Why the World Has More Millionaires Than Ever, Despite the Pandemic

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You might have heard, but there was a bit of a globanel pandemic last year and it did a number of the world’s economy.

In the U.S. alone, gross domestic product (GDP) fell at a stunning annual rate of 32.9% in the second quarter of 2020, according to the Bureau of Economic Analysis. Add that to Q1 2020, when GDP decreased by 5%. It was a mess, and the economic fallout has been well covered by now.

So why do we have so many new millionaires?

Let’s go to the data: According to the 2021 Credit Suisse Global Wealth Report, the number of millionaires globally jumped to 56.1 million in 2020, adding 5.2 million new members in the midst of the coronavirus pandemic and related economic downturn. And that’s not all. The number of ultra high net worth individuals who have net worths of $50 million and above grew by 24% last year to just over 215,000.

The bank’s data set included both housing as well as investable assets when estimating net worth. According to the report…

  • Millionaires’ share of global wealth rose from 35% in 2000 to 46% in 2020 — reaching $191.6 trillion.
  • To be a part of the global top 1% now requires a net worth of more than $1,055,337, up from $988,103 from a year ago.
  • The U.S. contributed 1.7 new millionaires and 21,323 new ultra high net worth individuals to the total last year, followed by Germany with 633,000 new millionaires and 1,630 ultra rich individuals.

Credit Suisse speaks: “Wealth creation in 2020 appears to have been completely detached from the economic woes resulting from COVID-19. In the lower wealth bands where financial assets are less prevalent, wealth has tended to stand still, or, in many cases, regressed.” — Anthony Shorrocks, economist and author of the report

A larger slice of a larger pie.

Overall, global wealth was driven in 2020 by the U.S. stock market rebound and rising housing prices supported by low interest rate policies, adding $28.7 trillion to end the year at $418.3 trillion. 

But, at the same time, income inequality has grown exponentially across the world as the rich get richer and the rest of us more or less stay the same.

Why?

The Credit Suisse report offers some clues. Simply put, wealthy individuals don’t suffer so much from the ups and downs of economic cycles. They have plenty of capital to pay their bills so they don’t need to worry about short-term concerns and have cash sitting on the sidelines to invest when prices drop.

That’s one of the things that drove the stock market rebound in 2020. Wealthy investors bought at the bottom of the market and rode the gains up throughout the year. In fact, just recently the S&P 500 notched a 100% gain from the lows of March 2020. Imagine if you had invested when stocks were at their lowest and just doubled your money.

Cheap money was another reason.

As governments all over the world scrambled to bail out struggling businesses and help their citizens with cash infusions and low interest rates, the wealthy were able to use those policies to invest more and drive the market forward.

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