Two-and-a-half million people in the United States became millionaires last year, but thanks to rising prices, that may not mean as much as it used to.
Worldwide, 5.2 million people became millionaires in 2021, according to the Global Wealth Report 2022, an annual release published by Credit Suisse. Including those 5.2 million, 2.5 million of whom are in the U.S., the total number of millionaires globally increased to 62.5 million at the end of 2021. The total amount of global wealth tallied nearly $464 trillion, which was an almost 10% increase over the prior year, too, the report says.
While the report shows an overall uptick in household wealth and the number of millionaires around the world, it’s important to note that the data is from 2021—a year during which the stock markets were riding high and asset values (such as homes) were still at or near record highs. In fact, this combination is something mentioned in the report.
“While financial assets have accounted for most of the increase in household wealth since the global financial crisis, the split between wealth increases driven by financial and non-financial assets was almost even in 2021,” wrote Nannette Hechler-Fayd’herbe, chief investment officer for the EMEA region and global head of economics and research at Credit Suisse, in the report’s executive summary.
Conversely, 2022 has not been nearly as kind, as rising interest rates, among other things, have caused the markets to dip into correction and bear-market territories. For example, the S&P 500 is down almost 22% year-to-date, which has almost assuredly taken a serious toll on the portfolios of millions of investors. And home values are also taking a hit, as prices dropped 6% between June and August. To cap it off, the Federal Reserve announced another 75-basis-point rate hike this week, further dampening the prospect of a market recovery this year.
All told, the current economy could have knocked some borderline millionaires’ fortunes back into six-figure territory so far this year. And there’s still inflation to add into the equation, which is running at or near 40-year highs, and which is kneecapping the spending power of Americans from all income levels. The latest CPI summary, released on September 13, showed that prices rose 8.3% during August.
Even for someone who had coffers totaling $1 million in January 2020, high inflation over the past several months means that that $1 million now has the same purchasing power as $1.148 million as of August 2022. So even millionaires are feeling the heat.
As such, Hechler-Fayd’herbe noted this in the report: “Some reversal of the exceptional wealth gains of 2021 is likely in 2022/2023 as several countries face slower growth or even recession.”
With that, even as global wealth increased during 2021, and the U.S. minted a number of new millionaires, inflation and the current economic climate may see things reverse course in the near term. The good news? Credit Suisse’s report does anticipate wealth to continue to grow in the years ahead. As Hechler-Fayd’herbe wrote, “[O]ur five-year outlook is for wealth to continue growing. We would expect global wealth to increase by USD 169 trillion by 2026, a cumulative rise of 36%.”