What is the ‘great Rolex recession’ – and is it really here? Amid fears of an economic downturn, buyers scale back on splurging on luxury watch brands from Patek Philippe to Audemars Piguet

Aug 4 , 2023

The great Rolex recession may be upon us, as higher interest rates spark fears of an economic downturn. Photo: Rolex

Since late 2022, Wall Street has been rife with predictions for the Federal Reserve’s interest-rate increases to wreak havoc in the US economy and stock market.

But while the broader economy has held up surprisingly well, the monetary blitzkrieg has sparked a downturn of a different kind – a rout in the secondary market for luxury watches.

US Federal Reserve chairman Jerome Powell speaks during a news conference after the release of the Fed policy decision to keep interest rates unchanged, at the Federal Reserve in Washington, US, on June 14. Photo: Reuters

The WatchCharts Overall Market Index – which tracks the prices of 60 timepieces from top brands including Rolex, Patek Philippe and Audemars Piguet – has plunged 32 per cent from a March 2022 peak. A separate index for just Rolex models fell 27 per cent over a similar period.

Visitors look at models on the Patek Philippe booth during the Watches and Wonders fair in Geneva, Switzerland, on March 27. Photo: Reuters

The US central bank’s aggressive monetary tightening over the past five quarters is seen as a key reason for the slump in watch prices. Higher interest rates have fuelled fears of an economic downturn, spurring investors to scale back luxury spending and boost savings. The downturn in the crypto market, also precipitated by rate rises, has also hurt demand for watches.

Oyster Perpetual Cosmograph Daytona Photo: Rolex

The costliest timepieces have suffered the worst declines. Those in the US$50,001 to US$100,000 price bracket slumped over 15 per cent in the past 12 months, while the US$10,001 to US$20,000 group fell 10.4 per cent, according to WatchCharts data. The US$5,001 to US$10,000 band saw a 6.8 per cent drop.

A green Rolex Submariner watch worn at Milan Fashion Week in February 2017. Photo: Shutterstock

Luxury watches have underperformed stocks since March 2022, when the Fed started raising interest rates. The S&P 500 index of US large-cap shares is up by about eight per cent since then.

Certain chronometer brands have felt the bite more than others. The Rolex Market Index, which tracks the top 30 most valuable models, is down 12.5 per cent from a year ago, while the Patek Philippe index lost 18 per cent. However, Audemars Piguet saw the sharpest losses, down almost 20 per cent year-on-year, WatchCharts data show.

Patek Philippe reference 1518 Pink on Pink. Photo: Sotheby’s

When the “everything rally” – referring to how the increased price of stocks, commodities and essentially any asset you could think of – was in full swing during the pandemic period, luxury watches were no exception. Surplus cash was piling into all kinds of alternative investments such as NFTs and meme stocks – and opulent timepieces were also swept along with the tide.

The Patek Philippe Nautilus 5980R is an elegant sports model from the brand. Photo: Patek Philippe

Prices of Rolexes, Patek Philippes and Piguets reached record highs in early 2022. Pre-owned watch sales reached US$22 billion in 2021 – nearly a third of the US$75 billion luxury watch market, according to a report from Boston Consulting Group.

Participants sit near the Patek Philippe booth during the luxury watch fair Watches and Wonders Geneva, in Geneva, on March 27. Photo: AFP

Despite the declines over the past year, prices have climbed considerably higher over the longer term, outperforming the stock market. The Rolex index is up by more than 55 per cent from five years ago.

Audemars Piguet Royal Oak Chronograph. Photo: @vip62933218/Instagram

“Luxury watches have performed well, especially over the long term, in comparison with traditional investment categories. From August 2018 to January 2023, average prices in the second-hand market for top models from the three largest luxury brands – Rolex, Patek Philippe and Audemars Piguet – rose at an annual rate of 20 per cent, despite broader market downturns during the pandemic, compared with an annual rate of eight per cent for the S&P 500 index,” BCG said in a report published earlier this year.

This article originally appeared on Insider.

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Timepieces

The second-hand luxury market is currently experiencing a demand slump as higher interest rates spark fears of an economic downturn, prompting spenders to splash less on luxury goods
Prices for Rolex, Patek Philippe and Audemars Piguet have plunged, since the pandemic boom which saw surplus cash being spent on the timepieces, as well as NFTs and meme stocks