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Fine Wine Outperformed Equities Gold and Oil Last Month

The Telegraph has reported that wine was the top performing asset class last month, outperforming the FTSE, Dow Jones and the gold price. According to finance reporter Emma Wall wine “has outperformed equities, gold and oil, according to the latest monthly figures. A report from The Bordeaux Index revealed wine is the asset class that lost the least value in October.”

The FTSE 100 lost 8pc last month, and the Dow Jones index fell 9.5pc – but wine was the most defensive asset losing only 4.3pc, while gold fell 5.6pc in October.

Wine has also outperformed the FTSE so far this year, falling just 4.4pc compared to the blue-chip index fall of 6pc.

The report predicted that further weakness in the wine market is likely – a less than a week after a wine investment manager warned that the fine wine market was experiencing a bubble and due a correction.”

Will Beck of the Fine Wine Fund told the Telegraph that:

“The fine wine market enjoyed almost two years of unchecked growth from the summer of 2009 to that of 2011, rising by around 60pc. It would not be difficult to argue that some kind of correction was due,”

“The fine wine market traditionally gets spooked by macroeconomic events that lead to financial market turmoil – the oil crisis in the Seventies, the stock market crash in the late Eighties, the Asian currency crisis late Nineties, and now the recent recession and sovereign debt crisis. Stock risk and market risk is relatively low, but when you get financial market systemic risk, then even fine wine is affected.”

Mr Beck also said that Chinese investors – who have been catalysts for the fantastic returns of the past two years – were also being scared off fine wine as it is a product of the troubled eurozone: “Chinese buyers are worried about the sovereign debt crisis in Europe, as well as a slowdown in China itself. Credit supply has decreased in China.”

The fine wine market does need to rebalance itself after the extraordinary price hikes of the past two vintages. The prices caused the 2010 En Primeur Campaign to stall (see My Take on Bordeaux 2010, the Market, China and the Futureand Rieussec and the Break Down of En Primeur). Hopefully we will see a return to common sense with the pricing of the 2011 vintage . . . but I am not holding my breath.

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