The global economy is constantly in a state of shifting power of countries. The Ebbs and Flows of the luxury markets are both seasonal and cyclical on a more micro scale. And on a macro scale, the luxury markets typically are dominated by first world countries that share trade agreements. The delicate balance of global politics plays a large role as to where luxury timepieces are being bought and sold. For example, China and the USA are two global powerhouses where luxury watches made in Switzerland are constantly trading hands. The buying power of each country is directly tied into how well that country’s economy is doing both internally (GDP – gross domestic product) and externally (exports and imports). There are many factors that go into who is buying what types of luxuries across the world. For example the trade war between Trump and Xi Jinping has stalled a lot of trade between the two countries. Watch dealers that do enormous volumes of trading will be keeping a close eye on this without question.
And these external factors always impact the internal factors of each country. We’re not going to talk about what we cannot predict or control. So we as watch traders have to put ourselves in a strong position to take advantage of what we CAN control throughout these economic shifts.
So what does all of this mean to you as a watch trader and how can you make sure you’re always staying ahead of the changes? There’s really two different types of market conditions you need to be mindful of on the micro scale – A Bull Market and a Bear Market.
A Bull Market – is a market where the economy is trending upwards. The stock market, GDP, and economy are doing well, and people aren’t afraid to spend money. In these types of market conditions, people are buying more than just the basic necessities. They are buying things that they WANT not just things they NEED. This is when the luxury markets do very well. In a Bull Market, you want to be prepared to sell. Having inventory, even if it’s slightly purchased over target price (which we teach in Watch Trading Academy) is okay. You’re going to want to be moving plenty of volume whether you’re brokering watch deals (taught in WTA part 2) or selling your own. It’s wise in these lucrative spending times to get as much money and momentum as you can so you can prepare for when spending isn’t so active.
These are the times when you can get a little more aggressive with your watch trades. You can try to flip some pieces that are more volatile and higher priced. Typically in these types of conditions, Entry Luxury (think Omega, Breitling, Tag Heuer) all the way up to Ultra Luxury (Richard Mille, Patek Philippe) are doing well.
You can feel more confident making trades for 5-10% and sitting on odd-ball timepieces like carbon fiber Hublots during the times where people are not concerned about spending money.
A Bear Market – is a market where the economy is trending downwards. The stock market, GDP, and economy are declining, and people are more conscientious about where and how they spend money. In these times, watch trading can be very slow. People start focusing on the necessities and not their superfluous desires.
In a Bear Market, it’s always best to be a buyer! This is where you will pick up very strong deals, because people are either looking to get cash immediately, or they get scared and don’t want to hold onto assets that they are now viewing as liabilities (even if they aren’t).
You can position yourself in these scenarios as a problem solver, and offer to buy their watches from them at bottom cash value (taught in WTA part 2) so they can be more liquid.
As a buyer in these types of markets, you’re going to want to only hold inventory that is at Bottom Cash Value or lower, and are marquee brands that the masses love to buy. This is not the time when you want to be paying over target price, and carrying weird watch models, or brands with much more volatility. For a list of which watch brands are more stable and which ones are more volatile, check out all of the content in the WTA Facebook community.
To be successful at watch trading, you always should be disciplined enough to hold and move inventory that you can afford to trade correct. In a good economy, be moving inventory quickly, and holding out for the bigger margin trades when you can be patient. And in a bad economy, you have to be able to hold and wait through the slow times. You have to be okay selling for slightly less on certain watches, and/or waiting until there are seasonal spikes in spending around the Holidays for example.
If you want to stay on top of what the markets are doing and how they will impact your watch trading I highly recommend signing up for the weekly mastermind calls, and joining WTA where we publish periodic market reports to benefit the community.