Some 18 months after the start of the COVID-19 pandemic markets across the globe, a return to normality still hangs in the balance with markets continuing to experience significant volatility.
A Slow Return To “Normality”
Q2 saw the advance of global equities, with the S&P even hitting a new record high in June, thanks to the rapid rollout of vaccination programmes in countries like the US, UK, and much of Europe. Over in the US almost all sectors made gains and the PMI (Purchasing Managers Index) shifted from 59.7 in March to 63.9 indicating expectations of increasing consumer demand over the summer and beyond.
Yet beneath this rosy picture uncertainty over easing restrictions and surging COVID-19 rates across the globe are hampering solid growth. Travel and oil firms continue to subdue the markets, and it seems that the global economy is still some way off the confidence in the markets many predicted would be achieved by the end of H1 2021.
Whisky Market Performance
Against this unsettled outlook the performance of whisky as an investment class continues to impress. In the wider spirits sector both Diageo and Artisanal Spirits have reported strong growth in H1 2021.
Scotch malt whisky and spirits merchant Artisanal Spirits recorded a 20% sales increase, with online sales over the period up 28% in the UK. The company credited the rise to “international sales growth, particularly in the US with performance boosted by the suspension of US tariffs on imports of Scotch whisky in March 2021.” Diageo also reported “particularly strong” performance in North America and expects to deliver an operating profit growth of 14% in 2021.
Tariff Suspensions Boost Transatlantic Trade
Great Britain and the U.S. agreed to a four-month long pause in their retaliatory tariffs in March, followed up by a five-year suspension in June. This long-awaited agreement brings an end to the 25% tariff on imports
of Single Malt in the US and has been warmly welcomed by Scottish distilleries and trade bodies. The tariff was imposed in October of 2019 by the Donald Trump administration.
According to figures compiled by the Scotch Whisky Association the tariffs caused a 35% decline in Scotch Whisky exports to the United States, resulting in losses of around £500 million for the already hard-hit industry. Recovery is expected to be slow and steady over the next few quarters as supply chains are re-established and awareness trickles down to consumers.
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