If you followed in Jay Z’s footsteps and locked up some expensive bottles of wine as a retirement investment, you might be looking for a refund right about now.
Driving the news: Fine wines, pitched to investors as a safe store of value, have turned out to be not-so-safe after all, with values falling amid a rebound in the stock market.
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Fine wine has had a compound annual growth rate of 10% over the last 30 years, according to one index that tracks prices of fine wines.
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But prices have dropped over 2% so far this year, while the S&P 500 is up nearly 20%.
Catch up: Interest exploded in alternative assets like wine, whisky, and handbags thanks to a combo of pandemic-era boredom, new DIY alternative investment platforms, and a long period of low-interest rates.
Why it matters: The true test of alternative assets’ staying power will come now that they are getting beaten by the good ol’ stock market.
Yes, but: Prices may be down at the moment, but the value of wine has fared better than the stock market during recent episodes of economic turmoil.
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During the period that captures the pandemic onset (between January 1st and March 31st of 2020), the S&P 500 fell 23%, while an index of fine wines was down only 4%.
- The same scenario unfolded during the 2008 financial crisis: the S&P 500 plummeted almost 40%, while the wine index fell just 0.6%.
Bottom line: Fine wine investments may not be completely safe from economic volatility, but given its stable performance during tough times, wine investors probably won’t be hitting the panic button (or popping corks) just yet.—LA