If investors were hoping that 2021 would bring some calm to the stock markets after the turbulence of 2020 and the Covid-19 pandemic, that certainly hasn’t been the case.
Not only have further national lockdowns shown that the health challenges are far from behind us, but a new threat (or opportunity) has arisen in the shape of swarms of new investors causing targeted chaos.
As with the dramatic swings in the financial markets in 2020, investments in whisky are once again looking like a safe port in a storm.
GameStop was hardly a global household name until January. It’s a bricks and mortar high street video game and electronics store chain in the USA that was making losses, not least because of the impact of the pandemic. This can make a brand look like an appealing gamble for investors who borrow shares in the company, sell them and promise to buy them back, with the hope that they will be worth less when they do that and can make a profit.
That’s called ‘shorting’ and hedge funds often target stores like GameStop for exactly that reason. But this time something went wrong. On social media site Reddit, there’s a sub-Reddit called ‘wallstreetbets’ where investors swap tips and on this occasion they swarmed the GameStop stock, sending the value skyrocketing by more than 700% in a week.
This caused chaos in the markets and a media storm that pitted the young amateur investors of Reddit against the established hedge funds. Eventually, Robinhood and Interactive Brokers stepped in and stopped trading in shares at GameStop and other targeted brands like AMC Entertainment, Koss Corp and BlackBerry, which saw shares drop by around 55%.
What the long-term implications of this chaos will be, remain to be seen. The day traders of Reddit will have been buoyed by their remarkable successes, even if they were followed by some stories of very burned fingers as the market fought back hard. So we can expect ‘wallstreetbets’ to continue to have an impact in the short term at the very least.
This means that the financial markets will be volatile and that unpredictability will put off a lot of investors who don’t want to be collateral victims in the middle of this battle between the establishment and Redditors.
In such times of uncertainty, wise investors traditionally turn to assets to spend their money on, knowing that these offer less risk of being impacted by fluctuations in the markets. Assets like Scotch whisky have shown that they can ride out such storms and continue to offer value for money.
In 2020, Covid-19 did have some impacts on whisky production and distribution, but these were short-term and the value has been largely unaffected. This is down to the nature of whisky investments and production. If you’re investing in a 70-year-old bottle of Scotch, its value isn’t going to be affected by lockdown or people from Reddit trying to prank the stock markets.
There’s only finite supplies of each kind of whisky, especially vintage bottles and casks and it’s never going to go out of fashion or be impacted by changing habits. Indeed, whisky produced in 2020 may well benefit in value by the fact that production of it was largely halted for months, so there may be less of it available than other years.
With rare whisky already having risen in value by over 500% between 2010 and 2020, it’s proving itself to be a highly profitable alternative investment during a pandemic and there’s every reason to believe that it will continue to be a safe and lucrative port in a storm during the market volatility of 2021.