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This article has been automatically translated from Dutch. Click here to see the orginal article including all links to sources.
We are living in historically uncertain times and stand at a turning point in history. Markets showed exceptional patterns and unprecedented volatility this past week. What is going on, and what explains it? At the same time, millionaires are turning their backs on the United Kingdom in large numbers. In this rapidly changing world, capital is on the move—searching for a safe haven. Read on!
London is no longer among the five richest cities in the world. The city lost more than 11,000 millionaires in 2024 alone. With 215,700 dollar millionaires, London—alongside Moscow—is one of the few cities in the top 50 where the number of wealthy individuals is lower today than it was ten years ago. According to Bloomberg, a recent tax reform plays a major role in this shift.
Millionaires fleeing the UK (source: Bloomberg)
Since the beginning of 2024, foreign high-net-worth individuals have been leaving the United Kingdom following the abolition of a centuries-old tax advantage (dating back to 1799) that allowed so-called “non-doms” to avoid British taxes on foreign income for up to 15 years. Combined with high inheritance taxes, this is making the UK increasingly unattractive.
“If you’re an international entrepreneur with assets in multiple countries, it feels unfair that the UK demands 40 percent of your global estate when you die. It violates every basic principle of ‘fairness,’” said Peter Ferrigno, head of tax advisory at Henley & Partners, in Fortune.
Other factors cited include London’s declining relevance as a global financial hub, a less attractive investment climate for entrepreneurs, and growing concerns over public safety.
There are about 75,000 non-doms living in the UK, and they contribute more than £8 billion in annual tax revenue. The British treasury hopes the new reform will raise £2.5 billion a year—but this is highly doubtful. The Adam Smith Institute even published a report warning that the UK could lose up to £111 billion over the next ten years and more than 40,000 jobs.
Millionaires as a share of the population (source: Adam Smith Institute)
Countries with more attractive tax regimes for the wealthy are gaining ground. Many wealthy individuals are moving to the United Arab Emirates, St. Kitts, Portugal, Australia, the U.S., Singapore, and Italy. Italy, for example, charges a flat rate of €200,000 per year for shielding foreign assets from local taxes. The expectation is that this trend will continue in the UK for years to come. According to the Adam Smith Institute, the share of millionaires in the population is also expected to decline in the Netherlands, while rising in most other countries.
In these historically uncertain times under Trump, the market is displaying erratic and unprecedented volatility. Last week, U.S. Treasury yields fell—but this week, we are seeing a sharp rise. Interestingly, the dollar is simultaneously losing value. That’s notable because rising interest rates in the U.S. typically strengthen the dollar: higher rates make dollar-denominated assets more attractive, increasing demand for the currency. The current rise in yields is driven by a sell-off in U.S. government bonds.
US Treasury Yields (source: Financial Times)
According to the Financial Times, this bond sell-off may indicate a shift where Treasuries are no longer seen as the ultimate international safe haven. The U.S. stock market also had another rough week. Normally, stocks and bonds move in opposite directions—but now we’re seeing both U.S. equities and bonds being sold off.
Former Treasury Secretary Lawrence Summers wrote: “This highly unusual pattern suggests a general aversion to U.S. assets in global financial markets...” So what explains this atypical market behavior? The British newspaper doesn’t offer a definitive answer but discusses several potential causes.
Inflation fears triggered by import tariffs are an obvious candidate. There are also signs that some investment funds are selling their most liquid assets to meet margin requirements. Additionally, increased volatility may be related to hedge funds being forced to unwind so-called “basis trades”—a leveraged strategy aimed at profiting from price differences between futures and the underlying bonds.
Geopolitical tensions are another concern. Some fear that the ongoing trade war may escalate into a financial war. For instance, China could pull out of dollar assets. This week, China did allow the renminbi to weaken against the dollar, fueling speculation about a possible currency war.
The spread between U.S. and German government bonds (source: Holger Zschaepitz)
Whatever the cause, it’s clear that investors are not only fleeing to cash. Some are turning to Germany, as shown by the widening spread between U.S. and German government bonds. CNBC reports that Germany is currently benefiting from capital flight out of the United States. This Sunday evening, our English-language channel Reinvent Money will feature a discussion with Tom Luongo on this topic. Don’t miss it—and in the meantime, check out our previous episode with Tom!
Gold, at least, is living up to its reputation as a safe haven in uncertain times. This week, the gold price again reached a new record in dollars. Today, one troy ounce of gold costs over $3,200. On Wednesday alone, the gold price rose by 3.3 percent in dollar terms—the largest one-day percentage increase since 2023.
Gold price in dollars as of Friday afternoon, April 11 (source: Holland Gold)
According to Lyn Alden, gold has now performed just as well as Warren Buffett’s Berkshire Hathaway since 1998. There are signs that Asian investors are dumping dollar assets in favor of gold. ZeroHedge cites the threat of a currency war as a key driver. In a currency war, countries intentionally weaken their currencies to improve competitiveness. Peter Schiff (not exactly an unbiased observer) also sees the world turning away from the dollar and seeking refuge in gold. The key question remains whether all of this is temporary—or the start of a more structural shift. To be continued!
Cover photo Trump (source: Gage Skidmore)
