Perusing the financial headlines on a weekly or daily basis, one can find any amount of opinions on the direction for 2018 of a variety of assets: stocks, precious metals, crypto currencies, bonds, and even art. However, there is one common theme that seems to weave all of them together, and that is there is virtually no consensus on predictions. The stock market has risen unabated for more than a year and a half, and while every knows it cannot continue, very few are willing to predict when it will stop.
On the other side of the coin, there are many market pundits that attempt to predict the interest rate policy of the Federal Reserve, and it is the fulcrum of these two data points that will impact the wider economy in 2018. There is little doubt that the bull market in stocks has spilled over into the collectibles market, with buyers much more willing to spend profits on purchases to stock away as tangible, liquid assets. The primary threat to the ever-increasing stock market is a hike in interest rates. While the Federal Reserve controls the benchmark interest rate, their hand may be forced. With global growth and productivity projected to increase this year, that would also lead to a greater rate of inflation, which the Fed, per their own policy, have to counter with an increase in interest rates. There is little disagreement that very low interest rates and cheap credit are largely responsible for the run up in the stock market we have seen. If rates were to jump, it would almost certainly trigger a sharp correction in the equity markets. The great unknown is how other asset markets will react to such a correction. Will commodities like oil and precious metals spike? What would be the price action of the U.S dollar? Will bitcoin collapse? This is where medium and long-term planning can be beneficial, and as dealers, working with clients to hedge against these inevitable events could yield positive results.
The rare coin market remains a collector-driven market, and while buying patterns are influenced by the action of asset markets, long-term valuation is not. If past history is any indication, being in a strong cash position during a stock market correction and credit collapse can present some very fortuitous buying opportunities.
At the end of the day, the best possible outcome for the financial markets, and rare coin hobby, is steady economic growth that is organic, with the wage growth that comes along with it, in order to make collectors comfortable with adding pieces to their collection for the enjoyment of the hobby.