Resilience: The Outlook for Fine Wine in a Complex Climate

2022 was meant to be our year of deliverance; the calm after a long storm that took away our freedom to travel, to unite with friends and family. But no sooner had we begun to fantasise about resuming normal life than new clouds set in, steamrolling our dream of an “easy” year.

The war in Ukraine and an increased realisation of the profound climate challenges we are facing (let alone the financial aftermath of the global health crisis) have wreaked havoc on the world economy, causing markets to tumble, interest rates to rise, and inflation to creep upwards: 2022, annus horribilis. And yet, amid the turmoil, 2022 has been an annus mirabilis comparatively for fine wine – its illustrative index (Liv-ex 1000) is up an impressive 14% since January.

Why has fine wine performed so well? Firstly, wine is a real asset that appeals to investors seeking a safe, tangible store of wealth. Secondly, its pricing model is simple, correlating to supply vs. demand, and demand continues to break records for all-time highs.

What’s on the books for wine in 2023?

2023 threatens to deliver more of the same geopolitics and macro-economics as this year. While we do not expect the same strong returns in 2023 as we’ve experienced over the last 24 months, we do believe fine wine as an asset class is galvanised to keep its investment value, and remain protected against major downsides.

If we are to trust in history, the wider wine market may stumble heading into next year. The last financial crisis incurred a slight negative impact on wine prices in 2008, albeit with lower drawdowns than most other asset classes.

Today’s wine market is fortified by better liquidity, diversity, and transparency. So the days of basement bargains when hard times hit are long gone, particularly for the most sought-after wines.

And here-in lies the key: expert wine selection. While seekers of mainstream “drinking wines” may prefer to sit tight, savvy investors will keep their heads in the game. The very top end of the wine market is narrowing, trimmed at one end by unprecedented levels of interest, and at the other by Mother Nature, whose increasingly volatile behaviour threatens the production of the world’s greatest wines as we know them.

Today’s collectors will not only possess assets poised to weather market turbulence better than most, they will become the guardians of our dearest vinous treasures – a case of survival of the rarest.