How has the market been affected by downturns in the economy?

Although wine has displayed an enviable track record averaging 14.9% compound growth per year over the last 20 years, it is not impervious to the sort of dramatic upheavals seen in the wider economy since 2008. That said, one man’s misfortune is another’s gain and with any dips in prices, there is value to be taken advantage of.

The Lehman crash and ensuing credit crunch in 2008 saw wine prices drop as embattled investors liquidated whatever assets would produce the least crippling losses. For those who had held wine for at least 3 years prior they would certainly have done well. China’s involvement in the wine market from this time was prompted by the exceptional value available and taxes on wines and spirits in Hong Kong being scrapped. The market soared.

As the value disappeared and the world reeled once more on news of the Euro crisis and sovereign defaults, trade for wine dipped and a necessary price correction took place. Fast forward to July 2012 and the Liv-ex 100 ended its downward cycle and flat-lined for the next 4 months until mid-November.

In the following quarter to date, the Liv-ex 50 that tracks First Growth prices on recent bottled vintages has moved up by over 10%. This signals the beginning of the next growth phase triggered by the exceptional value on offer combined with investors seeking assets that are tangible and provide a means to hedge against inflation. The next couple of years has strong potential for continued growth.

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