During the peak of the pandemic, wealthy, listless people stuck in lockdown spent their time outbidding each other online, turning nearly every luxury acquisition into a “so-called alternative asset class.” So it made complete sense when the likes of Sotheby’s launched an online auction ‘Scarce Air’, featuring the rarest Nike sneakers ever produced, from 18 to 29 March 2021. Sotheby’s is not alone in this push. Christie’s luxury sales of $980 million that same year comes pretty close to Sotheby’s $1 billion.

Fast forward to 2022 when Charles Stewart, chief executive officer of Sotheby’s, told Bloomberg Businessweek that the auction house intended to hold more luxury auctions, expand their offerings, and blend categories.

This is part of their strategy to connect with younger generations by transforming the company into a “glamorous all-round marketplace”. For example, last summer in Hong Kong, the auction house held whisky, jewelry, and handbag auctions at the same time, knowing full well buyers for one category would be interested in the other. In fall of the same year, Christie’s launched a new department focusing on streetwear, sneakers, and sports collectibles across music, fashion, culture, and art.

With multiple reports of a cooling global art market in recent months, the pivot to luxury goods does seem to make sense. In fact, Sotheby’s total luxury sales in 2022, including real estate and classic car auctions, amounted to $6.4 billion while fine art only made $5.7 billion, down 9.5% from the previous year. Even with stiff competition from the fragmented resale market, luxury acquisitions remain buoyant – just this month Phillips, Sotheby’s, and Christie’s watch auctions in Geneva brought in $108 million in total.

Nonetheless, not all rainbows have a pot of gold at the end. Several luxury brands experienced slow or declining sales during the last quarter of 2022. Industry market share leader LVMH saw only a 9 percent uptick in organic revenues in its fourth quarter, instead of the increase in the 20 percent range  the conglomerate experienced in the first three quarters. This February, PwC’s Global Consumer Insights Pulse Survey examined over 9,000 consumers across 25 markets and concluded that luxury and premium sectors “will take the brunt of a spending slowdown” over the next six months.

Dubbed a “richcession” by the Wall Street Journal, there are specific trends that indicate the wealthy may not necessarily go unscathed by the recession. This could impact their spending on luxury goods, according to Forbes.

The Wall Street Journal reported that percentage gains for the wealthy in the US, while starting from a higher base, have been muted since the end of last year due to the falling stock market. Moreover, recent widely reported layoffs have mostly affected higher-income workers, who might be able to get another job easily but may not be paid as much as their previous stints, leading to an inadvertent belt-tightening.

There are already signs that the top socioeconomic bracket is opting for cost-saving options in the US – they made up nearly half of Walmart’s gains in the first quarter of 2023. It is more than likely that the rich could pivot away from not just fine art purchases but luxury acquisitions as well. At least till the global economy gets less volatile.

This analysis was originally commissioned by London-based Pictorum Advisory for their May newsletter.