If you think an expensive watch is akin to an investment that can deliver stock-like returns, you’re wrong – at least according to the CEO of Rolex.
“I don’t like it when people compare watches to stocks. It sends the wrong message and it’s dangerous. We make products, not investments,” Jean-Frédéric Dufour told Swiss newspaper NZZ last week.
His comments as pre-owned watch prices fall after dramatic pandemic-era growth.
WatchCharts’ overall market index, which tracks prices, soared 72% between January 2021 and March 2022, as retail investors who got rich trading cryptocurrencies and meme stocks sought to diversify their portfolios .
Since that peak, the indicator has fallen 38%, while the benchmark S&P 500 index of U.S. stocks has risen 13% over the same period.
Watch prices began to fall when the Federal Reserve began raising interest rates. Between May 2022 and July 2023, the central bank increased borrowing costs from near zero to around 5%. When interest rates are higher, demand for big-ticket items tends to decrease because consumers have more incentive to save rather than spend.
Dufour, CEO of Rolex since 2015, also told NZZ that he expects a “difficult” year. Luxury watch companies such as Rolex, Patek Philippe and Audemars Piguet cannot necessarily lower their prices to stimulate demand, he added.
“This marks the end of a phase in which all manufacturers were doing well. In good times, production tends to be too high. When markets weaken, as is the case now, retailers suffer pressure to lower prices is extremely problematic because discounts hurt emotional products like ours.
A year ago, Patek Philippe president Thierry Stern warned that the luxury watch market was “slowing down.”
His company does the coveted Nautilus sports watch and only produces between 60,000 and 70,000 watches per year, which start at around $30,000.
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