Down Markets Favour the Audacious
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Every market bubble tells the same story: too much money chasing too few assets.
One could argue that optimism is the fuel of unrealistic expectations.
Someone always knew someone else who struck it big—selling a Burgundy to cover a divorce or flipping Champagne for a flat deposit. The allure of quick wins was irresistible, drawing investors in. Headlines like “Fine Wine Outperforms Gold & Equities” and “Fine Wine Favoured Over Gold During Economic Uncertainty” dominated the market. Ironically, such headlines are often cause for concern—and this time, they were.
As many of you will recall, the fine wine investment bubble burst almost exactly two years ago.
By July 2022, declines began in Burgundy and Champagne, regions that had seen the sharpest price surges. By mid-2023, the contraction became widespread, affecting nearly every fine wine category. Since its peak in October 2022, the Liv-ex 1000 Index—a key fine wine benchmark—has fallen by 23%.
The fine wine bubble of 2020-2022 revealed fundamental flaws in the wine industry.
The biggest crack? Release prices.
Many producers raised prices to match bubble valuations, leaving buyers burned when the market corrected. This pricing strategy has eroded trust, with some customers hesitant to pay premium prices for new vintages after experiencing losses on prior investments. As a result, the lack of confidence has further fueled the downward market spiral we are in now.
In addition, demand from China and Asia has significantly slowed. For over a decade, strong demand had been driving up prices for Burgundy and other top wines. But by 2022, the economic strain from China’s post-Covid policies and a weakened real estate market started to affect middle-class spending.
These factors created a “perfect storm” that shattered the illusion of perpetual growth in fine wine prices.
Since its peak in October 2022, the broad Liv-ex 1000 Index—a key benchmark for the fine wine market—has dropped 23%, with no clear signs of recovery.
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Or are there?
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While it's impossible to time the market bottom, here are three key indicators that could signal an upcoming rebound.
Sign #1 - The End of Bidding
Our friends from
gather bids, offers and closing prices from over 42 merchants in the UK. Why is that relevant? you may ask.
In August 2024 (pink line), buyers were able to negotiate larger discounts from the original list price, as only 68% of sales closed within 20% of the asking price.
By November 2024 (blue line), sellers gained more pricing power, and 88% of sales closed within just 20% of the list price. Over the months, discounts have decreased, meaning buyers are paying closer to the sellers' original asking price.
This rapid recent shift suggests a change in the market where sellers are slowly re-gaining stronger positions. This trend indicates a healthier or more competitive market for sellers, one that might suggest a bottoming out of the market.
While this information is intriguing, it doesn’t explain the underlying reasons for this change.
Sign #2 - Low Interest Rates Are Back
The answer to that question might lie with central banks.
Why should we care about what central banks do?
We care because they control interest rates and interest rates are a powerful economic lever, impacting fine wine in four major ways:
Reduced Liquidity: Higher interest rates make borrowing more expensive, which can dampen consumer spending—bad news for luxury items like fine wine.
Controlled Consumption: Central banks use interest rates to manage inflation (generally aiming for around 2%). When inflation rises too quickly, rate hikes follow, reducing discretionary spending on high-end goods.
Shift Towards Safer Assets: With high interest rates, safer investments like bonds and savings accounts become more attractive, steering investors away from riskier assets, including wine.
Increased Storage Costs: High rates raise the “cost of carry” for older vintages, as storage and discounting become pricier.
With central banks around the world easing monetary policies—starting with the U.S. Federal Reserve’s 50 basis point cut in September 2024 and then again in November—the stage is set for a potential fine wine market rebound. As interest rates fall, the opportunity cost of holding non-yielding assets like wine decreases, drawing investors back to the market.
Historically, lower interest rates increase incentives for commodities and other non-yielding assets. This easing cycle, coupled with anticipated future inflation, enhances fine wine’s appeal. With bond markets forecasting interest rates to drop from 5.5% to around 3.0% by late 2026, we can anticipate renewed interest in fine wine as the rate cuts move from projections to reality.
Sign #3 - Resilient Performers
Liv-ex recently published their 2024 market review that offers some interesting takeaways.
It is reported that despite the challenges of 2024, certain wines and regions have demonstrated resilience, offering glimpses of stability and exciting shifts in the fine wine market.
Italian wines, particularly from Tuscany, have outperformed other categories, with trade volumes and values significantly increasing, driven by strong demand from US buyers. Super Tuscans like Sassicaia and Masseto have maintained steady performance, while Brunello di Montalcino, exemplified by Argiano’s 2018 vintage, has seen notable price gains, supported by critical acclaim.
This marks a shift away from Bordeaux, which has struggled with inflated release prices and oversupply, towards regions offering better value. In Bordeaux, pre-2009 vintages have shown resilience due to scarcity, while newer vintages face pricing challenges.
Champagne has maintained steady turnover, with Grande Marque brands remaining popular due to high consumption, though some prestige cuvées, like Cristal 2015, have seen notable price drops.
Spain’s Vega Sicilia Unico has been a standout in 2024, with rising trade value and volume, especially among US buyers. These trends underscore growing interest in quality and value over tradition and prestige.
Italian wines and other rising stars are gaining prominence as buyers seek diversity and affordability. This shift signals that buyers are increasingly exploring back vintages and regions beyond traditional Bordeaux, at least for now. It’s an exciting opportunity to discover often-overlooked areas, such as Ribera del Duero, that offer exceptional value and quality.
Risks to Recovery
While fine wine is poised for recovery, potential roadblocks remain:
U.S.-EU Tariffs: Donald Trump’s re-election has renewed concerns about trade tensions.
A potential 17% tariff on European wines could hinder U.S. demand. Especially when, as reported by Liv-ex the US market accounted in 2024 for 35% of total fine wine trade, up 10% from the previous year.
Slow Market Response: Unlike gold or Bitcoin, fine wine markets respond slowly to changes in liquidity, delaying recovery.
Where Do We See Value?
The correction has created a rare buying opportunity.
In addition to Italy & Spain mentioned before, below you can see the top 20 wines that are rebounding the fastest in the Liv-ex 1000.
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As Warren Buffett famously advises, “Be greedy when others are fearful.” For contrarian investors, now is an opportune time to capitalise on market uncertainty.
Happy trading!
This article was originally published in Italian - Il mercato aiuta gli audaci, on WineWins, a wine investment company founded by sommelier Matteo Gavioli and entrepreneur Andrea Calzoni. Gavioli honed his craft in Italy's top restaurants and on the stages of prestigious wine events. Calzoni, a seasoned businessman and collector of vintage cars and art, brought his entrepreneurial flair. Together, they launched one of Italy's first companies to position wine as a true passion asset. What do you think of this current market? Let me know in the poll and comments below.
Thanks, as always, for being here.
👋 Sara Danese
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Disclaimer: The content provided in this article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial product or investment. The value of fine wine investments may go down as well as up, and you may not get back the original amount invested. Past performance is not indicative of future results. Any opinions expressed are those of the author and are subject to change without notice. You should seek advice from an independent financial adviser if you have any questions regarding the suitability of any investment. 'In the Mood for Wine' is not regulated by the Financial Conduct Authority (FCA) and does not provide regulated investment services.