Will Stock Market Volatility Damage Monterey’s Big Auctions?
From the Ferrari bubble of the ’90s to the booming values seen during the pandemic, macroeconomic factors deliver clearly observable impacts on the collector car market. But what about jolts to the stock market? Say, the 1000-point selloff and subsequent recovery we’ve seen in the last few days? What, if any, influence do these moments of volatility have on the collector car market?
Seeking answers to these questions, we turned to our trove of historic data. In order to discern the potential impact of short-term market movements on overall collector car sales, Hagerty Director of Valuation Analytics John Wiley surveyed stock market performance from the end of July to the first day of Monterey sales (in mid-August) during each of the last ten years, subsequently comparing each period of results to total Monterey auction sales from that year.
The correlation was 0.77 (a correlation of 1 means a clear 100% relationship between the two factors; lower numbers indicate a lower correlation), meaning that there appears to be a strong relationship between short-term changes in the stock market and overall sales figures from Monterey. This correlation seems to support the notion that fresh events affect the way people bid when cars are on the block.
That said, it’s important to note that an overall sales figure represents only one way of measuring true auction performance. For instance, sell-through rate—the percentage of cars offered that sell at an auction—is often a useful metric for whether buyers and sellers are aligned on prices. When we take short-term market movement over the same period and compare it to sell-through rates in corresponding years, the results yield a much weaker correlation rate of 0.27.
If these numbers make you feel like you’re back in some dreadful math class, here’s the takeaway: There’s enough evidence to suggest that short-term market behavior can, and likely does, impact our hobby. However, the extent of that influence varies in any given year. A wealth of factors come into play, from specific inputs (what’s coming to auction that year, for example) to big-picture macroeconomic factors (think inflation).
Cold-hard statistics aside, stock market volatility does speak to one meaningful factor that rules the purchase of luxuries from watches to handbags, jewelry, and collector cars: Emotion.
“The quants and other people who work in financial markets remove passion from the equation, but you can’t remove the passion from a marketplace like ours,” says Dave Kinney, Publisher of the Hagerty Price Guide. “And as a result, when the market drops, it creates a real double-edged sword.”
“There are a lot of people who get spooked by a bad stock market, and they retract whatever their costs and investments are,” he continues. “Then there are others who are making money in the stock market who might see that the reliable return on investment [in stocks] is going, so they search out alternative investments. One of those alternative investments can be automobiles.”
These two perspectives, in tension, can balance each other out to some degree. Stirred emotions can also create a more dynamic buying and selling environment.
So while it’s not absolutely clear how the recent financial volatility will impact the 2024 Monterey sales, it’s worth remembering that such events are one of many potentially disruptive factors—large and small—that shape what happens when exceptional vehicles drive up onto the block in Monterey each year.
Actually often sell off of stocks result in higher auction prices as people remove the money they may lose and put it into other assets like property, collector items like high end cars and gold.
” Will Stock Market…? ” Yea probably. And while I hate to use movie or other one liners, from ‘Men In Black’ and paraphrasing – ‘Why don’t you just tell everyone? People are smart.’ – ‘A PERSON can be smart. but people are dumb panicky animals and you know it.’ – One constant is that all markets hate volatility. Another is- that there always is .
More and more people are using the Recession word. That will hit the market more than just a blip. That is when the cars go up as people move money. Mostly the high end stuff.
Agree. The rare and coveted vehicles will probably set records. Those buyers aren’t impacted by this dip. On the low end of the market, the mundane stuff, like the C4 Vette, may not make reserve.
“Recession” has been used for the past five years. The “Knee-jerk” reactors who dumped stocks last week made a bad choice.
update- at the close of the bell – seems like ‘much ado about nothing’
The chart seems clearer when looking at the ends, i.e. when the short-term change in the S&P is large in either direction, so are auction results. The middle is where the muddiness is. I consider 2021 an outlier as the pandemic tossed a gigantic monkeywrench into the pool.
I wouldn’t mind seeing this become a regular measure. I think it might be more useful if the big-ticket sales are taken out of the mix, as those are likely going to transact in spite of any short-term movement in markets.
I’m not sure what this crazy stock market is going to teach us about the collector car market right now.
One could probably find dozens of other, non auto related markets to compare that would show the same correlation. Remember, correlation does not equal causation.
There might be a slight change with some buyers holding off for the fed to lower rates but insignificant. Back over forty and seventeen a confident market. How will that affect the classic car market …” place your bets “