The World’s Richest Are Getting Richer Again - Kanebridge News
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The World’s Richest Are Getting Richer Again

By ABBY SCHULTZ
Thu, Jun 6, 2024 9:10amGrey Clock 3 min

A resilient global economy is leading to a rise in wealth once again for the world’s richest individuals, despite plenty of economic and geopolitical uncertainty, according to a new report.

Globally, the population of those with at least US$1 million in investable assets rose by 5.1% last year to 22.8 million, while their wealth rose 4.7% to US$86.8 trillion, according to the 28th annual World Wealth Report from Capgemini Research Institute, a global think tank division of Paris-based Capgemini.

It’s a sharp difference from a year earlier, when global wealth fell 3.3% to US$83 trillion.

The growth trend was particularly evident in the U.S. last year, where economic resilience, slowing inflation, and soaring U.S. stocks led to a 7.3% increase in the population of those with at least US$1 million in investable assets to 7.5 million, Capgemini said. The wealth of these individuals rose 7% to US$26.1 trillion.

“We are back in business,” says Elias Ghanem, global head of Capgemini Research Institute for Financial Services. “It’s a good message for the economy, it’s a good message for the people, and it’s a good message that growth is back on stage.”

Among the ultra wealthy—those with at least US$30 million in investable assets—the global population rose by 5% to 220,000, while their wealth grew by 3.9% to about US$29.4 trillion. That represents 34% of total global wealth, according to Capgemini.

A big reason for the upturn in wealth was a strong recovery in global stocks, and the fact that the wealthy moved their assets out of cash and cash equivalents. Globally, this population’s average allocation to cash was 34% as of January 2023; by January this year, cash allocations dropped to 25% on average.

“There’s a move in the high-net-worth mind from wealth preservation back to growth, and that’s good,” Ghanem says.

Although average global stock allocations dropped to 21% as of January this year from 23% a year earlier, the wealthy boosted their allocations to fixed-income by 5 percentage points to 20%, to lock in higher rates, Ghanem says. They also moved money into real estate as prices declined, increasing that investment, on average, by 4 percentage points to 19%.

“As interest rates went up, the real estate to be sold increased, and thus the price went down, and high-net-worth individuals leveraged the opportunity to invest,” Ghanem says. That investment has a positive ripple effect on the broader economy, he says.

The wealthy also boosted their allocations to alternative investments, mostly private equity and private credit, by 2 percentage points to 15%. That’s money that funds the private sector, where businesses are engaged in creating industries and products “that are essential to transforming our economy,” Ghanem says.

The message all these moves make: “Money is circulating again and money circulating is growth for everyone,” he says.

Capgemini’s annual report doesn’t predict the future, but the shifts in asset allocation point to a new perspective by the wealthy that takes into account the shocks of the recent past, from the pandemic, to inflation, and war.

“The business environment has considered these factors and is able to manage them,” Ghanem says.

Whether China reopens for business remains “a big question mark,” however, he says. Though the Nasdaq stock index in the U.S. gained 43% in 2023, after tumbling 34% a year earlier, the Shanghai Stock Index posted a decline of 3.7% last year, better than a nearly 15% drop a year earlier, but still sluggish.

As a result, Asia has yet to regain its status as the world’s wealthiest region—which it was from 2017-19, on the strength of growth in both China and India, Ghanem says.

The report was based on a survey of 3,119 individuals (including more than 1,300 ultra-wealthy) living in 26 markets in North America, Latin America, Europe, the Middle East, and Asia-Pacific, the firm said.

The findings are aimed at wealth management firms serving these elite populations across the globe. Among the uber-wealthy, Capgemini warns these firms have competition from family offices that are better positioned to orchestrate non-financial services, such as education or travel, and to bargain among banks to get the best deals, and services. That’s reflected in the fact the number of wealth management firms hired by the ultra-wealthy has risen to seven on average from three in 2020, Capgemini found.

“With their diverse operating models fully aligned with the objectives of the families they service, family offices are becoming more visible and are significantly challenging traditional wealth management firms,” the report said.

Capgemini’s conclusion: Wealth management firms need to decide if they want to compete against family offices or collaborate with them.

One way the report urges them to compete is by developing behavioural finance technology driven by artificial intelligence. These systems can be trained to understand biases and identify them early on to help individuals avoid making bad decisions, Ghanem says.

“One of the strongest messages of the report is that it’s time for the banks to leverage AI-powered behavioural finance to interact better with their clients,” he says.



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These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

By KEN SHREVE
Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at  ken.shreve@investors.com .