Why Fine Wine Investments Are Souring

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It has been a heady year for most liquid assets, but not fine wine.

While stocks and bonds are set for banner gains in 2019, top-end wines fell almost 3% in value in the 12 months through November, according to the Liv-ex Fine Wine 100 index, an industry benchmark that prices monthly. That puts 2019 on course to be the industry's worst year since 2014, when key Bordeaux brands were still reeling from Chinese President Xi Jinping's crackdown on corrupt gift-giving.

One problem may be that the U.S. Federal Reserve policy of cutting rates rewarded more conventional investments. The Liv-ex 100 turned down in the second half, at the same time as money managers embraced riskier securities, such as cheap stocks.

But U.S. tariffs didn't help. The French still wines that remain the market's core are covered by the 25% surcharge on $7.5 billion of European Union imports sanctioned by the World Trade Organization in October as a response to illegal plane subsidies. Tellingly, the best-performing fine-wine regions of 2019-Italy and Champagne-were excluded, though President Trump in December threatened the latter with an even steeper tariff in retaliation for France's new digital tax.

At least there is one consolation in a souring market for fine wine: It gets cheaper to drink.

By Stephen Wilmot
December 30, 2019
Source: WSJ.com