Does the car market correspond to the stock market?
The stock market entered bear territory this week amid signs that inflation continues to accelerate and concerns that Federal Reserve measures to slow it will push the economy into recession. If history is any judge, the big dip in the markets will impact the collector car world. Exactly how that impact will be felt of course remains to be seen. We do, however, have a dataset that helps us make informed guesses—the 300SL repeat sale index.
Regular readers know we visit the 300SL index often. For those new to the party: We track 1954–1964 Mercedes-Benz 300SLs that have sold at least twice at auction and use their sale prices to shine a light on various trends in the collector car market.
Why 300SLs, specifically? In a word, consistency. They were desirable collectible cars back when R32 Skyline GT-Rs were but a glimmer in a Nissan product planner’s eyes and have never gone out of style. They were built in sufficient numbers that they come up for auction with relative frequency, but they aren’t so common that new ones flood the market. Last but not least, 300SLs have easily traceable serial numbers—not a given on pre-1981 cars—which makes it easy to keep tabs on individual cars over time and to identify outliers that don’t belong in the index, such as the more expensive alloy-bodied cars. (Just to be clear, the recent 300 SLR sale doesn’t factor here.)
Because of the consistency of the index—and also perhaps because 300SL buyers are a knowledgable bunch—we generally find this index to be a step ahead of the rest of the collector car market. To wit, it started dipping in 2014, a time of rapid appreciation, but then stayed more or less flat through 2020 even as other segments took a dive. Amidst the latest surge in prices, the index has remained relatively flat even as other data showed things to be at an all-time high. In other words, take away the excitement of rising collectibles and one-off blockbuster sales, and you see a market that is actually pretty calm.
That doesn’t mean the index is imperturbable. Over the last 25 years, the 300SL index has generally echoed the undulations of the S&P 500 with the glaring exception of the period between 2010 and 2014, when collector cars (along with other tangible investments, like real estate) gained rapidly compared to the stock market.
At present, the 300SL Index seems to be dipping much like the S&P 500, albeit nowhere near as drastically.
Looking back at the 300SL index compared to the stock market helps us envision two possible scenarios, should the gloomy economic news continue to pour in. One holds that people see the disappointing performance of the stock market as a reason (or at least an excuse) to pour more money into cars. That's largely what happened in the wake of the Great Recession. The other, more sobering possibility is that collectors get so badly burned and/or spooked by the stock market that they begin to sell their cars at lower prices.
Our prediction: Both scenarios will come into play and will, for the most part, cancel each other out. Some collectors will need to sell under duress while others will see bear markets as a buying opportunity. The 300SL index, more than anything, shows the stability of the mature segments of the collector car market over the long run, and we expect that to continue no matter what bumps are on the road ahead.