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Dec 31, 2018

Markets: The Best Investments of 2018? Art, Wine, Cash and Cars.

The Wall Street Journal.
Markets Bull logo.
Markets
It's the last trading day of the year. I'm Amrith Ramkumar, your markets guide on New Year's Eve with stock markets operating normally.
Futures are higher after stocks preserved their weekly advance in another rocky Friday session. Investors are watching trade signals after President Trump tweeted over the weekend that he and Chinese President Xi Jinping had spoken by phone and made “big progress” in talks.
Major indexes are well down for the month, quarter and year after a bruising selloff in recent weeks.
Investors will also be eyeing the latest jobs report Friday after a quiet period of earnings and economic data around the holidays. 
Plus, our Avantika Chilkoti looks at a continued rise in luxury assets even as stocks, bonds and commodities have faltered lately. 
A programming note: We'll be off tomorrow for New Year's Day but back in your inbox early Wednesday. 
 

Markets in a Minute

Markets Data
 

Overnight Developments

 

Luxury Goods Outperform as Markets Swoon

By Avantika Chilkoti, markets reporter
Some of the investors who have beaten the market in 2018 are those that like the finer things in life.
Luxury assets—including wine, art, classic cars and fancy colored diamonds—have outperformed stocks and bonds this year.
“People are looking for a place for their cash and the security of holding something physical is appealing,” said Anthony Maxwell, director at Liv-ex, the London-based wine exchange. “They are looking outside securities and gold is not what it used to be.”
People who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November, according to Art Market Research’s Art 100 Index. In November, David Hockney’s painting of a man in a pink jacket by a swimming pool set a new record for a living artist at auction, selling for $90.3 million at Christie’s New York.
Those investing in wine have seen a 10.2% gain this year, according to the Liv-ex 1000 index.
Meanwhile, global stocks have tanked in the past quarter as investors have turned jittery over slowing global growth and trade tensions.
Investors who put money in the S&P 500 at the beginning of the year have lost about 5%, based on estimates of total return. Those seeking refuge in cash equivalents have gained roughly 2%, while gold is down about 2%.
Of course, the fall in stocks is a recent trend, and there are major risks involved in holding alternative assets, from regulatory reform to changing tastes. Prices are also vulnerable to currency moves.
Still, the market for high-end diamonds has been steady, gaining 0.4% in value in the first three quarters of 2018, according to an index of high-end yellow, pink and blue diamonds published by the Fancy Color Research Foundation.
Luxury car prices were down slightly this year, according to Historic Automobile Group International’s Top Index. The correction was expected given the rate at which investors poured money into the vintage car market following the financial crisis, said Dietrich Hatlapa, director of the group.
Cars have been the best performing luxury investment over the past 10 years, gaining 289%, according to a report published by global real-estate consultancy Knight Frank earlier this year.
Coins rose 182%, wine added 147% and jewelry climbed 125% over the same period, while antique furniture and Chinese ceramics lost value.
A longer version of this article can be viewed online here.
Are you investing in luxury goods? Let the author know your thoughts at avantika.chilkoti@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location.

Market Facts

  • The S&P 500 and Dow industrials are both down more than 9.5% this month and heading for their largest monthly drops since February 2009. Each index is also on pace for its worst quarter in more than nine years and largest annual decline since 2008.
     
  • The Cboe Volatility Index, or VIX, has closed above 25 in eight consecutive sessions, the longest such streak since September 2015. Wall Street's "fear gauge" closed above 25 on 11 straight days that month. 
     
  • On this day in 2008, in the depths of the financial crisis, the Dow ended the year down 34%, the largest annual percentage drop since 1931. 

Key Events

The Dallas Fed manufacturing survey for December will be released at 10:30 a.m. ET. 
 

Must Reads

President Trump and Chinese President Xi Jinping in Beijing in November 2017. PHOTO: ANDY WONG/ASSOCIATED PRESS
The U.S. is pressing China on trade proposals. With 90-day trade talks due to wrap up on March 1, the U.S. is pushing Beijing to fill in the details of a slew of trade and investment proposals Chinese officials have made recently. 
IPO-hungry investors look for their moment. Despite a whipsawing stock market, a host of big-name tech companies like Uber, Lyft, Pinterest and Slack are preparing for stock-market debuts as soon as the first half of 2019.
Frackers are scaling back drilling plans. The modest cuts amid weak oil prices are a reversal for an industry that months earlier expected 2019 to be a banner year. Shale drillers still remain on track to push U.S. crude production to new highs next year.
Mutual funds are trying a new role: activist investor. In the mutual-fund industry’s heyday, proxy fights and other activist tactics were considered unseemly, and often pointless. Today, mutual-fund managers are taking on executives more frequently.
What's in store for M&A in 2019 after the third-busiest year ever? We asked some of the bankers and lawyers who helped arrange the year's biggest deals what could lie ahead
Investors don’t see a sovereign debt crisis coming. Repeated false alarms about crises in advanced economies such as Japan, the U.S. and the U.K. have left many skeptical of the idea that burgeoning sovereign-debt piles in those nations pose a major threat to markets.
Amazon reinvents itself to win in rural India. Amazon is targeting hundreds of millions of new online shoppers outside of India's big cities by simplifying its order screen with Hindi and videos, opening stores to help people shop and adding a fleet of deliverymen who can take payments.
 

What We've Heard on the Street

“The year is ending badly for stocks, which has investors averting their eyes. But there are deals to be had for those who can bear to look.”
—Heard on the Street columnist Charley Grant
 

Stocks to Watch

Wells Fargo: Shares of the bank closed up 0.5% Friday after earlier rising as much as 2%. The climb even as major indexes closed slightly lower came after Wells Fargo agreed to pay $575 million to all 50 states and the District of Columbia to settle claims that a fake-account scandal in its retail bank and improper auto-loan and mortgage charges harmed customers.
NetflixThe streaming company is down 32% for the quarter and heading for its largest quarterly drop in seven years, though it is still up more than 30% for 2018.
Dell TechnologiesThe personal-computer maker and data-storage company made its re-entry to the public markets Friday, five years after its eponymous founder and a big private-equity firm took it private in the biggest-ever technology leveraged buyout.
Sears: Edward Lampert’s ESL Investments unveiled an offer to save a chunk of Sears stores late on Friday, but the retailer’s survival isn’t guaranteed.

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