The vast riches comprising the world's US$1.8 quadrillion financial balance sheet may speak to the rude health of the global economy. But the rapid expansion of household net worth to some $570 trillion last year is increasingly being driven by paper equity values, drifting away from tangible asset values and underlying economic performance.That makes this bill of health look a lot more precarious.
The annual number crunch by business consultants McKinsey & Company tries to capture the global financial picture using a balance sheet lens, estimating the scale of interlocking assets, liabilities and wealth around the world.
National variations can be stark, but the overall picture is clearly one of household net wealth expanding faster than global gross domestic product.
Equities were the main driver of this in all major economies last year. The artificial intelligence boom swept world equities 20 percent higher last year, even in the face of seismic United States trade disruptions and even as real GDP growth hovered near its long-term average.
The McKinsey report said household wealth expanded 7.3 percent globally last year, well above the 5.9 percent annual average since 2000. Some 57 percent of that gain was because of equities, with only 15 percent driven by real estate, a marked departure from the average composition of wealth drivers over the past 25 years during which real estate produced more than half of the increase in wealth.
