Global Wealth report – surprising relief; China’s stimulus package, country & sector risks, durable goods & currency war

In 2023, global financial assets of private households grew significantly by 7.6%, recovering from the previous year's 3.5% decline, reaching EUR239trn. In our Global Wealth flagship report, we analyze the different asset classes, how they have fared and why we see a notable decline in bank deposits and why, on the other hand, securities and insurance/pensions remain popular. Insights into why this financial recovery was broad-based with most regions experiencing growth and the recent narrowing of the growth gap between emerging and advanced economies. Looking ahead, moderate growth of 6.5% is expected in 2024. In our What to Watch category, we explore what the recent PBOC’s super package includes and what implications we see for policy rates and liquidity, the property sector, and the stock market. Our quarterly update of country & sector risk assessments, what trajectory we expect for durable goods in 2025 and the tricky challenge for different clusters of central banks, balancing foreign exchange rates (FX), inflation, and growth.

Allianz Global Wealth report 2024: Surprising relief

Our in-depth analysis for you here .

Against the backdrop of resilient economies and booming markets despite monetary tightening, global financial assets of private households recorded strong growth in 2023: With an increase of +7.6%, the losses of the previous year (-3.5%) were more than made up for. Overall, total financial assets amounted to EUR239trn at the end of 2023. But growth in the three major asset classes was quite uneven. Securities (+11.0%) and insurance/pensions (+6.2%) benefited from the stock market boom and higher rates, growing significantly faster than the average of the last ten years. In contrast, growth in bank deposits fell to +4.6% after the pandemic-related boom years, recording one of the lowest increases in the last 20 years.

No place for bank deposits

In 2023, the normalization of fresh savings continued after the pandemic-related boom years of forced savings: They fell by -19.3% to EUR3.0trn. The movement in stocks is echoed by the shifts in financial asset flows as this decline was almost exclusively attributable to bank deposits. On balance, banks worldwide only received EUR19bn, a slump of -97.7%. The main culprit: US households who liquidated deposits worth EUR650bn. The other two asset classes, on the other hand, remained popular with savers. Inflows into securities even increased once again – by +10.0% – from their record level of the previous year. However, there was a notable change of favorites within this asset class: While shares were sold on balance in many markets, savers made strong gains in bonds, thanks to the turnaround in interest rates. This led to an +84.3% increase in securities purchases in Western Europe, for example. European savers have never been more appreciative of capital market products. Finally, insurance/pensions proved to be relatively robust, with the decline in fresh savings worldwide amounting to just -4.9%.

Broad-based recovery

In contrast to 2022, in which financial assets shrank in many markets and regions – and also worldwide – the recovery in 2023 was broad-based. In fact, only two countries – New Zealand and Thailand – recorded negative growth rates last year. Moreover, growth was relatively uniform across all regions, not least in Asia and North America, which both grew by over +8% – with the US (+8.6%) growing even more strongly than China (+8.2%). Only Western Europe (+5.0%), where the UK’s weak performance (+1.5%) dampened growth, and Eastern Europe (+18.0%), where hyperinflation in Türkiye led to high (nominal) growth rates, were somewhat out of line.

Three lost years

Inflation has only become really painful in recent years. At the end of 2023, real financial assets worldwide were only at the level of 2020 – the last three years were lost years for savers worldwide. Compared to the pre-coronavirus year 2019, however, there was still an increase of +9.1%. Regional differences are large. While Asia grew in real terms over all the years – thanks to relatively low inflation rates – and real financial assets were 26.3% higher at the end of 2023 than in 2019, the trend in Western Europe was diametrically opposed: real financial assets have shrunk in recent years and are now 4.3% lower than in 2019. European households suffered four lost years. The trend in North America was not quite as bad: although it is still below the 2020 figure, the increase compared to 2019 was 6.0%.

The new reality of a fragmenting world

In one respect, 2023 represented a return to the new reality of a fragmenting world: The growth advantage of the emerging economies over the advanced economies has shrunk significantly again, amounting to just 2pps last year. Until 2017, the year in which the trade disputes between the US and China broke out under President Trump, there was still a growth gap of 10pps or more between these groups of countries. In 2022, this growth gap widened again, triggered by the market turbulence caused by the interest rate turnaround, which mainly affected the US and Western Europe. As expected, however, this return of the gap appears to have been just a blip.

Moderate growth ahead

The (so far) positive trend on the stock markets and resilient economies should lift financial assets in 2024. Assuming stable savings efforts, we expect global financial assets to grow by +6.5% in 2024. However, the medium-term outlook is overshadowed by uncertainties about the two megatrends of AI and sustainability. The potential of AI is undisputed, but it will probably be years before the AI boom reaches the entire economy and leads to productivity increases across the board. Disillusionment after the initial euphoria is already noticeable. Similarly, the necessity of the green transformation is not disputed. But the difficulties in terms of costs, technology and regulation are being perceived more strongly again. The green boom in the economy and stock markets is still a long time coming – but with the right (political) framework set, it is still possible. This brings the biggest problem into focus: political uncertainty, be it on a national level with the rise of extreme parties or on an international level with several geopolitical crises and increasing fragmentation. Against this background, only modest growth in global financial assets of +4-5% can be expected over the next few years – albeit with high volatility: the economy and markets are likely to oscillate between fear of crisis and euphoria about change.

Our in-depth analysis for you here .

What to Watch this week

All four stories for you here .

• China: authorities try to lift confidence ahead of the 75th anniversary. The PBOC’s super package includes measures for policy rates and liquidity, the property sector, and the stock market, as well as unexpected guidance on future policy moves. But more will be needed to lift domestic confidence from the doldrums, notably further fiscal spending, which this week’s Politburo meeting suggests should be forthcoming. The economy should end up close to this year’s official growth target of “around 5%” but risks still remain on the downside. For 2025, risks to our forecast (+4.3%) may be on the upside.
• Quarterly country and sector risk changes: normalization complete. We have upgraded 14 countries, reflecting the ongoing recovery in economic outlooks. But the road ahead remains uneven as protectionist policies and geopolitical tensions remain. As for sectors, we found a limited improvement in the risk outlook, with nine moving up and five moving down. Downgrades occurred in all regions, mostly from medium to sensitive risk, especially in the automotive sector due to negative developments in Germany and Switzerland, as well as retail in China due to the weak outlook for Chinese consumers.
• Durable goods: poised for a rebound in 2025. After the great reopening of 2021, a pronounced slowdown followed in both in 2022 and 2023, due to saturation effects, exacerbated by higher interest rates. Sales should remain sluggish in 2024 in Germany (+2%), France (+3%), the US (+2%) and Italy (5%), with a slight slowdown in the UK (-1%). But five factors set the stage for a strong recovery in 2025: (i) financing costs are coming down; (ii) consumers are moving away from expensive services; (iii) goods purchased in 2021 will soon need to be replaced; (iv) technological innovation will spur demand, notably for AI-powered devices and (v) supply-chain disruptions are also easing.
• The great loosening cycle: central banks must balance FX, inflation, and growth. The Fed’s jumbo cut is an important tailwind for the global FX market after years of volatility and widespread depreciations vs. the USD. But the path ahead is not so clear. We find four clusters of countries with different priorities: 1) emerging Europe, Chile, and Colombia (boosting growth without overlooking inflationary pressures). 2) Most advanced economies in Europe, China, and Thailand (boosting growth but fewer inflationary pressures). 3) Most of Asia, the rest of Latin America, South Africa, and Norway (weak exchange rates and financial stability concerns will slow the pace of easing). 4) Large African economies, Türkiye, and Argentina (restoring confidence in the exchange rate and bringing down inflation). Switzerland and Japan stand out as two countries where intervention may be required to manage appreciation pressures. ?

All four stories for you here .