May 2018 Wine Investment Report

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May 2018 Wine Investment Report

One of the reasons I write about the global economy in this analysis is because it now has an impact in the fine wine investment market. We can no longer say wine is not correlated to the global economy or stock market.

In recent years, the wine market has been seen to feed from the stock market ups and downs. For example; when the stock market is volatile, investors seek a safety net in fine wine. When the markets are sliding, investors run for safer assets to seek capital preservation, again one of them being wine. When the stock market is bullish, investors look to wine investment as a hedge while making gains in the stock market, investors buy wine investment to bank in profits from the fast money made in the stock market.

It is this underlying support from global markets that give strength to the wine market. Wine is well known as a safer place to keep your money or rather protection from major downturn. As history has proved to us, money in equities can deplete to zero. Wine always remains of value even in a downturn. Thanks to Mr Trump for the volatility he has created in the markets over the last 18 months, it has helped the wine market and it’s rather ironic that he happens to be teetotal.

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April marked the start of the en primeur campaign for the 2017 vintage in Bordeaux. It has not been a great vintage but there are some winners hidden away if you look hard enough. As always, we did not participate in en primeur because we find it an unnecessary risk. We do well from existing vintages or when the wine is almost reaching the bottle after 2-3 years in the barrel.

As we come closer to the first half of 2018, below is the last 5 months performance of our valuations for Bordeaux versus Rhone Valley and Champagne.

The Rhone Valley and Champagne market has outperformed the Bordeaux market in the last few months. While Bordeaux has taken a breather, we see a great opportunity to buy first growth Bordeaux wines and negotiate better prices. We saw a large percentage of first growths increase double digits last year, although we may not see the same growth pattern in 2018, could this all change in the second quarter? Again due to rallies in the stock market and confidence levels, there has been a lot of money going into equities and when the markets become choppy again, we will see money move back into hard assets like fine wine.

Remember to buy when the market is quiet and sell when the market is hot. Despite the growth being less aggressive compared to last year, 2018 is a year for hedging, hedge your stocks and other investments against fine wine to protect you in the event of markets collapsing. Do not over expose yourself when markets are so aggressive, then buy in cheap when markets have had a devaluation.

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Politics and the Global Economy

Are you enjoying the political show that Trump and Rocket Man are putting on at the moment? So much political entertainment in 2018, the media is having a field day and thanks to Trump, Twitter has become popular again.

It looks like the threat of world war is again upon us while the debate continues for the next move. And will they ever get the face-to-face meeting that Trump just cancelled?

Interestingly, this is what Trump thrives on and the media continues to play his game. This rallies both bulls and bears in the stock market. It is certainly an interesting year for stocks and politics. One which will go down in history. A president of a leading economy that we have never seen before, one who likes to create a reaction in both markets and the media to garner attention. What I find most amusing are some of the comments he receives on twitter… We do hope he can get the economy back on track as this will fuel the rest of the world’s growth. It is good to see the oil prices rising again, I’m sure a welcome relief for many of our clients who are in oil and gas.

DOW Jones is teetering towards 25,000 points. This could mean a pull back, but following a pull back we should see another rally for the 25k mark.

Stock markets, still remain fairly bullish. The equity put/call ratio is very low which means that equity and fund managers are not taking much insurance out, (meaning they are not buying many puts as a hedge against their large positions). This shows a very bullish trend.

Crude Oil

With Crude Oil rallying up to $72 it looks like a nice steady trend which should be re-launching many of the oil and gas projects that were paused when oil prices crashed last year. With its current price level, making projects in the oil and gas sector profitable again.

Bitcoin and Crypto Currencies

Bitcoin is holding its value around $8000 which again proves that it is here to stay and not going away any time soon as many of the pundits were lamenting. Watch the crypto space carefully as the next few months look like they could produce some large gains. The institutional money that stocked up in BTC in December and forced the price to record highs of $20,000. Looks to have sold off a lot of their position and selling volume is now lower which shows the bear trend is running out of gas and looks to be flattening out or reaching a bottom. This could present a huge rally in the near future as the big money starts their buying spree in crypto again. Gains in crypto could be on the brink of another 30-50% in the short term.

Crude Oil has climbed from $57 to $72 since January 2018 up to May 2018.

The Pound has lost some ground to the US Dollar since April dipping from a high of $1.42 in April to $1.34 in May. UK retail sales in March were worse than expected and UK inflation dropped to 2.5%.

As always, feel free to contact us if you have any questions.

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The figures for May

This month’s valuations showed a drop in Champagne and Rhone Valley wines -0.36%.

This month’s valuations showed a drop in Champagne and Rhone Valley wines -0.36%.

• 12% of the wines valued showed a positive return, while 37% showed a negative and 51% remained the same.
• 82% of our portfolio is Bordeaux while 18% is Champagne and Rhone Valley.
• The overall loss for ALL the wines valued this month was – 0.27%

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Your Wine Portfolio Was Updated on the 1st of the Month!
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