In what was a year marked by surprising results from elections and referenda around the world, 2016 saw its fair share of volatility in the financial markets. Naturally, some investors cashed in substantially. By and large, the winners were people adding to their already fabulous fortunes.
The rising and falling fortunes—literally—for many of the world's billionaires can tell us something about how investing trends played out over 2016, and perhaps what to expect in 2017.
The up-and-down nature of global markets in 2016 became clear within the first few weeks of the year. The stock markets in the U.S. swiftly shed about 10% of their value in January only to see the Dow Jones Industrial Average and S&P 500 indices recover their losses by March. The rest of the year was fairly kind to equities in the U.S.
Throughout the year, there were various "Black Swan" events—surprising occurrences that negatively impact market performance—that threatened to upend normal trading patterns. Perhaps the first and foremost among these was the unexpected "Leave" vote in the United Kingdom's so-called Brexit referendum, which caused the British pound sterling to take a haircut of about 15% of its value. The currency has yet to recover from this shock, casting a pall of uncertainty over the economic future of the U.K. and the rest of Europe. More recently, and undoubtedly more shockingly, the election of Donald Trump as the next U.S. president likewise defied the oddsmakers. Interestingly enough, the effect has been mostly the reverse, as the U.S. dollar and stocks have ridden the "Trump rally" higher.
Whether due to "contrarian" investing instincts or some other factor, several of the richest individuals in the world capitalized on this yearlong volatility.
The names of those accumulating the biggest gains to their net worth in 2016 will surely be familiar to most of us. Warren Buffett, the legendary head of the behemoth fund Berkshire Hathaway, added 19% to his personal wealth over the course of the year, totaling a windfall of almost $12 billion. This didn't vaunt him ahead of the world's richest man, former Microsoft tycoon Bill Gates, who made nearly $10 billion in 2016 to bring his net worth over the $90-billion threshold.
Buffett and Gates added more to their wealth than any other individuals in 2016. Not far behind them in fourth place was Amazon CEO Jeff Bezos, who gained close to $8 billion in net worth this year. Despite public opposition to the president-elect, folks like Bezos and Buffett saw their portfolios do remarkably well following the election. Collectively, existing billionaires in the U.S. grew $77 billion richer in the post-election rally.
The resource sectors (energy, metals, mining) and technology sectors saw the biggest payoffs to investors by year's end. The latter group returned $80 billion this year. Foreign billionaires didn't fare nearly as well as the American counterparts, however, due partly to the strength of the dollar. Wang Jianlin, China's second-wealthiest person, watched $5.8 billion vanish from his fortune; the richest African individual, Aliko Dangote of Nigeria, lost a third of his $15-billion wealth ($4.9 billion); and the Saudi prince Alwaleed Bin Talal Al Saud lost the same amount as Dangote, representing a fifth of his fortune.
With more volatility to be expected in the year ahead due to the ramifications of the votes in the U.S., the U.K., and Europe, we could see a similar trend play out in 2017. At the same time, the continued uncertainty could catch markets off-guard yet again.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.