Global wealth is experiencing a significant upswing, rebounding impressively from a post-pandemic fall. Billionaires have recovered from 2022’s net loss of $1.4 trillion, and the global luxury market was projected to hit $1.6 trillion in 2023, a new high.
The Bull Market Prevails Amidst Challenges
In the U.S., the bull market has shown resilience with the S&P 500 rising nearly 25%, despite political brinkmanship over the debt ceiling and a banking crisis that felled five banks. Globally, conflicts in Ukraine and the Middle East have added to the turmoil.
As the impact of higher interest rates permeates the economy, inflation is falling, and unemployment is at 3.7%. Many forecasters predict a bullish 2024, provided the economic machinery continues to function smoothly. However, the World Bank projects slower output growth in the coming months, signaling cautious optimism.
Billionaire Wrap-Up: Resurgence of Wealth
The number of billionaires worldwide increased by 7% in the 12 months leading to April 2023, totaling 2,544. This is slightly below the peak of 2,686 in 2021, when their collective worth was $13.4 trillion. The net loss of $1.4 trillion in 2022 was erased by a $1.5 trillion gain in 2023, according to Bloomberg.
Currently, the world’s richest individuals have a combined worth of $12 trillion, as reported by Forbes. European billionaires in the consumer and retail sectors have significantly contributed to this recovery. The UBS Billionaire Ambitions Report 2023 highlights that the Americas hold the largest concentration of wealth, with France leading in billionaire wealth in Europe, the Middle East, and Africa.
Tech stocks, buoyed by enthusiasm for artificial intelligence, boosted tech-savvy investor portfolios by $658 billion, or nearly 50%, in 2023, further enhancing the fortunes of the wealthy.
Surge in Private and Concierge Services
“There’s a tremendous generation of wealth and a growing aspiration for finer things,” says Sherry Dewane, a UBS Certified Financial Planner™. This rise in wealth has spurred the popularity of private and concierge services. “It’s unprecedented; I’ve never seen it to this extent,” she adds.
Top-tier services catering to the wealthy include concierge health care, education consulting, spa and wellness services, aviation, travel, gourmet cuisine, and business coaching.
Exponential Wealth Generation in the Entertainment Industry
Dewane observes significant wealth generation within industries such as the gaming industry, which boasts an annual revenue of $187.7 billion, according to Forbes. The overlap of gaming, television, and movies creates a lucrative market.
Virtual fashion in the gaming industry, encompassing fashion, accessories, and “skins” for avatars, has become a multibillion-dollar market, valued at $40 billion. Major luxury brands like Gucci and Louis Vuitton have tapped into this market through collaborations and partnerships.
“There is seemingly endless money being poured into content,” Dewane notes. “Contracts for name, image, and likeness have become highly valuable.”
Wealthy Mindsets and Strategic Thinking
The wealthy and their advisors think across generational lines, focusing on long-term strategies. Inherited wealth has increased, contributing to the creation of new billionaires. The UBS Billionaire Ambitions Report highlights that for the first time, inherited wealth has surpassed wealth generated through entrepreneurship.
Different generations have varied views on philanthropy, investing, and business. Heirs are now focusing on major economic opportunities and challenges such as innovative technologies, clean-energy transformation, and impact investing. The report also indicates that two-thirds of surveyed billionaires see generative AI as a significant commercial opportunity.
International Wealth Management
Wealthy individuals often operate in multiple jurisdictions and currencies. “Many clients work in different countries, requiring a team to navigate varying interest rate regimes,” says Ranjeet Guptara, a senior vice president at UBS.
Real Estate and Long-Term Planning
In the U.S., rising interest rates since March 2022 have impacted mortgage planning. Adjustable-rate mortgages pose a ticking clock, and staying in homes too long without re-mortgaging can have financial repercussions.
Realtors play a crucial role in managing high-end properties, ensuring favorable timing for sales and managing embedded gains. Decisions on property management and taxes can significantly benefit the family.
Strategic Tax Planning
Changes in tax codes have led to increased use of charitable remainder trusts, enabling donors to place assets in an irrevocable trust, providing a fixed annual income to the donor or a beneficiary, with the remainder going to charity. This strategy offers tax benefits and fulfills charitable inclinations.
The Future of Wealth Generation
Dewane and Guptara foresee a dynamic future for today’s Gilded Age. “The pace of change will increase,” Dewane says, while Guptara believes we are on the cusp of something even more exciting. The fourth industrial revolution, driven by AI, digitization, and big data, is poised to impact industries globally, creating opportunities for cross-industry collaboration and benefit.
This interview is part of PERSPECTIVES Wedbush ETFMG Global Cloud Technology ETF, a comprehensive look into prime residential real estate trends. Access the full report to discover the latest market dynamics.