With a backdrop of floundering financial markets and growing economic uncertainty investors are looking at tangible assets and US investment wines are an important target. Liv-ex reports today on the robust performance of US fine wines on the exchange and that top Napa brands have seen their trade share by value on Liv-ex rise to 5.2% of total trade in the first quarter of 2020 – double the average of the previous five years.
The Liv-ex California 50 index measures the ten latest physical vintages of the most actively traded wines of the region: Screaming Eagle, Opus One, Dominus, Harlan Estate and Ridge Monte Bello. The index is up 2.8% YTD and has grown 54% over the last five years, outperforming the broader Liv-ex 1000 which has seen 38.3% growth over the same period. We compare this performance with key financial markets and gold in the table and see in Q1 this year that US fine wine icons have seen strong first quarter growth and that across five years that performance outstrips all assets including ‘safe haven’ gold, whilst equities are experiencing unprecedented losses and uncertainty.
California top fine wines compared to financial markets and gold:
| Index | Q1 2020 | 5 years |
| Liv-ex California 50 | 2.8% | 54% |
| Liv-ex 100 | -1.1% | 24.2% |
| Liv-ex 1000 | -2.7% | 38.3% |
| FTSE 100 | -26.0% | -17.6% |
| S&P500 | -19.4% | 25.9% |
| Gold | 6.4% | 37.3% |
Source: Liv-ex.com – data to 31.03.20
Since 2015 the number of individual US investment wines traded on the exchange has seen a consistent average growth rate of 35% per annum.
Understanding emerging market opportunities as early as possible is obviously key to investors and iconic Californian cult wines are an important consideration in terms of that ‘market youth’ and also as a component of a diversified fine wine portfolio. The US is an embryonic sector compared to Bordeaux and Burgundy in terms of fine wine investment and this is largely due to heritage as the top producers are all relatively young, compared to the French First Growths but, significantly also due to supply. The top Californian wines are produced in very low numbers which are generally pre-sold to loyal US customers. Getting hold of rare Screaming Eagle outside of the wine estate’s wait list is a global challenge.
In addition to very low supply – quality is also extremely high. International critic, James Suckling has recently tasted and rated top US wines – nine of Napa’s finest were awarded perfect 100 points.
Screaming Eagle 2007 has just been ranked 7th in the top ten most traded fine wines on Liv-ex for the first quarter of 2020, trading at c. £32,000 (12 x 75cl). The US fine wine icon still has one of the most valuable sales on record with a 6 litre bottle of Screaming Eagle Cabernet Sauvignon 1992 raising US$500,000 at auction twenty years ago in 2000.
US wines are not inflicted with the current 25% Duty charges imposed on Euro wines being imported into the US so American demand may well have increased for Californian investment wines as French First Growths saw a hefty price rise for US consumers in Autumn 2019.
Fine wine investors must look at the rising global demand for wines from the USA and other strong regional performers including the Italian Piedmont Barolos and Super Tuscans and strengthen their portfolios with the best wines of these regions.
Right now fine wine offers a rare safe haven for capital that investors should not ignore. There is no end in sight at the moment to the current economic uncertainty nor do we yet understand the depth of the potential economic fall out of Covid-19. Fine wine has never been as an important a consideration for investors as it is right now.
For more information on creating a diversified fine wine portfolio to protect capital and position for strong, long-term growth contact the Vin-X team at 0203 384 2262 and see our Guide to Fine Wine Investment.