Watch market update 2020 Spring- Summer**
In 2019, most financial analysts predict 2020 as the year of recession. The inversion of Bond yields spook investors (short-term interest rates become higher than long-term rates. This type of yield curve seldom occur and is considered to be a predictor of economic recession). Fed reserve also turn dovish and lower the interest rates as result. For a good part of the decade, many economists predicted China as the most cause of economic crisis. Statistics are appalling, over leveraged, shadow banking, housing bubble, ghost cities will empty new apartment blocks…
These fears are unfounded, again Chinese government have rolled out policies after policies to keep these problem in checks. Now it is clear recession is indeed coming, but the cause is something that no one predicted. (as like previous financial crisis) It is a the COVID-19 that will cause the downturn. Of course hardest hit is China and that’s gonna stall lot of manufacturing production lines, supply chain is gonna hit hard. Many end products such as iPhone and automobiles are not going to be deliver as schedule. Companies missed earnings, retail, F&B tourism business across the affected countries going to be hit hard.
However, this recession is unlike the Great Recession of 2008 or the Asian Financial Crisis of 2008 or the Asian Financial Crisis of 1998. Here’s why:
1. this crisis in not a destroyer of asset unlike the previous 2 crisis. It disrupt the spending, production and supply chains. Disruption will be temporary if countries are able to control the spread and stabilize the situation with months.
2. The survival rates of the COVID-19 virus is actually high, thanks to modern medicine; unlike the previous Pandemic for example like the Black Death in the Middle Ages where 50% of the population in some cities was reportedly annihilated.
3. Measures against economic slow down already in place. Central Banks have acted quickly and this is evident from the reaction at the stock market across the globe. Confidence that the disease will be brought to control soon, hopefully.
4. Strong rebound in consumer spending expected aftermaths the pandemic eradication. Surely the sense of relieve of the general public maybe spur a suddenly spending spree will uplift the post-pandemic economy.
For watch market, resale price took a dip in 2H 2019 and stabilized somewhat during the January 2020. February we saw price for some Rolex Sports rebounded, bear in mind that happened while the virus is on the loose. Partly it is the weakening of SGD that send the prices creeping up somewhat. Rumor of 116610LN & 116610LN discon also cause a renew interest in these models.
Although early signs indicated a slowing down in the Swiss watch export to China, as retail grinds to a halt in some major cities across China. But that not necessarily means that resale price gonna take a huge plunge. It is possible grey market sales will be offset somewhat by online purchase, as shoppers are unwilling to leave the homes. As of now still too early to tell how resale prices will be affected should this crisis prolong.
Brand new Rolex & Patek sports prices should remain stable as the demand is still strong: there is consistent backlog of order/waiting-list everywhere. But a word of caution: we might see a decline of the used/resale watches prices should the crisis prolong deeper into the summer.
As mentioned above, the main difference between this crisis and previous this time round asset value are not destroy. Although spending may slow down and decelerate the growth; business such as retail will be taking a big hit. But destruction or individual wealth won’t be as bad as 2008 or 1998, hence there will not be a repeat of Daytona at S$12,000 and Kermit at S$7,000 (of 2008-9).
At this moment we don’t see a need to panic sell, but remember, like we always preach upon time to time: relook/review sell your excess watches in your collection every few months. Clear the access, also do look out for the buying opportunities too. Since there is less intense competition for collectible watches now. You might just get the grail watch that you wanted so much.
*Do note that “prices” we refer to in this article are for sports Rolex and Patek Nautilus and Aquanaut. Any reference to other brands will be mention according.
**This article is written based on the current situation, on assuming a more hopeful and optimistic CONVID-19 situational outcome, where WHO guidelines are adhere by those affected Nations. We will also disclaimed against the other possibilities of disruptions to the economy like for example trade war or oil/energy shock.