The largest interest rate increase in 27 years is not being passed on to savers, but wine investments continue to grow as inflation is forecast to exceed 13% this Autumn.
Wine investments are rewarding investors:
- Average wine trend growth of 24.3% in the 12 months
- Burgundy investment wines rose 49.6% in last year and 25.4% YTD
- Champagne investment wine prices have risen by 51.3% in one year
- Top performing wine in July 2022 grew by 20.4%
Data: Liv-ex.com at 31.07.2022
Since December 2021 the average savings account rate has risen by a mere 0.09%, despite the Bank of England’s progressive rate increases through 2022 to the latest 0.5% on the 4th August, taking the base rate to 1.75%. The BoE is applying tough measures to attempt to rein in rampant UK inflation, which is now forecast to exceed 13% this Autumn and potentially hit 15% by the end of the year.
With inflation largely fuelled by global energy prices and the UK’s higher dependency on fossil fuels, we’re in for a tough winter and for savers seeing negligible returns and cash value eroded by a higher cost of living, what steps can be taken to protect capital?
Wine as an inflation hedge:
Gold has been the ‘traditional safe haven’ and a normalised tool for hedging high inflation – but what’s happening? Gold is not performing as expected in the current environment. A strengthening dollar is part of the equation that has seen its decline of -2.2% in the year to 31st July 2022. In comparison, fine wine investments have seen an average growth of 11.6% in the same period. Fine wine is tangible, finite, low-risk and stable with performance that is not directly correlated to financial markets. It is proving its value as a hedge to market volatility and rising inflation.
Wine compared with gold & equities:
Index | YTD 2022 | 1 Year | 5 years |
Liv-ex Burgundy 150 | 25.4% | 49.6% | 122% |
Wine - Liv-ex 1000 | 11.6% | 24.3% | 49.5% |
Gold | -2.2% | -2.7% | 40.1% |
US equities S&P500 | -13.6% | -7% | 66% |
Equities - FTSE 100 | 0.7% | 4.8% | -0.1% |
Source: Liv-ex.com, 31.07.2022
Across the year-to-date, one-year and five-year periods, fine wine’s average performance compares favourably to gold and equities. Even more compelling, the profits made are generally exempt from Capital Gains Tax, see our special Tax Report for more information on the tax benefits of investing in wine.
Investment wine price performance:
Top performing wines in the first half of 2022 achieved growth approaching 50 per cent and July’s top performer, Dom. Comte Georges de Vogue, Bonne Mares, Grand Cru 2018 rose 20.4% in price. Burgundy has delivered strong growth in recent years and over the last 12 months has achieved an average 49.6% rise. Champagne is also driving growth in the fine wine market with an average trend of 51.3% over the last year, producing some of the most traded wines on Liv-ex and delivering liquidity and strong returns to investors.
In contrast to savings accounts, equities and gold, fine wine is delivering value, sheltering cash against inflationary pressures and is a strong tool diversify a portfolio tax efficiently. See our Q2 2022 Report for more information and speak to a member of our team on 0203 384 2262.