Rampant inflation, the global fuel crisis, recession fears and fiscal tightening from central banks have caused equities and bonds to tank over the past few months.
Fine wine has significantly outperformed global equities and most commodities, but market momentum has been ‘much more subdued’ in the second quarter of 2022, said Liv-ex, a global marketplace for the trade.
The Liv-ex 1000 – which tracks the performance of 1,000 leading fine wines – increased by 3.6% year-on-year in sterling-denominated terms in the three months to 30 June.
However, sterling weakened in Q2. Measured in dollars, the Liv-ex 1000 has already started to turn down.
The Liv-ex 1000 contains seven sub-indices – the Bordeaux 500, Burgundy 150, Champagne 50, Rhône 100, Italy 100 and Rest of the World 60.
Burgundy was the star performer in Q2, increasing 8.1% year-on-year. That was down from 14.6% growth in Q1, but it still leaves the overall Burgundy 150 Index up 23.9% so far this year.
Meanwhile, the S&P 500 has endured its worst H1 performance since 1970 – down 20.6% – so many people that invested in tracker funds may wish they had turned to the likes of Domaine Armand Rousseau and Domaine Leflaive instead.
The Rhône 100 was the second strongest sub-index over the past three months, having increased by 3.5%.
Champagne, Bordeaux, Italy and the rest of the world saw modest growth in sterling-denominated terms, but they are down when viewed through the lens of the dollar.
The star performer was Ermitage Le Pavillon 2014 from Chapoutier, which increased by 48.2% in value in Q2, according to Liv-ex. Wines from Burgundy and Rhône dominated the top 10, although Krug 2003 was also up 27.1%.
The fine wine market tends to focus on Bordeaux’ en primeur campaign in the months of April to June. Liv-ex was scathing in its assessment of this year’s event, but it noted that trade in Bordeaux did rise slightly in Q2.
Most other regions maintained their trade levels from the first quarter to the second. The only regions to decline were California and Piedmont.
Prestige Champagne has had a particularly strong 18 months on the market, and Louis Roederer Cristal 2008 was the most traded wine by value on Liv-ex in Q2. The next four were: Screaming Eagle 2019, Cristal 2014, Château Lafite Rothschild 2019 and Scarecrow 2019.
Liv-ex said the ongoing war in Ukraine and the growing likelihood of recession in the UK and the US have created more of a bearish outlook for fine wine. However, it pointed to a couple of reasons for optimism.
‘Sterling weakness against the dollar means fine wine prices are becoming more affordable to American and Asian buyers,’ said the report.
‘Meanwhile collectors of fine wine often view its low correlation to mainstream financial assets as the very reason to hold fast in times such as these, not least as an inflationary hedge.’
Several merchants have reported interest from investors looking at fine wine as a potential hedge against inflation.
‘We’re constantly taking on new clients at the moment in that context,’ said Matthew O’Connell, head of investment at Bordeaux Index and CEO of the merchant’s LiveTrade platform, speaking to Decanter magazine’s Market Watch earlier this week.
He reported very strong trading on LiveTrade in the first half of the year and said the market had been ‘strong across the board’, led by top-end Burgundy but with growth also in prestige Champagne, plus Italy and Bordeaux.