Whilst trying not to sound like a broken record, the facts are that market conditions continue to be extremely challenging for investors. Hints of a Chinese manufacturing recession and Brexit has investors looking for ‘Safe Havens’ and 2018 ended up being the worst year for global stock markets since the financial crisis a decade ago. The S&P500, which has been the standard bearer recently, fell 6 percent over the last 12 months and the MSCI All World Index ended 2018 11.5 per cent down for the year.
The markets have started the new year on a low note. The FTSE fell 1.4 per cent in the opening hours of trading and the DAX index of European shares was also down 1 per cent today.
Commentators view the situation as the markets responding to emerging issues in China, with the latest figures suggesting that the Asian powerhouse’s manufacturing sector may now be suffering a recession and Japan too has reported negative economic growth. Across the pond, the US faces its own challenges with a shut-down of key government functions amidst ongoing political shenanigans. Back in Europe, even Germany is reporting a decline and both UK and European markets are feeling the ongoing lack of certainty due to Brexit.
Liv-ex published year-end performance data on the 31stDecember 2018 comparing fine wine and international equities, and fine wine outstripped financial markets over a 15-year period. It certainly bears strong consideration as a ‘Safe Haven’ asset with the Liv-ex 1000 returning 258.2 per cent over the period, delivering nearly five times the growth of the FTSE’s 59.2 per cent.
The FT’s Adviser publication today quotes Jeremy Leach, CEO of MPG who states that the inflation-proof qualities of commodities will appeal to investors in 2019 and in particular he expects to see a significant increase, possibly as high as 20 per cent, in gold as investors seek wealth protection with continued uncertainty around equities and potential interest rate rises putting pressure on bonds.
Dan Nguyen, Chief Investment Officer at Invesco, predicts a tepid year for equities and bonds due to geopolitical tensions and higher interest rates and forecasts stronger performance from industrial commodities and gold as investors diversify their portfolios.
There isn’t any sign of a change in status expected in the near future. Brexit’s Meaningful Vote mid-month is unlikely to have any positive influence over equities, in fact it could erode value even further. Preserving capital at this time with appropriate tangible assets such as fine wine has to be an important consideration. Notably, past performance of traditional ‘safe-haven’ gold has been strong in recent weeks, but over the longer term it is still out-classed by fine wine.
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