$9 trillion decline as global wealth falls for first time since 2008

The financial assets of high net worth individuals around the world has fallen for the first time in more than a decade, according to new research. North America and Western Europe were the regions where millionaires were worst hit – seeing assets decline by around 8% and 3% respectively.

One week after a study from Capgemini found that the wealth of the super-rich declined by $3 trillion in the last 12 months, another report from Boston Consulting Group has discovered that overall global wealth has also declined noticeably. The former might have prompted many people to break out the world’s smallest violin for struggling millionaires everywhere – but the latter has wide-reaching implications for households around the world.

According to the BCG report, global financial wealth saw almost 15 years of consistent growth grind to a halt in 2022

Amid heightened inflation, leading to a decline in the spending power of regular consumers around the world, global wealth fell by 4% – to $255 trillion.

The drop was worst felt in North America, where financial assets tumbled by 8.1% over the course of the year. A chaotic year for stocks and shares, as well as the inevitable bursting of the cryptocurrency bubble, saw the region record huge losses in wealth throughout 2022.

Assets in Western Europe also endured a torrid 2022, sinking by 2.8%. The war in Ukraine, and sanctions against oligarchs linked to the government of Vladimir Putin, resulted in an exodus of wealth from the region.

As a result, along with a 1.5% decline in Eastern Europe, the regions drove the first downturn in the global financial wealth market since the 2008 crisis. The findings stand in stark contrast to BCG’s previous findings, too, which saw a 10% rise in value in 2021 – one of the sharpest in over a decade.

In this case, the study considered the wealth of all income groups. These included ‘retail’, or those with income between $0 and $250,000, all the way up to ultra-high net worth individuals (UHNWIs) making more than $100 million per year. While BCG did not break down the losses of wealth into these groups, historically society’s poorest are the ones hit hardest by a downturn – and that may well continue to impact the ability of the majority of the world’s population to spend their money; driving further economic headwinds in the future.

Even so, BCG maintains that there are some ‘silver-edges’ to the clouds over the economic picture. Bright spots included a 6.2% increase in the value of personal cash and deposits, as a more risk-averse approach to investments prevailed. Meanwhile, the value of real assets, ranging from real estate to art, also rose by 5.5% to reach $261 trillion – leading BCG to conclude total absolute global wealth had ‘grown’ to $516 trillion in 2022, a 1% increase compared with 2021.

But as the average person is unlikely to have a Picasso stored away in the garage, it is unlikely that these benefits will be felt beyond the UHNWI category that is largely recession-proof anyway.

Michael Kahlich, a BCG managing director and partner, and co-author of the report, commented, “We expect that the improving macroeconomic outlook and rebound in stock markets will drive a return to growth in financial wealth as early as 2023, and our five-year compound annual growth rate forecast to 2027 remains a healthy 5.3%.”