Fine wine no longer ‘pillar of stability’ in tumultuous market

By James Bayley

Published: 11 December, 2023

In 2022, fine wine established itself as a powerful alternative amidst times of economic turmoil, a pillar of stability in an otherwise volatile equities market.

Fast-forward 12 months later and this is no longer the case – major Liv-ex indices have relinquished most of the growth they recorded in the previous two years – the Liv-ex Fine Wine 100, the industry benchmark, is down 13.4% year-to-date, while both the Fine Wine 50 (which tracks the movements of first growths) and Fine Wine 1000 (the broadest measure of the market) are down 13% over the same period.

Many economies are still reeling from the effects of the pandemic and the Russian invasion of Ukraine, which among other things has been driving investors back to safe investments like gold, according to Liv-Ex’s annual fine wine market review.

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While inflation figures are coming down from the heights reached in 2022 and early 2023, core inflation (excluding energy and food) remains high across the board, with the International Monetary Fund (IMF) predicting that most countries won’t return to normality till 2025.

To add insult to injury, the last 12 months have also seen a series of interest rate hikes by central banks – across major economies, interest rates are at their highest since the 2008 financial crisis.

In short, consumers have less money than they did two years ago and the implication for fine wine is clear – buyers are not prepared to spend as much as they did last year, if at all.

As a result, many collectors have become net sellers according to Liv-ex, due to rising storage costs and a sense that growers are demanding too much for their new releases, further adding to the pool of wine to be shifted.

Furthermore, the prospect of incoming high-yielding vintages from Burgundy, Tuscany, California, Bordeaux and Champagne could saturate the market even further in 2024.

With stock accumulating in warehouses and buyers and sellers at an impasse, the fine wine market, like many other financial markets, is set for a challenging 2024.

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