Fine wine: A physical passion asset that can shine in inflationary times

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Central banks around the globe are aggressively rolling out quantitative easing measures to help their economies recover from the Covid-19 pandemic. The excess money supply, coupled with labour shortages and supply chain disruptions due to lockdowns, drive inflation to multi-year highs. Rising prices are the most prominent in the US and Europe, yet Asia is not immune from inflation in an interconnected world. 

For example, in Hong Kong, the overall consumer price index (CPI) jumped 3.7% year-on-year in July 2021, the highest level since August 2016. The latest figure was 1.7% in October, compared to 1.4% in the previous month. Singapore’s CPI is also on a rising trend, with October seeing a 3.2% year-on-year increase, from 2.9% in September. Although equity markets continue to rise, inflation surprises have triggered bouts of volatility as investors gauge possible shifts in monetary and government fiscal policies. 

In this environment, real assets, such as fine wine, can shine. 

“Inflation is hitting multi-year highs in several major economies in late 2021. This is causing more uncertainty in financial markets as central bank policy could shift faster than expected,” says Tom Gearing, CEO & Co-Founder of Cult Wines, the world’s leading fine wine collection management and investment company. “As a physical passion asset, the primary drivers of fine wine prices are internal factors, namely limited supply and persistent demand through different macro backdrops. Fine wine is, therefore, less susceptible to changes in the inflation or policy than many other financial assets.”