Wealth trends the past TWO decades | FI SENSE
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Significant growth in household trends has been witnessed in the past 20 years. Using the current USD exchange rates, the Global Wealth Report 2020 by Credit Suisse reports a total increase from USD 117.9 trillion in 2000 to USD 399.2 trillion in 2019, which averages to a growth of 6.6% each year.

“There have been two distinct phases separated by the global financial crisis: a “golden era” between 2000 and 2007 when total wealth grew by 10.3% p.a., followed by a sharp 7.5% decline in 2008, after which growth resumed at a modest pace averaging 5.7% p.a. from 2008 onwards.” – Credit Suisse 2020.

It seems that the financial crisis in 2008 has permanently damaged the growth prospects for household wealth. Similar trends can be witnessed when allowance is made for population growth, such that “Wealth per adult in US dollars grew by 4.9% per annum during 2000–19, split between 8.2% pre-2008 and 4.1% post-2008” – Global Wealth Report 2020 (Credit Suisse). These signs do not portray a good omen for wealth growth post the COVID-19 crisis. However, when analysing the trends, a better and positive assessment emerges. In the beginning of the 2000s, the widespread depreciation of the US dollar has flattered the wealth growth in USD terms, more precisely amongst the Eurozone countries. Post-2007, the situation was reversed, and the US dollar appreciated causing wealth growth contracted for nations not pegged to the US dollar.

Such distortions can be rectified by fixing the USD exchange rates. The Credit Suisse reports an average global growth of 4.9% in wealth per adult for this century. However as seen below in figure 1, the time pattern is markedly different. With fixed exchange rates, there is no secular decrease in wealth growth post the 2008 financial crisis. Instead, an average growth of 5.6% per annum after 2008 slightly exceeds the rate (5.5%) before the year 2008.

The Global Wealth report 2020 by Credit Suisse suggests that whilst data implies that financial crisis could have dampened wealth growth for some years, they do not entirely support that it permanently damaged the worldwide prospects for wealth growth.

 

 

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