Acker Market Insights Q3 2022
Is Fine Wine the New Gold?
NEW YORK - OCTOBER 6 2022
The first nine months of 2022 saw a decade-long era of historically low interest rates come to an end, sending prices of most asset classes into double digit negative returns. Many asset classes have not seen these types of declines in almost half a century, and certain currency markets have hit all-time lows against the dollar.
Global Central Banks, which continue to accelerate monetary tightening to combat inflation, risk a high probability of sending global economies into recession. Global geopolitical strain caused by the continuation of Russia’s invasion of Ukraine has only intensified the current risk environment creating still more uncertainty. And yet, within this period of volatility, the Fine Wine Market has been a haven of financial stability. In the first nine months of the year, the fine wine market has once again proven a top performing asset.
INDEX COMPARISON YTD
INDEX COMPARISON 3 YEAR
A look at 3 year returns also shows the consistency of wines’ stability and relative strong performance.
THE BEGINNING OF 2021
As can be seen in the table, Fine Wine maintained most of its 2021 gains with most other asset classes giving up all positive returns since 2021. This is not to say there weren’t declines in some segments of the wine market this year, but even those that did decline in 2022 still maintained nice positive returns since the beginning of 2021.
Although not impervious to the environment, the economics of the fine wine market favor continued relative outperformance. The supply demand imbalance in the market has been further exacerbated during this year. On the supply side we continue to see the impact of climate change on current production, but this year we have seen the global auction market volume of bottles auctioned slow from last year’s torrid record pace, reducing the supply availability from private collectors. Demand has continued to be strong as more global collectors and investors experience the asset classes’ favorable economic imbalance as well as unique factors of less volatility, hedge against inflation, store of value, and no short selling mechanism. Wine has demonstrated many characteristics that gold used to possess as a hedge during inflationary environments, with the added benefit that you can enjoy it. Finally, it is a well-known fact that wine consumption has historically risen during recessionary and difficult economic environments, adding further to forward demand.
Wine regions saw a variety of results, with Champagne being the top performer. Bordeaux lagged other regions and was affected by the British pound’s plunge, creating cheaper prices at the end of the quarter.
There was a lot of continued good news among certain producers and vintages. We take the glass half full approach and highlight all those with positive performances so far this year.
The year saw strong demand for younger wines as evidenced by a high volume of vintages in the 2000’s having positive returns, led by Leflaive and Roumier.
While we expect volatility and macro and geopolitical risk to characterize the current environment, all trends point to fine wine continuing to be a haven of relative stability and outperformance while maintaining great upside should the global economic conditions and market change in a positive way.
Chief Executive Officer