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A million dollars no longer gets membership of top 1% wealth club –Credit Suisse

A net worth of a million dollars is no longer enough to earn you a membership of the world's top 1% by wealth club.

Despite the worst health crisis in at least a century that sent most global economies into recession, global wealth grew 7.4% in 2020 to an estimated $418.3 trillion, according to the Credit Suisse Global Wealth Report 2021 published June 22. The increase was fueled by rising asset prices that surged after the initial shock from the COVID-19 pandemic, and a weaker U.S. dollar. The depreciation of the dollar last year alone added 3.3% to global wealth.

"Wealth creation in 2020 appears to have been completely detached from the economic woes resulting from COVID-19," said Anthony Shorrocks, a consultant for Credit Suisse and the author of the report. The pandemic had an acute short term impact on global markets, but it was reversed by the end of June 2020.

Global governments opened stimulus spigots and central banks pushed interest rates to record lows to counter the economic drag from the pandemic. Several countries, including Australia and developing Asian economies, resorted to quantitative easing for the first time, sending equity markets and property prices in many parts of the world soaring.

If asset price increases are set aside, global household wealth may have declined in 2020, Shorrocks said, noting that in the lower bands where financial assets are less prevalent, wealth has tended to stand still, or even regressed. Some of the underlying factors may self-correct over time. "For example, interest rates will begin to rise again at some point, and this will dampen asset prices," he said.

If exchange rates had stayed stable, total global wealth would have increased by 4.1% and wealth per adult by 2.7% last year. Wealth per adult rose 6% in 2020 to $79,952 after initially falling 4.7% due to the drag from the pandemic.

By region, total wealth rose by $12.4 trillion in North America and by $9.2 trillion in Europe last year. China added another $4.2 trillion. However, India and Latin America both recorded losses in 2020. Total wealth declined 4.4% in India and the loss was amplified by exchange rate depreciation, according to the report.

The number of millionaires globally expanded by 5.2 million to reach 56.1 million. As a result, an adult now needs to be worth more than $1 million to belong to the global top 1% group, up from $988,103 in 2019. "So, 2020 marks the year when for the first time, more than 1 percent of all global adults are in nominal terms dollar millionaires," according to the report.

Global wealth is projected to rise by 39% to reach $583 trillion by 2025, according to projections by Credit Suisse. Emerging economies, or low- and middle-income countries, are expected to contribute 42% of the growth, although they made just 33% of wealth in 2020.

Within the emerging economies, China and India are expected to be the strongest contributors. China was the first major global economy to be hit and also to recover from the COVID-19 pandemic, while India is still emerging from a deadly wave of COVID-19 and struggling to vaccinate its 1.3 billion population.

In the next five years, 28 million millionaires are expected to be added globally, taking the total to 84 million. The U.S. is expected to add 6.1 million new millionaires, followed by China with 4.9 million and Japan with 1.7 million. The number of ultra-high net worth individuals, defined as those with more than $50 million in assets, is expected to grow by 25,000 each year on average, totaling around 129,000 over the next five years, according to the report.