A new report reveals that the United States saw a net increase of 600,000 millionaires last year, far outpacing other regions in the world and generating record-breaking wealth. Despite market uncertainties globally, the number of millionaires continues to rise, with a growth rate of 5.1% recorded last year.
Released on June 5 by consulting firm Capgemini, the World Wealth Report of 2023 shows a 5.1% increase in the global population of millionaires, reaching 22.8 million individuals. Their total wealth saw a 4.7% growth, hitting a record high of $86.8 trillion.
Capgemini defines millionaires as individuals possessing investable assets of $1 million or more (excluding primary residences, collectibles, or durable consumer goods).
The report highlights that for the world’s largest economy, the United States, the number of millionaires grew by 7.3% in 2023, reaching 7.5 million individuals. Their total wealth surged to $26.1 trillion, a 7% increase from 2022.
In 2023, the recovery of high net worth individuals in North America was the most robust globally, with a 7.1% rise in population and a 7.2% increase in wealth. The report attributes this momentum to a strong economic resilience, moderated inflation pressures, and a rebound in the US stock market. While similar trends exist in most markets, both in terms of wealth and the quantity of high net worth individuals, the extent varies.
According to a report by CNBC, Elias Ghanem, Global Head of Capgemini’s Financial Services Research Institute, stated that while in the years preceding the Covid-19 pandemic, Asia had surpassed North America in the population and growth rate of millionaires, the United States has now reclaimed its dominant position.
Aside from North America, the Asia-Pacific region saw the strongest growth in millionaire population at 4.8%, corresponding to a 4.2% wealth increase. This was followed by Europe, with millionaire population and wealth growth at 4% and 3.9% respectively; Latin America experienced a 2.7% growth in millionaire population and a 2.3% increase in wealth; the Middle East saw a 2.1% rise in millionaire population and a 2.9% growth in wealth; while Africa witnessed a 0.1% decline in millionaire population and a 1% drop in wealth, reportedly influenced by falling commodity prices and reduced investments.
The wealth of the highest-tier individuals grew the fastest. In 2023, the number of Americans with a net worth of $30 million or more increased by 7.5% to reach 100,000 people, and their wealth skyrocketed to $7.4 trillion.
Globally, ultra-high net worth individuals represent only 1% of millionaire population, yet they hold 34% of the wealth, indicating a growing concentration of wealth even among the affluent.
The report notes a shift in investment behavior among the wealthy, with a transition from safe wealth-preserving assets to more growth-oriented assets. Holdings in cash and cash equivalents, which previously accounted for 34% of investment portfolios in early 2023, dropped to 25% in January of this year, signaling a move to deploy cash.
Despite strong performances by major stock indices this year – the S&P 500 index has risen by 12% and the Nasdaq Composite index by 14% to date – affluent investors are avoiding markets mainly driven by a few large tech stocks.
Ghanem suggests that alternative investments, particularly private equity and private credit, may see the largest inflow of funds from affluent investors this year. Research indicates that two-thirds of millionaires plan to increase their investments in private equity in 2024.
“Everything is cyclical – with private equity underperforming, this presents a good entry point,” he said. “They believe that entering now, when prices are lower, is a good long-term investment.”
The biggest question is whether the decade-long wealth prosperity can be sustained. This prosperity initially stemmed from low interest rates and liquidity, later propelled by pandemic stimulus policies and artificial intelligence. Ghanem emphasizes that global conflicts, elections, interest rates, and potential economic slowdowns could all potentially hinder wealth creation.
“The past decade has been extraordinary,” Ghanem stated. “We now face inflation, potential recessions, geopolitical issues, and elections. The landscape is completely different.”