Credit Suisse reports first global wealth dip since 2008 crash

The U.S. asset dip and 4 other takeaways from Credit Suisse wealth report

August 15, 2023 5:14 PM

Matthew Lloyd/Bloomberg

The U.S. — despite losing $5.9 trillion in total wealth in 2022 — held its place near the top of richest countries and had the greatest share of ultrahigh net worth individuals.

So found the Global Wealth Report 2023, released Tuesday by Credit Suisse and UBS Group. The drop in U.S. wealth came during a year that also saw total net private wealth across the world fall by 2.4% to $454.4 trillion, marking the first decline in that measure since the 2008 economic crash. Much of the decrease was concentrated in North America, where households' total wealth decreased by 4.5% to $151.2 trillion.

Globally, the average wealth of the roughly 5.4 billion adults alive in 2022 dropped by 3.6% to $84,718. The report found the decline was largely the result of the appreciation of the U.S. dollar against other currencies. A strong dollar can put countries in a difficult position because it causes the cost of imports to rise while also making it more expensive to pay debt owed in U.S. currency.

Last year's downturn is expected to be a blip. Credit Suisse and UBS predicted global wealth will increase by 38% in the next five years to $629 trillion by 2027. Both in the U.S. and globally, the headcounts for millionaires and ultrahigh net worth individuals are expected to show substantial increases in the same period.

Such prospects in the U.S. are central to the wealth management ambitions of UBS. The Swiss-based bank's acquisition of the faltering Credit Suisse in June cemented its position as the global leader of wealth management. But it still has room to move up the ranks in the world's richest country.

Johann Scholz, a Morningstar analyst specializing in European banks, has estimated that the share of UBS' total profits that come from its wealth and asset management business will rise to 63% in the next four years. Much of that will come from the bank's strength in working with the ultrarich.

"Ultra-high-net-worth clients value strong relationships with their bankers, typically built over years, often across generations," Scholz wrote in an analyst note.

Scroll down for more highlights from the Global Wealth Report, which is in its 14th edition this year and is being released for the first time as a joint product of Credit Suisse and UBS.

Total U.S. wealth

Even with its decrease in total wealth in 2022, the U.S. had the second highest average wealth among its adult population for any country in the world. The median wealth of U.S. adults was down 5.3% year over year to $531,826. That put the U.S. behind only Switzerland, where the average wealth of adults was $685,230 last year.

In both the U.S. and other parts of North America, the declines were driven by wealthy adults' tendencies to hold a large share of their assets in stocks and other equities. The stock market decline in 2022 drove North Americans' holdings in financial assets down by $11.2 trillion, a decrease of 9%.

That came after a year of surging markets in the U.S. and elsewhere.

"The decline was driven by financial assets, which fell 9.1%, with corporate equities and mutual funds leading the way, falling 20.5%," according to the report.

Nannette Hechler-Fayd'herbe, the global head of economics and research at Credit Suisse, said some of those losses have no doubt been reversed now by market gains seen so far this year.

"In the United States, the good financial markets and how they are impacting financial asset growth has worked in the favor of private household growth," she said.

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Meanwhile, the report found that people who held most of their wealth in nonfinancial assets — primarily real estate — tended to fare better in 2022. Latin American countries were the outliers last year with their nearly 19% growth in private wealth, bringing the total to $15 trillion. A big driver of that was a $1.7 trillion increase in the value of nonfinancial assets in those countries.

The super rich

For wealth managers seeking to work with ultrahigh net worth individuals — defined in the report as people worth $50 million or more — the U.S. remains the place to be. The U.S. had 123,870 members of this exclusive club, or roughly 51% of the global total. The second closest country was China, which had 32,910 ultra high net worth individuals last year.

The good news for wealth managers who are eager to work with the super rich is that these figures are expected only to grow in coming years. Even though the number of ultrawealthy adults showed a slight dip in the U.S. and many countries in 2022, the global total is expected to rise by 129,000 to 372,000 by 2027. In the U.S. over the same five-year period, the number of millionaires is expected to increase by 16% to 26.4 million.

James Davies, an author of the report and a member of the University of Western Ontario's department of economics, said the findings bode well for people in the financial planning business "because they mean wealth is becoming only more important."

A (slightly) more equal world

One side effect of the rich seeing their total net worth dip a bit last year in most countries was that it flattened out inequality in many places around the world. In the last quarter of 2022 in the U.S., the share of the country's total wealth held by the least affluent half of the population rose slightly year-over-year from 2.5% to 3%. Meanwhile, the proportion held by the richest 0.1% fell from 19.2% to 18.5%.

To be sure, the changes were marginal and are likely to be at least partially erased this year with the return of surging stock markets. But globally, inequality is on the decline, particularly with the rising household wealth of China and India.

And median wealth, a measure that's less affected by outliers on the wealth spectrum and is thus a good gauge of how the typical person is faring, was up in 2022 even as total wealth was down. The Credit Suisse report found global median wealth rose by 3% last year.

"For the world as a whole, median wealth has increased five-fold this century at roughly double the pace of wealth per adult, largely due to the rapid growth of wealth in China," according to the report.

Demographic details

In the U.S., the only generational group to show a gain in its net wealth were millennials, whereas both millennials and Gen Xers did well in Canada. In the two countries, rising housing likely contributed to the rising figures.

The report found that white adults in the U.S. generally saw their wealth decrease by nearly 4% in 2022, and Black adults saw no significant changes. The big outlier was Latino households, whose net wealth rose by 9.2% in 2022, a result of their large holdings in real estate.

The effects of exchange rates and inflation

As noted above, much of the blame for the decline in net global wealth can be laid at the feet of the strong U.S. dollar. According to report authors, if the exchange rates between various world currencies had held steady between 2021 and 2022, then the world's wealth would have increased by a modest 3.4% and the wealth per adult by 2.2%.

But, as the report is also quick to note, inflation was a huge drag on wealth accumulation last year. If the effect of rising prices is factored in, the net outcome was still about a 2.6% loss in 2022.

In other words, last year did see the first decline in global wealth since the global crash of 2008. But that was more of a short pitstop along the road toward increased prosperity than a fork leading in an entirely new direction.