Bid offer ratio vs Liv-ex 50

For the last two months our weekly Talking Trade blogs have noted that the bid:offer ratio (i.e. the total value of bids divided by the total value of offers) has remained stable at around 0.5. But why could this be important for the general fine wine market? In the above chart we have tracked the Liv-ex Fine Wine 50 Index against the bid:offer ratio. As shown, 0.5 has historically been a turning point for fine wine prices: when the ratio dips below this – as in August 2011 and March 2012 – then Bordeaux First Growth prices have subsequently fallen. When it rises above this – as in November 2012 – prices have lifted.

Although imprecise, it certainly seems that a change in direction of the bid:offer ratio results in a change in direction for the Liv-ex 50. This is why recent figures have injected some optimism into the market. In August the ratio reached 0.49, and the Liv-ex 50 closed the month up 1.3%. Since then the ratio has held close to the all-important 0.5. If this continues, First Growth prices might just build a base at current levels.