As UK inflation hits 9% in April 2022, wine investments are a strong hedge as equities and cryptocurrencies plunge.
Now at the highest level in 40 years, the UK CPI index has more than doubled from 4.2% (at 31st October 2021) to 9% in the last six months. The pandemic stimulated the inflationary environment with supply chain issues but mounting energy prices exacerbated conditions at the end of 2021. The war in Ukraine has super-charged these pressures hitting commodity supplies and serious implications for global food shortages creating very significant political and economic challenges.
How does fine wine compare with gold with rising inflation?
Equities and other assets are responding with increasing volatility and inflation is eroding capital value. Gold has been the traditional ‘go-to’ investment in times of increasing inflation, but whilst there was a rally in gold prices in Q1 2022, this stalled in April when average gold prices declined -0.8%. In comparison fine wine average price performance grew by 1.3% in the month and exceeded gold's YTD growth of 5.3%, as the Liv-ex 1000 recorded 8.6% increase at 30th April 2022.
Wine investments compared with cryptocurrency in inflationary environment
Adventurous investors have considered cryptocurrency as a potential inflation hedge since its launch. More digital coinage is entering the sector and its experiencing significant volatility. In fact commentators on the current crash are seeing it as necessary correction. The leading player, Bitcoin lost -4.9% value in April and fell a further 20% in early May 2022. It is not currently offering a defence against rising inflation.
Contrast equities and fine wine as UK inflation hits 9%
Meanwhile, fine wine investments are maintaining a solid performance and prices are growing with inflation. In the year to date to the end of April 2022 the Liv-ex 1000 benchmark had grown 8.6%, compared to the FTSE 100’s 2% and the S&P’s -10.5% loss, even outperforming gold’s trend growth of 5.3%.
Wine investment returns are stronger than UK Property in 2022
Even when compared with ‘bricks and mortar’, fine wine is delivering stronger returns. In the month of April Halifax recorded an average 1.1% growth in UK property (residential) prices, fine wine recorded average 1.26% and Burgundy investments 3.46%. Across the last year wine investments grew an average 24.6% compared to property’s 10.8%.
Get the latest wine investor information
It’s a no-brainer – every investor should be including fine wine in their portfolio planning to hedge inflation, volatility in financial markets and to enjoy stable growth. For more information download our latest May 2022 Market Report and speak to a member of our expert team on 0203 384 2262.