51% of all ultra-wealthy individuals, the report said. China is second, with 14% of this elite population.

The drop in the number of ultra-wealthy is unusual, the report said, noting these individuals are “four times as common” as they were in 2008, and have risen by more than 60,000 in the last three years. 

Davies pointed out that several individuals are on the cusp of the US$50 million threshold and are likely to cross it as markets rise. In fact, the report estimates that the ultra-wealthy will continue to gain in number, reaching a total of 372,000 individuals by 2027. 

Those gains will be driven by a 38% rise in global wealth overall in the next five years to a total US$629 trillion, driven by growth in middle-income countries, the report said.