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Red flags for fine wine, says Liv-ex

Published:  08 December, 2022

Fine Wine provided stability amid an increasingly uncertain economic outlook in 2022, a new report from Liv-ex has revealed. However, as renewed investment and speculation pushed prices, analysts have been left wondering whether the ‘Covid era boom’ has run its course.

Liv-ex’s report, The Fine Wine Market in 2022, examines the impact of political and economic headwinds, as well as the top performing wine across the year and what to expect in 2023.

It noted that last year’s review of the fine wine market was all about records. The Liv-ex indices hit record highs in 2021 and there were record levels of trade in both value and volume, plus a record number of wines traded. It was a bull market powered by a ‘low interest rate environment and a growing interest in alternative, tangible assets in the wake of the Covid-19 lockdown’. As a result, the market saw robust demand from both old hands and new.

In 2022, the outlook is more muted. While the ‘Covid era boom’ in the fine wine market masked the fragility of the global supply chain in 2021, Russia’s invasion of Ukraine in late February added to the turmoil as energy prices soared.

As a result, inflation set in at higher levels than the financial markets or central banks expected; and increased volatility in currency markets has led the world’s markets to the brink of recession.

Perhaps, one of the key indicators of the slowed growth is the performances in Burgundy and Champagne. Despite their strong performance in the early stages of the year, market sentiment for both has begun to decline, with many high value Burgundies becoming increasingly difficult to sell.

Signs of the wider economic storm are apparent elsewhere, too. Back in July, the Liv-ex 100 fell for the first time in 18 months, then fell again in October and November. The Burgundy 150 index also saw smaller gains as the year went on, running flat in October and finally dipping in November.

The good news for fine wine has been its stability in the face of increasingly severe headwinds.

Although the rise is slowing, the number of wines trading in 2022 has overtaken the 2021 record. In 2022, fine wine also continued to outperform equities and commodities, thus cementing its worth as an alternative asset and hedge against inflation.

Justin Gibbs, deputy chairman and exchange director at Liv-ex concluded: “No market rises forever. The fine wine market has been on the up since 2015. An increasing amount of indicators are pointing to a pull back in the short term. But the wine market has never been about the short term.”