US-China trade war and interest rate rises spell losses for the super-rich
Donald Trump’s trade war with China and fears over rising interest rates triggered stock market losses worth $2tn (£1.6tn) for the world’s super-rich last year.
After seven years of steadily rising wealth, the richest people on the planet saw the combined value of their assets slide by 3% from a year earlier to stand at $68.1tn as financial markets plunged against a backdrop of rising tensions, with China hit the hardest by the decline.
The US-China trade war and the US Federal Reserve raising interest rates against a backdrop of rising concerns over the global economy sent stocks into a tailspin last year, hitting the investments of pensions funds and the global elite.
According to the annual world wealth report from the consultancy firm Capgemini, which surveys the global elite, the number of “high net worth individuals” (HNWI) dropped by about 100,000 to stand at 18 million.
A high net worth individual is defined as anyone with $1m (£641,000) or more in “investable assets”. The definition excludes the value of a main home and of any consumer durables such as cars.
Asia accounted for about $1tn of the decline in the total wealth of the world’s super-rich, with China accounting for more than a quarter of the fall in total HNWI wealth against a backdrop of plunging Chinese stock markets.
HNWI wealth declined across nearly all other regions: Latin America declined by 4%, Europe by 3% and North America by 1%, while wealth rose by 4% in the Middle East. The total wealth of the US super-rich declined by 1%, despite US GDP rising and the rate of unemployment dropping to the lowest level since the 1960s.
In the worst annual performance since the financial crisis, the widespread turmoil dragged the FTSE AllWorld index down 11.5%. More than £240bn was erased from the value of London-listed shares, while the Shanghai composite index crashed by 25%, leaving investors suffering heavy losses.
“Global stock markets started 2018 with a strong note, but as the year pro
gressed, momentum was lost, and the year ended on a low note – primarily because of growing interest rates and trade concerns,” Capgemini said.
While the world’s wealthy were left nursing large losses, their position still sharply contrasts with the rest of the planet. The 18 million HNWI individuals have at least $3m each, on average, while the total wealth pile of $68.1tn is almost worth as much as the total output of the world economy each year.
Oxfam warned earlier this year that the rising concentration of the world’s wealth meant 26 billionaires own as many assets as the 3.8 billion people who make up the poorest half of the planet’s population.
According to research from the International Labour Organization last week, nearly half of all global pay is scooped up by the top 10% of workers, while the lowest-paid 50% receive only 6.4%.
Although the wealth of the superrich declined last year, stock markets have raced back into life in 2019 after the US Fed and the European Central Bank stepped back from raising interest rates, likely reinflating the portfolios of HNWI investors.
Hopes have also risen for a deal between Washington and Beijing in the trade war between the world’s two largest economies, which has served as a brake on global economic growth over the past year.