The WatchCharts Overall Market Index, which tracks the prices of 60 luxury watches from top brands, has experienced a dramatic shift over the last five years. This index saw a bubble-like peak around early 2022. This rise in watch prices, arguably fueled by excess liquidity, booming stock markets, and speculative buyers, was part of a larger trend where alternative assets like NFTs, art, and high-end watches saw massive gains.
At the peak in 2022, prices soared, driven largely by brands like Rolex, Patek Philippe, and Audemars Piguet. However, since then, the bubble has burst, with the WatchCharts Index falling by 37% from its highs. Rolex models, in particular, dropped by 31% over this period. High-end watches priced between $50,000 and $100,000 saw double-digit declines, while watches in the $10,000 to $20,000 range experienced a 7% drop.
Several factors contributed to this decline, but one of the primary drivers has been the U.S. Federal Reserve’s aggressive interest rate hikes, which began in March 2022. Rising interest rates curbed the appetite for luxury goods, particularly speculative purchases. Investors, who once saw watches as a safe asset, have pulled back, shifting focus towards saving and more traditional investments. The tightening financial environment has also affected crypto markets, another source of demand for high-end watches during the boom.
The question of whether we’ve reached “peak watch” is a compelling one, especially given recent trends. The explosive growth in prices during the pandemic, followed by a sharp correction, suggests that the watch market may have already experienced its speculative peak. From March 2020 to early 2022, prices for high-end watches like Rolex, Patek Philippe, and Audemars Piguet reached unprecedented levels, driven by factors like low interest rates, abundant liquidity, and increased interest in alternative investments.
However, as prices have fallen by over 30% since their peak, many are wondering if we’ve already seen the market’s zenith (no pun intended). While it’s difficult to predict with certainty, several indicators suggest that the speculative bubble has burst. Rising interest rates, economic uncertainty, and shifts in consumer behavior are likely to keep prices from soaring to previous highs anytime soon. I’d also add that using basic logic, with Rolex increasing supply and addressing backlogs, the scarcity that once fueled price surges should become less pronounced. But then again, applying logic to an illogical market is perhaps not the best of ideas…