What does the Election result mean for fine wine prices?
We have had a lot of calls over the last couple of days about the Election result, and its implications, such as they are, for the fine wine market. At APM we proclaim no particular political affiliation, but we can draw general conclusions from the decision the electorate took last Thursday.
All markets like stability. Whilst it is in the nature of any free market place that there can be precious few guarantees, no-one other than a volatility geek likes uncertainty. We have all become more or less used to what is on the Conservative economic agenda, and as the currency and stock markets illustrated on Friday and Monday, no change is good news.
Whether it really is in the nature of the Labour Party to tax and spend (unarguably it is for “Old Labour”, if less so for “Blairite Labour” as far as the tax side of that equation is concerned), the threat of a hike in taxes would not have been helpful to the fine wine market. As we have been at pains to stress, fine wine is a luxury good. Anything that impinges on people’s disposable income would not be a good thing. (An increase in spending such as promulgated in the Labour Party manifesto would have had no impact on luxury goods purchases.)
There is little doubt that luxury items are purchased “at the margin”. No-one actually NEEDS a Rolex watch, or a Bentley. They are bought because people feel good about themselves, their prospects in life, and because they can afford them. Some people are obviously so wealthy that they will buy these things irrespective, but in most cases it is the aggregated marginal buyer that tips the scale.
The exception to this is when you have a seismic structural change to the market place. We have seen over the last ten years how the emergence of a massive new economy has the power to do remarkable things when purchasing power increases by a factor. These occasions don’t come along very regularly, but when they do you get a paradigm shift that refocuses supply to a new level (see Range Rover, Louis Vuitton, etc), or pricing, in the event that supply is constrained (see the fine wine market).
The feelgood factor that economic growth gives rise to can only benefit the fine wine market place. We all know that the UK is no longer the dominant player in the fine wine market, but it is still more important than anywhere bar China. If a continuation of current policies in the UK, and a reasonably benign global environment, see the economy continuing to grow, then there will be a degree to which fine wine prices are underpinned at current levels.
Any market watcher has to assess threats to the market place, and whilst the best-laid plans can be derailed by unforeseen circumstances and exogenous shocks, it is difficult to conclude that the Conservative Party victory last week is in any way bad for fine wine prices. And if it’s not bad, perhaps it will be good.