A bumper year
In 2019, central banks saved the day and gave stock markets around the globestrong tailwinds, bestowing households with the fastest growth in financial assets since the Great Financial Crisis (GFC): Gross financial assets jumped by +9.7% in 2019 and reached EUR 192 trn. This increase was widespread, with both emerging and advanced countries growing in sync. But while advanced markets clocked the strongest growth since the turn of the century, for Emerging Markets, it was only the fastest growth since 2016 .
Crisis? What crisis?
Then, Covid-19 hit the world economy and sent it into the deepest recession in 100 years. But will this wipe out huge chunks of wealth? Our estimates suggest that private households have been able to recoup their losses of the first quarter, recording a slight +1.5% increase in global financial assets by the end of the second quarter of 2020 as bank deposits, fueled by generous public support schemes and precautionary savings, increased by a whopping +7.0% since the end of 2019. It’s very likely that private households’ financial assets could end 2020 in the black .
Walking on the safe side
Fresh savings set a new record in 2019, increasing by +18.7% to almost EUR 3,000 bn. The increase, however, was mainly driven by U.S. households,
which accounted for 61% of all fresh savings. Saving behaviors are still tilted to the safe side: Only U.S. households (and German ones) were net purchasers of securities. Most other households share a penchant for liquidity and safety in a world of rising uncertainties and risks: Bank deposits remained by far the most popular destination for savings in 2019 for the ninth year in a row. At the same time, zero interest rates took a toll on insurance and pensions: Their share in total fresh savings have fallen from almost 60% in the aftermath of the GFC to a mere 26% in 2019.
Up in the air
Not surprisingly, securities were the best performing asset class in 2019: Booming stock markets led to an increase of +13.7%, after a decline of -5.1%
in 2018. Growth was never faster in the 21st century. The growth rates of the other two main asset classes were lower but still impressive: Insurance and pensions reached +8.1%, mainly reflecting the rise of underlying assets, and bank deposits increased by +6.4%. In fact, all asset classes clocked growth significantly above their long-term averages since the GFC .
To whom they have been given
The regional growth league table used to be dominated by Emerging Markets. Not so in 2019. The regions that saw the fastest growth in 2019 were by far the richest: North America and Oceania. In both regions, gross financial assets of households increased by a record +11.9%. As a consequence, for the third year in a row, Emerging Markets were not able to outgrow their much richer peers in the industrialized world. The catch-up process has stalled .
Debt is inching up
Worldwide household liabilities rose by +5.5% in 2019, a tad below the previous year's level of +5.7%, but also well above the long-term average annual growth rate of +3.9%. As debt grew slightly faster than GDP, the global debt ratio (liabilities as a percentage of GDP) inched up to 65.1%. Over the last decade, the distribution of global debt has changed. While the share of Advanced Markets is in decline, Emerging Markets account for an ever rising portion of global debt, first and foremost Asia (excluding Japan): its share has trebled over the past decade to 23.9%. In terms of liabilities per capita, however, the region remains a minnow: with slightly above EUR 3,000 it stands at a fraction of the levels seen in the Advanced Markets (EUR 33,550).
America remains at the top
If we subtract debt from gross financial assets, we are left with net financial assets. In 2019, they increased by a whopping +11.1% to EUR 146 trn on a global level. Net financial assets per capita amounted to EUR 26,410 (+10.3%). However, discrepancies between household assets in richer regions and those in the world's poorer regions remain huge. North America remains the richest region in the world, with average per capita assets of EUR 198,000 last year after deduction of liabilities. On the other hand, Eastern Europe was the region with the lowest net financial assets. At the end of 2019, households had an average of EUR 5,160 per capita.
Trend reversal
The prosperity gap between rich and poor countries has widened again. In 2000, net financial assets per capita were 87 times higher on average in the industrialized countries than in the Emerging Markets; by 2016 this ratio had fallen to 19. Since then, it has risen again to 22 (2019). This reversal of the catching-up process is widespread: for the first time, the number of members of the global wealth middle class has fallen significantly: from just over 1 billion people in 2018 to just under 800 million people in 2019. This negative trend could be further exacerbated by Covid-19.
The scars of the crisis years
Looking at the development since the turn of the century, the rise of Emerging Markets remains impressive. Adjusted for population growth, the global middle wealth class grew by almost +50% and the high wealth class by +30%, while the lower wealth class declined by almost -10%. The development in Western Europe, however, was the opposite: On the old continent, the number of members of the low wealth class increased and that of the high wealth class decreased. This reflects the crises of recent years – the Great Financial Crisis and in particular the Euro Crisis – which mainly affected the southern periphery; it is countries such as Greece, Portugal and Italy where the low wealth class has grown in number
A rich man’s world
The richest 10% worldwide – 520 million people in the countries in our scope with average net financial assets of EUR 240,000 – together owned roughly 84% of total net financial assets in 2019; among them, the richest 1% – with average net financial assets of above EUR 1.2 mn – owned almost 44%. The development since the turn of the millennium is striking: While the share of the richest decile has fallen by seven percentage points, that of the richest percentile has increased by three percentage points. So the super-rich do indeed seem to be moving further and further away from the rest of society.
Beware of simplifications
The popular narrative of societies drifting further and further apart does by no means apply to all countries. There is a broad spectrum of wealth distribution within countries, ranging from fairly equal societies to highly unequal ones, as our proprietary Allianz Wealth Equity Indicator (AWEI) shows. Among the countries with significant distribution problems (AWEI score above 5) are not only the U.S. but also the UK, South Africa, Indonesia, India and Russia, as well as Denmark, Sweden and Germany, hounded by high debt levels among large parts of the population (Sweden and Denmark) or the general shortage of capital-funded pension schemes as well as delayed reunification (Germany). At the other end of the spectrum, (AWEI score below 3), the usual suspects can be found: Japan, some Eastern European countries such as Slovakia or Poland and some Western European countries, namely Belgium, Spain, and Italy.
In 2019, central banks saved the day and gave stock markets around the globestrong tailwinds, bestowing households with the fastest growth in financial assets since the Great Financial Crisis (GFC): Gross financial assets jumped by +9.7% in 2019 and reached EUR 192 trn. This increase was widespread, with both emerging and advanced countries growing in sync. But while advanced markets clocked the strongest growth since the turn of the century, for Emerging Markets, it was only the fastest growth since 2016 .
Crisis? What crisis?
Then, Covid-19 hit the world economy and sent it into the deepest recession in 100 years. But will this wipe out huge chunks of wealth? Our estimates suggest that private households have been able to recoup their losses of the first quarter, recording a slight +1.5% increase in global financial assets by the end of the second quarter of 2020 as bank deposits, fueled by generous public support schemes and precautionary savings, increased by a whopping +7.0% since the end of 2019. It’s very likely that private households’ financial assets could end 2020 in the black .
Walking on the safe side
Fresh savings set a new record in 2019, increasing by +18.7% to almost EUR 3,000 bn. The increase, however, was mainly driven by U.S. households,
which accounted for 61% of all fresh savings. Saving behaviors are still tilted to the safe side: Only U.S. households (and German ones) were net purchasers of securities. Most other households share a penchant for liquidity and safety in a world of rising uncertainties and risks: Bank deposits remained by far the most popular destination for savings in 2019 for the ninth year in a row. At the same time, zero interest rates took a toll on insurance and pensions: Their share in total fresh savings have fallen from almost 60% in the aftermath of the GFC to a mere 26% in 2019.
Up in the air
Not surprisingly, securities were the best performing asset class in 2019: Booming stock markets led to an increase of +13.7%, after a decline of -5.1%
in 2018. Growth was never faster in the 21st century. The growth rates of the other two main asset classes were lower but still impressive: Insurance and pensions reached +8.1%, mainly reflecting the rise of underlying assets, and bank deposits increased by +6.4%. In fact, all asset classes clocked growth significantly above their long-term averages since the GFC .
To whom they have been given
The regional growth league table used to be dominated by Emerging Markets. Not so in 2019. The regions that saw the fastest growth in 2019 were by far the richest: North America and Oceania. In both regions, gross financial assets of households increased by a record +11.9%. As a consequence, for the third year in a row, Emerging Markets were not able to outgrow their much richer peers in the industrialized world. The catch-up process has stalled .
Debt is inching up
Worldwide household liabilities rose by +5.5% in 2019, a tad below the previous year's level of +5.7%, but also well above the long-term average annual growth rate of +3.9%. As debt grew slightly faster than GDP, the global debt ratio (liabilities as a percentage of GDP) inched up to 65.1%. Over the last decade, the distribution of global debt has changed. While the share of Advanced Markets is in decline, Emerging Markets account for an ever rising portion of global debt, first and foremost Asia (excluding Japan): its share has trebled over the past decade to 23.9%. In terms of liabilities per capita, however, the region remains a minnow: with slightly above EUR 3,000 it stands at a fraction of the levels seen in the Advanced Markets (EUR 33,550).
America remains at the top
If we subtract debt from gross financial assets, we are left with net financial assets. In 2019, they increased by a whopping +11.1% to EUR 146 trn on a global level. Net financial assets per capita amounted to EUR 26,410 (+10.3%). However, discrepancies between household assets in richer regions and those in the world's poorer regions remain huge. North America remains the richest region in the world, with average per capita assets of EUR 198,000 last year after deduction of liabilities. On the other hand, Eastern Europe was the region with the lowest net financial assets. At the end of 2019, households had an average of EUR 5,160 per capita.
Trend reversal
The prosperity gap between rich and poor countries has widened again. In 2000, net financial assets per capita were 87 times higher on average in the industrialized countries than in the Emerging Markets; by 2016 this ratio had fallen to 19. Since then, it has risen again to 22 (2019). This reversal of the catching-up process is widespread: for the first time, the number of members of the global wealth middle class has fallen significantly: from just over 1 billion people in 2018 to just under 800 million people in 2019. This negative trend could be further exacerbated by Covid-19.
The scars of the crisis years
Looking at the development since the turn of the century, the rise of Emerging Markets remains impressive. Adjusted for population growth, the global middle wealth class grew by almost +50% and the high wealth class by +30%, while the lower wealth class declined by almost -10%. The development in Western Europe, however, was the opposite: On the old continent, the number of members of the low wealth class increased and that of the high wealth class decreased. This reflects the crises of recent years – the Great Financial Crisis and in particular the Euro Crisis – which mainly affected the southern periphery; it is countries such as Greece, Portugal and Italy where the low wealth class has grown in number
A rich man’s world
The richest 10% worldwide – 520 million people in the countries in our scope with average net financial assets of EUR 240,000 – together owned roughly 84% of total net financial assets in 2019; among them, the richest 1% – with average net financial assets of above EUR 1.2 mn – owned almost 44%. The development since the turn of the millennium is striking: While the share of the richest decile has fallen by seven percentage points, that of the richest percentile has increased by three percentage points. So the super-rich do indeed seem to be moving further and further away from the rest of society.
Beware of simplifications
The popular narrative of societies drifting further and further apart does by no means apply to all countries. There is a broad spectrum of wealth distribution within countries, ranging from fairly equal societies to highly unequal ones, as our proprietary Allianz Wealth Equity Indicator (AWEI) shows. Among the countries with significant distribution problems (AWEI score above 5) are not only the U.S. but also the UK, South Africa, Indonesia, India and Russia, as well as Denmark, Sweden and Germany, hounded by high debt levels among large parts of the population (Sweden and Denmark) or the general shortage of capital-funded pension schemes as well as delayed reunification (Germany). At the other end of the spectrum, (AWEI score below 3), the usual suspects can be found: Japan, some Eastern European countries such as Slovakia or Poland and some Western European countries, namely Belgium, Spain, and Italy.