Happy New Year!
Welcome to the start of another year in the fine wine market. Two questions that wine investors are asking are;
What happened in the market last year?
What lies ahead for 2018?
The first of these questions, is the easy one....
The Financial Times article headlined "Fine Wine returns outperform UK Blue Chips and Gold" goes some way to explain this.
In 2017 the Liv-ex 100 rose by 5.3% finishing the year at 312.69 points, some 17% off it's high of 365 points in 2011. The broader index, the Liv-ex 1000 posted gains of 10.19% and is currently at record highs.
According to the Financial Times, this is compared with pound denominated gains of 1.4 per cent for gold in sterling terms and a return for the FTSE 100 of 6.6 per cent including reinvestment of dividends.
The Liv-ex 100, being made up predominantly of wines from Bordeaux, still has some ground to make up to get back to its previous highs.
The good news is that, each time the market has fallen in the past, it has always come back to supersede previous highs and reach new, record heights.
This is one of the many reasons why at Veblen Wines we are still bullish in our view to buying Bordeaux and would advise that investors stock their portfolios up sooner rather than later to benefit from these lower prices. Obviously it would not be wise to buy all Bordeaux blindly, so we at Veblen have picked out a number of undervalued opportunities that we will be happy to discuss with you.
To the next question, what lies ahead for 2018?
As always, without a crystal ball it would be foolish to attempt to predict the future exactly! However, given the current market liquidity as mentioned in this article, and the generally bullish view on the market, it looks as if we could see another year of growth.
For anyone investing in most markets, 12 months is a very short period of time, markets tend to go up and down so the correct strategy with wine is to have a longer term view (3-5 years+) in order to ride out any storms that may crop up.
There is a change to the critical landscape this year which will certainly have some affect on prices and therefore, create opportunities for profit. We are watching very closely and will go into much more detail at a later date.
In 2017, some areas of Bordeaux (particularly St Emilion and Pomerol) were badly affected with heavy frost. Reports of the harvest show that quantity will be very low and quality is yet to be determined. This article from Decanter mentions that production from Bordeaux for 2017 could be 50% of the 2016 levels. Other commentators have suggested that the amount of wine released from France this year could be the lowest since the 1940's! In most normal markets, if supply is lower or demand is higher then the supply can be adjusted or "topped up" with goods from other regions. In this case, the supply simply cannot be raised.
In conclusion, fine wine can be a valuable asset in a diversified investment portfolio and should be at least considered by High Net Worth Individuals.
If you haven't yet made up your mind to invest in wine, read the question below and see what you think;
With demand at all time highs and very little new supply coming to the market, what effect is this likely to have on prices?
If you have any questions, or would like to talk with us about growing your fine wine portfolio, please feel free to give us a call on 01622 672 314 or email to email@example.com and we will be very happy to help.
Lastly, we wish you all a prosperous year in 2018.
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