"The rich get richer and the poor get poorer." The 2015 Global Wealth report by Boston Consulting Group (BCG) does not address the latter half of that famous old phrase, but it does confirm the first half.
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Global Wealth 2015 projects that total worldwide wealth in the hands of millionaires will increase to 46% by the year 2019, compared to the 2014 value of 41%. That is propelled by a 7.7% growth rate in wealth for millionaires — more than twice the 3.7% growth rate expected from non-millionaires.
At the very upper end, households that have $100 million or more in wealth are expected to hold approximately $13 trillion by the beginning of 2019, or around 6.5% of global wealth. Collective private wealth is estimated at $164.3 trillion in 2014 and is expected to climb to $222.1 trillion in 2019, representing a compound annual growth rate (CAGR) of 6%.
The numbers are even more staggering considering that the wealth value only applies to holdings with relatively high liquidity — primarily cash, bonds, and stocks. Real estate, stakes in businesses, luxury goods, and other assets that are less liquid were excluded from the calculation. It is hard to say whether the greater collective home ownership in non-millionaires would cancel out or trump business ownership and other less conventional assets of the rich. However, it is reasonable to assume the BCG projection is conservative.
These projections should not be terribly surprising. The report confirms that 73% of the wealth growth in 2014 was through existing assets (equity returns, bond returns, and interest on cash and bonds) compared to new wealth (GDP growth and savings rates). In the more stagnant Japanese economy, existing assets account for a whopping 96% of wealth growth.
Stock market reactions may tilt the balance even further. In the millionaire class, there is a split in asset allocation. In 2014, 41% of the millionaire classes' wealth was in stocks, but in the group at $100 million and above that proportion drops to 29% with more cash holdings. A stock market swoon will knock some millionaires down, but the ultra-wealthy will be in better shape with their cash holdings, and they are likely to take advantage of the opportunity.
The overall number of millionaires is increasing, primarily in China. There were approximately one million new millionaire households in China, bringing the total to four million. The U.S still leads with seven million millionaire households, and Japan is a distant third with one million millionaires.
According to the report, the trend of greater wealth toward China and the other Asian-Pacific nations (excluding Japan) is expected to continue. China is projected to hold 34% of the world's wealth in 2019 instead of their current 29%. This share increase comes at the expense of North America, Western Europe, and Japan, who are all expected to decrease their share by 2-3%. The rest of the world is predicted to increase its share by approximately 1%.
The highest concentration of millionaires is found in Switzerland, with 13.5% of all households having worth of greater than $1 million. When the threshold is raised to $100 million or more, Hong Kong takes the concentration title at 15.3 in every 100,000 households reaching that level.
The BCG report simply reinforces what economists have been noting for some time about increasing wealth inequality. The interesting question is what governments will attempt to do about it, and whether or not the resulting policies create a larger or smaller number of worldwide millionaires in the process.
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