Written by Liv-ex

Market summary: cautious optimism

The market remains full of cautious optimism. All of the Liv-ex indices rose in 2017, but at a much more modest pace than in 2016. A fluctuating exchange rate is altering the level of demand for certain regions, with Bordeaux being particularly affected. The Fine Wine 50 – tracking the daily price movement of the Bordeaux First Growths – was particularly susceptible to exchange rate movement for the majority of the year, largely rising and falling along with sterling’s movement against the euro.

Despite gaining 5.3%, the industry benchmark Liv-ex 100 is the worst performing major Liv-ex index this year. In April 2017 it fell for the first time in 16 months. The current level remains 15% off its peak in June 2011.

Burgundy leads the way

The Fine Wine 1000 – the broadest measure of the fine wine market – was the best performing index, rising 11.3%. It is currently at an all-time high level. Among the subindices the Burgundy 150 had its best year in a decade, climbing 23.9%. A large percentage of this price growth occurred in the second half of the year when demand increased as earlier reports of the small 2016 harvest in Burgundy were confirmed.

Both the Italy 100 and the Rest of the World 50 also outperformed the market, rising 13.2% and 12.8% respectively.

To put the performance of wine in perspective, Chart 1 compares how the Liv-ex 100 and the Liv-ex 1000 have fared against Gold and equities. Although wine has not been able to keep up with US equities, it has still outperformed both UK equities and Gold so far in 2017.

Brexit: currency impact

Last year a Brexit bounce from the falling pound lifted prices. This momentum was carried through into this year until the Liv-ex 100’s 16-month streak was brought to a halt in April. This came as the pound strengthened and buying eased off in advance of the 2016 En Primeur campaign. Since then, month-on-month growth has been largely at the behest of currency fluctuations. Approaching the summer, the strong euro nudged the index up, before the pound strengthened in August and pushed the level down. Recently the resurgent dollar has supported an increased level of activity from Asian buyers who have been stocking up in anticipation of Chinese New Year.