Halloween Horrors in Equity Markets not suffered by ‘safe haven’ Fine Wine

Global commentators reported on Halloween that the “stock market horrors” experienced across the globe in October 2018, from HK to NY, have seen key indices take dramatic falls and markets lose $billions in value. Some view the current malaise as a result of the deepening trade war between the world’s two strongest economies, a view which led the IMF to downgrade its growth forecast for both China and US in 2019, in early October.

The US Nasdaq took the hardest hit, losing about 10%, its largest monthly fall since November 2008. The broader S&P 500 had already started to see a more sustained weaker performance in recent months and it fell nearly 7% in October, the S&P’s worst month since September 2011. Meanwhile, the Dow was down 5%, experiencing its poorest performance since January 2016.

Across the globe, HK’s Hang Seng index lost 10% in October, China’s Shanghai Composite fell 8% and commentators are seeing this as a deeper dive into a Chinese bear market.

‘Halloween Horrors’ include top US investor favourites; Amazon and Netflix, both lost about one fifth of their value in October. Oil hasn’t escaped the turmoil with US prices falling 11% and Brent Crude down 9% in October.

Some experts view this overall decline as a marker to the end of the longest ever bull run in US financial markets’ history and over-valued stocks are now experiencing a necessary correction. Another opinion is that markets are responding to an environment of rising interest rates. It appears that we may now potentially be at the end of a decade long era of ‘easy money’ from central banks and rising interest rates are sucking liquidity out of global markets, triggering a series of ‘bear markets’ around the world which has now impacted US equities. Others argue that the markets are simply undergoing a ‘healthy correction’.

Ahead of more detailed wine market analysis, Liv-ex commented on fine wine’s performance in the current environment with focus specifically on the Liv-ex 50 index. This reports the average price performance of the ten latest physical vintages of the five Bordeaux First Growths (Haut Brion, Latour, Lafite Rothschild, Margaux and Mouton Rothschild), currently the 2007 to 2016 vintages. These are classed as blue-chip wine investments due to their quality, long term price performance, and very strong secondary market demand. The market in these wines has softened slightly in recent months, however October’s 1.2% decline is nothing like as impactful as the equity markets’ decline. The Liv-ex 100 and 1000 indices also have a recent trend of outperforming the Liv-ex 50 due to the stronger performance this year of key wines from Burgundy, Champagne and California included in these benchmarks, so the Liv-ex 50 would provide the most modest growth comparative.

Fine wine, as we know does not directly correlate with the performance of financial markets and when included in an investment portfolio offers the opportunity to offset negative trends, preserve capital and strengthen overall returns over the long term.

For more information on how to include fine wine in your wealth management plans call us now on 0203 384 2262.