Under the Hood: Has the Fine Wine Investment Boom Gone Bust?
By Tim Carl
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The Spotlight
Welcome to “Under the Hood,” our exclusive Saturday series for Napa Valley Features paid subscribers. This week, we examine the growing uncertainty in wine investment amid market volatility. From the sharp decline in the Liv-ex California 50 index to the privatization of Duckhorn and the potential exit of Constellation Brands from the wine sector, we explore the factors reshaping the fine-wine investment landscape and what they mean for collectors, producers and investors.
Additionally, we’re diving into the latest data from our readers’ polls and providing insights from our economic dashboard, covering local Napa Valley, U.S. and global markets.
In addition, we feature "What We Are Reading," a section with a handpicked list of recent articles that provides a variety of viewpoints on issues important to our community and beyond.
“What We Are Reading” quotes of the day:
“There now appears to be the likely triple whammy, at least in the short-term, of a weaker U.S. economy, weaker dollar and possibly higher tariffs.” - Tom Burchfield, Head of Market Intelligence at Liv-ex, in today’s Under the Hood.
"The increased connection between the party of the president and Americans’ satisfaction with the state of the nation is further underscored by the extent to which aspects related to the government are named as the most important problem facing the nation." – from Jeffrey M. Jones, in "Record Surge in Republican Satisfaction With State of Nation," Gallup.
"When Europe responded to Trump's 2018 tariffs with a 25% tax on U.S. whiskey, exports to the EU fell by 20% through 2021, according to the Distilled Spirits Council." – from SF Gate, in "Trump threatens retaliatory 200% tariff on European wine after EU proposes American whiskey tax."
U.S. consumer sentiment plummeted in March to its lowest since November 2022 amid growing economic uncertainty, marking the third consecutive monthly decline, while inflation expectations surged for the fourth straight month to their highest levels since November 2022 and February 1993. “Michigan Survey, March 2025.”
"Napa County’s microwinery ordinance is 'the most restrictive in the wine industry.'" – from Elise Nerlove, in "'Most restrictive in the wine industry’: Napa County eyes changes to rules on small wineries amid industry struggles," The Press Democrat.
"Our goal is to safeguard these publications, ensuring they continue to provide accurate, in-depth, objective and trusted high-quality reporting." – from Cindy Gallaher, in "Local group makes offer to buy ‘Press Democrat,’" NorthBay biz.
"Today’s ruling to reinstate tens of thousands of these essential public servants is a big win in our fight against the President’s unlawful actions." – from Mike Thompson, in press release, "Thompson Applauds Rehiring of Tens of Thousands of Civil Servants."
"A lot of people enjoy drinking, and they don’t like to be told that something they really enjoy is bad for you." – from Emmanuela Gakidou, in "Alcohol and cancer risk: what you need to know," Nature.
"Grape variety is a tool to express the terroir, but we have too often made it a brand." – from Olivier Bourdet-Pees, in "Can old-vine varieties save wine from climate change?," World of Fine Wine.
Under the Hood: Has the Fine Wine Investment Boom Gone Bust?
By Tim Carl
NAPA VALLEY, Calif. — Wine has long been considered a relatively stable alternative investment, but recent events have shaken confidence in the sector. The fine-wine market is experiencing turbulence driven by corporate consolidations, economic instability and shifting consumer preferences. The latest Liv-ex California 50 index, which tracks the price performance of five California wines (Dominus, Harlan Estate, Opus One, Ridge and Screaming Eagle) across ten vintages, has fallen to 309.06 as of Feb. 28, 2025, continuing its downward trend.
Currency Shifts, Tariffs and Market Nervousness
According to Tom Burchfield, Head of Market Intelligence at Liv-ex, shifting economic conditions are adding further strain to the fine wine market.
"Last year we saw the direct impact of interest rate reductions on the market. With the Fed cutting rates in autumn last year, the USD strengthened and U.S. buying increased, rising from a percentage share of purchases of 34.5% in Q2 to 39.9% in Q3. As the dollar has weakened so far in 2025, we can see U.S. buying dip."
Recent currency movements complicate this picture. While the dollar has been strong relative to certain currencies, it has softened in recent weeks, creating uncertainty in global markets. This, coupled with broader economic instability, has led to hesitation among U.S. buyers.
“The rapidly evolving macroeconomic situation in the US is perhaps even more important,” he said. “US stocks have had a very tough time over recent weeks and the prospect of a recession is rising. With Trump threatening 200% tariffs on EU wine — a level that we would not anticipate coming to fruition — the market is nervous.”
Burchfield also noted that a possible “triple whammy” is amplifying concerns.
"U.S. share of purchases have fallen from 35.5% across 2024 to 27.4% this past week. There now appears to be the likely triple whammy, at least in the short-term, of a weaker U.S. economy, weaker dollar and possibly higher tariffs. This is not going to be positive for U.S. consumers (fine wine is not fungible), U.S. merchants or E.U. producers."
