The numbers are impressive on their surface. Global assets reached nearly $1.8 quadrillion in 2025, up from $1.7 quadrillion a year earlier. Global household wealth hit a record $570 trillion. In both cases, as the McKinsey Global Institute notes plainly, "this is the highest number ever." But the MGI's July 2026 report1, led by senior fellow Rebecca J. Anderson and a team of seven researchers, is not a celebration. It is a warning dressed in record-breaking statistics.
Paper Wealth Is Not the Same as Real Wealth
The central diagnosis of the report is that global wealth has grown, but not in a healthy way. Anderson notes that the analysis finds wealth was, "to an even greater extent than previously, rooted in asset values rising faster than real economy investment and growth, creating record levels of global wealth 'on paper.'" Only 20 percent of household wealth growth in 2025 came from net new investment in real assets. Nearly 60 percent came from asset price growth above and beyond general inflation. That ratio has worsened considerably from the 2000 to 2024 average, when paper gains drove one-third of wealth growth. Now they are driving nearly three-fifths.
This matters because paper wealth is fragile. It is a claim on future income or asset values that must ultimately be justified by real economic activity. When it is not, corrections follow. The only question is which form the correction takes.
Three Economies, Three Diverging Stories
The report draws a sharp line between the trajectories of the United States, the eurozone, and China. They are not just at different points on the same path. They appear to be on different paths entirely.
The United States is framed as the only major economy currently in a "productivity acceleration" scenario. AI-fueled corporate earnings growth has pushed US equity values to 3.7 times GDP and 2.4 times corporate net assets. The S&P 500's Magnificent Seven firms account for more than half of market cap growth since 2021. Corporate profits as a share of GDP are running at 9.2 percent, versus a pre-2000 average of 5.9 percent. Anderson observes that "high US equity valuations depend on corporate earnings continuing to outgrow GDP in the long run." That is a tall order, and the report is candid that it may not be met.
Government debt in the US now stands at roughly 120 percent of GDP, near all-time highs, with interest rates exceeding projected growth rates in 2025. The fiscal arithmetic is deteriorating. Anderson's team identifies the "fiscal tightrope" as a critical swing factor: too little tightening risks a public debt crisis or sustained inflation; too much risks secular stagnation.
The eurozone, by contrast, has drifted toward secular stagnation. Productivity growth is roughly flat, savings rates remain elevated, and productive investment trails the US by approximately $700 billion, or three percentage points of GDP. Real estate wealth has corrected sharply in purchasing power parity terms in Germany and France. Without a decisive investment-led competitiveness reform, the eurozone's current path leads to low growth and rising balance sheet leverage without the paper wealth gains to compensate.
China's story is the most structurally complex. It is working through what the report calls a "partial balance sheet reset," with property values continuing their multi-year decline. Corporate debt has reached 80 percent of real assets, nearly double the global norm of 40 to 50 percent. Government debt has grown fastest of any major economy, up nine percentage points in 2025 alone. Anderson's team notes that "debt-financed government and corporate spending cannot last forever," and that a pivot to domestic consumption may be "the only way to sustainably grow and escape long-term stagnation." That pivot would require domestic demand to rise by six to seven percentage points of GDP. It has not started in earnest.
Four Scenarios, One Preferred Outcome
The report lays out four possible trajectories for elevated balance sheets: productivity acceleration, sustained inflation, secular stagnation, and balance sheet reset. Only the first delivers real wealth growth alongside economic growth. The others each sacrifice something: inflation erodes real wealth even as nominal values rise; stagnation sees paper wealth persist but growth lag; reset produces absolute losses. Anderson's team is direct that "only productivity acceleration delivers real economic growth justifying valuations, thus protecting wealth."
Cross-border imbalances have also widened. Japan and Germany are net lenders at nearly 90 percent of GDP; the United States is a net borrower at nearly 90 percent of GDP. Half of the US negative international position is in equities, reflecting the magnitude of foreign ownership of US stocks. As US equities have outperformed, so has the claim the rest of the world holds on American corporate earnings.
Five Key Takeaways for Advisors and Investors
- Equity concentration risk is structural, not cyclical. US equities at 3.7 times GDP and 2.4 times net assets are not just expensive by historical norms. They are the dominant driver of global household wealth and cross-border investment positions. A structural earnings disappointment, whether from AI underdelivery or geopolitical shock, does not produce a routine correction. It produces a wealth event.
- The fiscal tightrope in the United States is a macro risk worth monitoring directly. With interest rates now exceeding projected growth rates, the debt-to-GDP ratio has no natural stabilizer. The swing factor to watch is whether fiscal consolidation of approximately three percentage points of GDP materializes without tipping the economy into stagnation.
- Real estate normalization in Europe and China is largely priced in. Australia is not. Household real estate has corrected toward 25-year GDP averages in most economies. Australia remains 80 percentage points above its long-term average. That gap will not persist indefinitely.
- China's corporate debt trajectory warrants close attention. With nearly 30 percent of Chinese firms loss-making in 2025, producer prices declining since mid-2022, and corporate debt at double the global average relative to real assets, the conditions for a broader corporate credit event are accumulating. Exposure to Chinese corporate credit deserves a fresh look.
- The paper wealth dynamic creates asymmetric downside. When 80 percent of new wealth is not grounded in real investment or real income growth, asset price corrections do not merely reduce returns. They destroy the perception of wealth that has been sustaining consumer confidence and demand. Advisors building portfolio resilience should treat that dynamic as a structural tail risk, not a cyclical one.
The report ends where it must: with the observation that "future global wealth and stability may depend on" recognizing the swing factors that could tip each major economy from its current path toward productivity acceleration, or away from it. The stakes, as Anderson's team has documented in $570 trillion of reasons, have rarely been higher.
Footnote:
1 Anderson, Rebecca J., Jan Mischke, Arvind Govindarajan, Sylvain Johansson, Nick Leung, Shubham Singhal, and Carlo Tanghetti. The Global Balance Sheet 2026: Imbalance and Divergence. McKinsey Global Institute, July 2026.
