At this week’s Pebble Beach Concours d’Elegance, an elite annual car show, a 1956 Aston Martin DBR1 is set to sell for a cool $20 million. Not far behind is an orange-trim 1970 Porsche, valued at $16 million. Overall, auctions at the event are expected to bring in $290 million. (Gawk at the classic cars in this Bloomberg photoessay of the event.)
The projected proceeds are 14% lower than last year. The Hagerty Blue Chip Index, a measure of the 25 most “sought-after collectible automobiles of the post-war era,” fell 1% in the second half of 2016, after roughly doubling over the past five years. Ferrari valuations have dropped by 2%, on average, since January. That’s the largest decline in eight years for the red-hot segment of the classic-car market. An index measuring prices broadly in the collectible car market in North America has been slipping for the past two years.
One of the factors in the classic-car market’s deceleration is, as it happens, the Federal Reserve. As the central bank hikes interest rates, the relative value of risky assets falls as the return on safer assets, like US treasury bonds, rises. The Fed’s unwinding of its crisis-era stimulus program, which ballooned its balance sheet after it pumped cash into the economy by buying bonds, will also pull liquidity from the system. Until recently, some of this money found its way into high-end assets like classic cars.
Vintage cars are more than just fun to drive and beautiful to look at—they’re an investment, of sorts. A 1972 Ferrari 365 up for auction this weekend is set to sell for three times the price it last changed hands, in 2008. But there is a lot of risk, volatility, and luck involved in betting on the prices of luxury collectibles such as cars, art, wine, and the like.
If you still think classic cars are a wise place to park your cash, as Bloomberg points out, history suggests it’s best to avoid American brands.