…And so it has come to pass that the stock market’s ten year bull rally finally looks to be coming to a devastating end. After one of the longest rallies of positive growth in history it looks like the bear market is here and a prolonged recession may be upon us. Already economic titans like Japan and Germany look to be in trouble, and with Coronavirus cases now having hit 110,000, ‘stock market volatility’ looks more and more like the understatement of the century.
Whilst many unprepared investors may be running for the hills, shocked at this sudden turn of events, there were some that had predicted it as far back as June 2019! The analyst responsible for first identifying the ensuing 2008 crash, Jesse Columbo, now claims to have identified no fewer than twenty different global investment bubbles- all of which look set to burst and any of which could trigger a dangerous domino effect leading to financial calamity. Moreover, if we do hit such a profound recession it could be far worse than 2008 as there is now an additional $100 trillion of new debt hanging around.
So what are the options?
Well, stock market uncertainty has always resulted in investors clamouring for tangible and finite commodities and here at VCL we are already witnessing increased demand for single malt Scotch whisky casks. Panicked investors are quite rightly freeing up their stocks and shares and looking for a safe haven for their money but the high street bank offers no sanctuary. With interest rates so low savings accounts can’t keep up with inflation, so that’s a no-no. What about traditional commodity investments such as gold and oil? Well, with Russia and Saudi Arabia now fully embroiled in a pricing war, oil prices have just plummeted by 33% so that doesn’t look like a sensible option either. With regards to gold, it currently stands at almost £1,250 per ounce- close to its all time high, and this is all down to fears over the Coronavirus. But what about when these fears recede? Industry experts believe that as progress is made and the Coronavirus contained, there will be a market correction for gold prices. We agree.
Well, as you might imagine, the devastation of the stock market has quite literally turned investors to drink- both for consumption and for investment. In fact, sales of high end single malt are skyrocketing.
Scotch whisky had a record breaking year last year- 2019 was the best year ever for Scotch whisky’s overseas exports with HMRC showing that £4.9 billion was exported from Scotland, up 4.4% on the previous year. More importantly, single malt Scotch was remarkable in that for the first time exports breached global values of £1.5 billion. Moreover we know that consumption levels are on the up as consumers’ disposable income rises- the number of consumers now able to buy and consume a rare and/or old whisky is growing by 50 million per year.
As for the Coronavirus; it will hit the supply chains of all sectors and industries, including Scotch whisky with its collaborative and labour intensive production system. Should VCL clients be afraid?- quite the opposite. If production levels at distilleries is reduced, or indeed grinds to a halt, it is widely accepted that prices for pre-existing casks will increase exponentially as supply levels fall.
The upshot is that cask whisky will be a lighthouse during this mighty economic storm. The Government recognises this which is why the Chancellor has just scrapped plans for an increase in Duty on spirits- they are ensuring that Scotland’s biggest export remains protected and indeed flourishes. Our advice is this; be proactive not reactive, anticipate the ensuing crisis and safeguard your hard earned cash by investing into the Knight Frank Luxury Index’s number one investment- Scotch single malt whisky.