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Global Wealth Growth: The Journey that was and the Voyage Ahead

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Global Wealth Growth: The Journey that was and the Voyage Ahead

The last decade has seen an astounding increase in private wealth which now sits at a mind blowing US$215 trillion (for reference Australia’s GDP is US$1.3 trillion). Perhaps even more staggering is that ~75 per cent of this wealth sits within 10 major economies and Australia is currently 9th on the list.

The last decade (2007-2017) has told some extraordinary economic stories, perhaps most significantly was the growth of the Chinese economy, which has seen private wealth increase by 198 per cent to US$24.8 trillion to become the world’s 2nd wealthiest country (by dollar value). India also saw a sharp expansion with wealth jumping 160 per cent and of course our very own Australian economy, which saw the 3rd most significant expansion of wealth, pulling it into the 9th place. On the flip side of the equation was Italy (-19 per cent), France (-11 per cent) and Great Britain (-2 per cent), all of which exhibited wealth declines over the last 10 years and have not returned to pre-crisis levels in U.S. dollar terms.

Clearly if an investor had identified these growing and contracting economies a decade ago, it may have provided a foundation to narrow the opportunity set and focus on parts of the world that may provide attractive opportunities for investment (something we are constantly looking to do).

Global Wealth Growth Over the Last Decade (2007 – 2017)

Screen Shot 2018-08-17 at 9.02.28 amSource: New World Wealth Market Research 

The team at Montgomery Global is always focused on the future while constantly seeking to learn lessons from the past, with the next decade expected to represent another remarkable upward inflection in global wealth. However, the top 3 wealthiest nations are projected to retain their respective rankings, although flying up the leader board will be India, with a 200 per cent increase in wealth, moving it into 4th place and only fractionally behind Japan ($24.7 trillion versus $25.4 trillion). China is expected to continue its amazing ascent with private wealth nearing that of the United States, which itself will have grown ~20 per cent over that time. Of note is perhaps the expected wealth inequality within the top 10, with the U.S. and China having a combined 50 per cent more private wealth than the next eight countries combined.

As for Australia, it is expected to have another golden decade and by 2027 private wealth will have reached $10.4 trillion and rival traditional economic superpowers like Germany and the United Kingdom. This will place Australia within ~5 per cent of the 5th richest country on the planet, despite only having 24 million people.

Global Wealth Projected Growth Over the Next Decade (2017 – 2027)

Screen Shot 2018-08-17 at 9.03.22 am

Source: New World Wealth Market Research 

We at Montgomery Global are relentlessly focused on identifying and investing in the world’s best businesses at prices that imply significant upside to where they currently trade. We look forward to continuing to deploy our unique, bottoms up, fundamental, value investing framework over the coming decade and beyond as we strive to maximize returns on your capital.

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Amit joined MGIM in April 2018 as a Senior Research Analyst after spending seven years as a credit analyst at Credit Agricole and Citigroup, based in New York. Prior to this, Amit was an investment banker with Citigroup for five years in New York and Sydney, focusing on Media and Telecoms; Metals and Mining; and Consumer Products.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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13 Comments

  1. I’m guessing the “wealth” figures are assuming current “everything bubble “ Asset valuations at the end of the longest business cycle in history fueled by a decade of exponential debt growth and monetary expansion of all types including nirp, zirp, qe , tax cuts and god only knows what has happened in China and is happening now due to the trade war. I thing it may be a touch optimistic to attempt a projected future wealth calculation based on current asset valuation projections unless mean revision is no longer a thing, which strangely could be the case in this centrally planned Keynesian fantasy land where we worship asset valuations and everything else is irrelevant.

  2. Maybe I’m misreading this but Australia already has a pop of over 25mil an over the next 10 years that will be over 30mil at current people importation rates.
    Presumably the growing pop in Aus compared to some of the above countries which will have slower rates, no increase or a decrease.

  3. Some people loves to focus on assets and wealth growth, but it doesn’t talk much about debt. They should because they are both important factors in the equation.

    Net wealth = Assets – Debt

    Since 1997, total global debt increased from $50 trillion to $233 trillion compared to the rise in global wealth from $120 trillion to $280 trillion.

    When you do the math, you find global debt has increased 366% vs. 133% increase in global wealth since 1997. That means net wealth was $70 trillion in 1997 versus $47 trillion in 2017.

    Fed Funds Rate in 1997 5%
    Fed Funds Rate in 2017 1%

    What will happen to wealth if interest rise to 5%?

      • “Was it a credible provider?”

        how accurate is data, who knows, your guess is as good as mine.

        it all depends if you can calculate all this in the first place.

        which data are you going to put in as well — like government promises.


        my point was, if you report one set of statistic you should report another as well.

        Net wealth = Assets – Debt.

        no offence, just observation
        thanks

      • Just to clarify…

        Wealth = Assets – Liabilities.

        The article it talking about wealth not assets (also debt isn’t this only liability that should be deducted from an asset to produce “net assets”)

      • Those numbers are from gold blogger Peter as huff. John Maudlin has some slightly different global debt totals:

        1997:   $74T
        2007:   $167T
        2016:   $216T
        2017:   $238T

      • I’d love to see some further analysis on this one, if he’s even in the ballpark with those figures, the world economy is toast.

      • As you say Armit, if you factor all liabilities into this equation of which many throughout the world are unfunded, eg US pensions and much of Europe is the same I guess , it’s entirely likely we have actual negative current wealth or something far worse than Xiao has outlined. Maybe this is why it’s not a popular discussion topic on mainstream media etc. it’s really telling that this data is hard to get and unclear at best, and I can’t help wonder why that is the case when we have all this fantastic technology available.

  4. Roger – where are the female team members? I see 14 men – I keep reading women are superior investors.

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