The World’s Richest Are Getting Richer Again

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.

U.S. investors’ enthusiasm over Japanese stocks at this time last year turned out to be misplaced, but the market is again on the list of potential ways to diversify. Corporate shake-ups, hints of inflation after years of declining prices, and a trade battle could work in its favor.

Japanese stocks started 2024 off strong, but an unexpected interest-rate increase in August by the Bank of Japan triggered a sharp decline that the market has spent the rest of the year clawing back. Weakness in the yen has cut into returns in dollar terms. The iShares MSCI Japan ETF , which isn’t hedged, barely returned 7% last year, compared with 30% for the WisdomTree Japan Hedged Equity Fund .

The market is relatively cheap, trading at 15 times forward earnings, about where it was a decade ago, and events on the horizon could give it a boost. Masakazu Takeda, who runs the Hennessy Japan fund, expects earnings growth of mid-single digits—2% after inflation and an additional 2% to 3% as companies return more to shareholders through dividends and buybacks.

“We can easily get 10% plus returns if there’s no exogenous risks,” Takeda told Barron’s in December.

The first couple months of the year could be volatile as investors assess potential spoilers, such as whether the new Trump administration limits its tariff battle to China or goes wider, which would hurt Japan’s export-dependent market. The size of the wage increases labor unions secure in spring negotiations is another risk.

But beyond the headlines, fund managers and strategists see potential positive factors. First, 2024 will likely turn out to have been a record year for corporate earnings because some companies have benefited from rising prices and increasing demand, as well as better capital allocation.

In a note to clients, BofA strategist Masashi Akutsu said the market may again focus on a shift in corporate behavior that has begun to take place in recent years. For years, corporate culture has been resistant to change but recent developments—a battle over Seven & i Holdings that pits the founding family and investors against a bid from Canada’s Alimentation Couche-Tard , and Honda and Nissan ’s merger are examples—have been a wake-up call for Japanese companies to pursue overhauls. He expects a pickup in share buybacks as companies begin to think about shareholder returns more.

A record number of companies have also delisted, often through management buyouts, in another indication that corporate behavior is changing in favor of shareholders.

“Japan is attracting a lot of activist interest in a lot of different guises, says Donald Farquharson, head of the Japanese equities team for Baillie Gifford. “While shareholder proposals are usually unsuccessful, they do start in motion a process behind the scenes about the capital structure.”

For years, money-losing businesses were left alone in large corporations, but the recent spate of activism and focus on shareholder returns has pushed companies to jettison such divisions or take measures to improve them.

That isn‘t to say it is going to be an easy year. A more protectionist world could be problematic for sentiment.

But Japan’s approach could become a model for others in this new world. “Japan has spent the last 30 to 40 years investing in business overseas, with the automotive industry, for example, manufacturing a lot of the cars in the geographies it sells in,” Farquharson said. “That’s true of a lot of what Japan is selling overseas.”

Trade volatility that hits Japanese stocks broadly could offer opportunities. Concerns about tariffs could drag down companies such as Tokio Marine Holdings, which gets half its earnings by selling insurance in the U.S., but wouldn’t be affected by duties. Similarly, Shin-Etsu Chemicals , a silicon wafer behemoth that sells critical materials, including to the chip industry, is another potential winner, Takeda says.

If other companies follow the lead of Japanese exporters and set up shop in the markets they sell in, Japanese automation makers like Nidec and Keyence might benefit as a way to control costs in countries where wages are higher, Farquharson says.

And as Japanese workers get real wage growth and settle into living in an economy no longer in a deflationary rut, companies focused on domestic consumers such as Rakuten Group should benefit. The internet company offers retail and travel, both of which should benefit, but also is home to an online banking and investment platform.

Rakuten’s enterprise value—its market capitalization plus debt—is still less than its annual sales, in part because the company had been investing heavily in its mobile network. But that division is about to hit break even, Farquharson says.

A stock that stands to benefit from consumer spending and the waves or tourists the weak yen is attracting is Orix , a conglomerate whose businesses include an international airport serving Osaka. The company’s aircraft-leasing business also benefits from the production snags and supply-chain disruptions at Airbus and Boeing , Takeda says.

An added benefit: Its financial businesses stand to get a boost as the Bank of Japan slowly normalizes interest rates. The stock trades at about nine times earnings and about par for book value, while paying a 4% dividend yield.

Corrections & Amplifications: The past year is expected to turn out to have been a record one for corporate earnings in Japan. An earlier version of this article incorrectly gave the time frame as the 12 months through March. Separately, Masashi Akutsu is a strategist at BofA. An earlier version incorrectly identified his employer as UBS.